In response to an FT article by Martin Wolf on 25th November 2014, entitled 'Radical cures for unusual economic ills'
"Japan should tax savings instead. This violates the prejudice that thrift is valuable. But in a world suffering from demand deficiency syndrome, it is not. Unproductive savings should be discouraged."
Who knew that savings were the problem? Now we're all saved! We can trust governments to tell us what is productive and unproductive for each of us. Praise be to the central planners who brought us to the brink by jacking up credit booms...they are now going to save us from our own savings by…jacking up credit booms!
Mrs Watanabe might actually buy it, with her legendary trust in government, but as for me, no thanks Mr Wolf.
Capitalism works through the process of creating surplus over current needs, and using that surplus to meet future needs, real and imagined, through the mechanisms of savings and investment. Savings also lead to a more fulfilling life because they facilitate freedom and choice. Strangely enough people's needs, wants, talents and time preferences are all different. Otherwise we'd have never bothered with trade and we'd all still be picking berries every day.
So now you want governments to tax savings and savers...those selfish folks whose insistence on self reliance has brought us to this sad turn of events. Rigging rates so these pesky thrifts get less than a 1% return on capital is obviously not enough 'incentive' for them to let go of their selfishness and trust the central planners. No, no, the little blighters are too stubborn for that - we must motivate them to spend with higher inflation (but let's call it price stability so they don't rumble the scam). Still no good...let's tax them into submission…if they won't spend it, we'll take it off them and spend it ourselves…trust us, look what we did with your money so far!
Sometimes the current lunacy in the global economy is criticised as 'Keynesian'. Sometimes it is criticised as 'monetarist'. Personally I think a better description would be 'nuts'.
I think even a statist like Keynes would get indigestion looking at this travesty of central planning. Here's what he said in The Economic Consequences of the Peace:
"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.
Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery"
That was 1919. Reading it gives me a funny feeling of deja vu even though I wasn't there. 'Wealth-getting' as Keynes called it, is de-generating into a gamble and a lottery. The lottery is being rigged by governments and central banks, and the booty is going to their cronies. The gamble is what savers are taking by investing their money further down the risk curve in order to find some yield. Now you want to tax savers. Give me a break Mr Wolfe…a tax break...I can use the money more productively than you can.