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Economics 101

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It seems we have a problem communicating certain thoughts.

We have one side that is claiming that the ONLY reason that we are recovering economically is because of the war, the tax breaks were TOO much, and the record deficit is going to get us into DEEP kaka.

I on the other hand disagree with all 3 statements, and I am now going to explain why in a VERY basic way.

First, we start with the tax breaks.

Let's say I am an investor, I have $10,000, just to make it an easy round number, and I take that money, and I buy a 20 acre piece of property as a long term investment, bare property, nothing on it but trees and little animals.

I do this in the 1984, just to make it 20 years, another nice round number.

4 years ago, the year 2000, a developer comes up to me and wants to buy my land to develop into a neighborhood, he offers me $10,000 an acre, well wow, after 20 years, he is offering me 20 times what I payed for it, $200,000. Not bad for just sitting on bare land for 16 years.

That would net me $190,000, again, we are rounding off and using nice even numbers, it would probably be considerably more being offered.

Well, because the Democrats and their class warfare rhetoric has allowed them to raise the capitol gains tax to 33%, if I sell that property, 1/3 of my gains is GONE, the government takes it, but if I sit on it, and WAIT for the government to LOWER the capitol gains, then perhaps I can see more of that money. So, I send the developer packing.

It is now 2004, a new developer has come to me and said, $15,000 per acre, I want the whole 20 acres to develop. I go to my tax adviser and he tells me, that the capitol gains tax is now down to %15, whoa, that's HALF of what it was 4 years ago. I can sell for $300,000 and only pay %15 of that in capitol gains.

So if I had sold in 2000 for 200,000 I would have payed a capital gains of $62000, or 1/3, but now since capital gains tax is DOWN, I can sell it and only pay $43,500 in capital gains taxes on it.

So not only do I get MORE for the land, I pay less in taxes to the government, WOW, let's do it.

OK, so what have we shown here, when an investor has to pay a confiscatory rate in taxes if they sell something and turn it into cash, they won't do it, what does that do? It slows down the economy incredibly, because all that investors money is LOCKED up within that land.

Lower that gains tax, and he is MUCH more willing to sell, and that land is now DOLLARS in HIS pocket. SO let's say he had to pay %20 total in everything to close the deal. He pays $60,000, and walks away with $240,000 in his pocket.

This money DID NOT exist before, it is BRAND new money..... Do you get it? Do you understand?

He spent $10,000 on the land, the land just sold for $300,000, that $290,000 was LOCKED up in the land, had NEVER been a part of the economy, it just SAT there. We now have a FRESH infusion of $230,000 into the economy, you have to take out the $60,000 he payed to other people and taxes, and the original $10,000.

So, by LOWERING the tax rate on this particulat investor, he sold his property and infused the economy with almost 1/4 of a million dollars of NEW money.... NEW money, it never existed before...... Do you get that yet?

Now, what is he going to do with that money? He sure as heck is NOT going to put it under his mattress, he is going to INVEST it so that it will grow some more, the money that was locked up in that property is NOW MOVING through the economy. Helping it grow by infusing it with cash.

Now not only is the land original cash value now moving through the economy, but the developer is now building houses on it, REAL property, after he has built said houses, the total money that has been created will be close to 3-4 million if not more. SO with a $10,000 piece of land, a bit of investment by others, that piece of land has added to the economy about $1,000,000 or 1 million NEW dollars.

Now multiply that by 1000, or 10,000, and most likely 100,000 times, and you will get the hint of what a tax cut does to help the economy.

$1 trillion LOCKED up in the economy, NOT moving, not making growth, or buying a house, or supporting a family, or buying a car, or investing in stocks or companies etc. One tax cut Gets ALL of that money moving through the economy again.

So, a socalled 200 billion dollar tax cut, is actually going to get the economy moving by actually infusing $1 Trillion dollars into the economy, and probably more. NOT only that, but that 200 billion dollar "tax cut" will actually become a gain for the government in the long run.

Lowering capital gains and income tax do 2 things, and ALWAYS do 2 things. A: gets the economy moving, and B: Always makes the government MORE money in tax revenue. Yes, I said MORE money.

So a tax cut, actually increases the government tax revenues, why? Because 15% of something, is a LOT more then 33% of nothing.

Now, off to the war is all that is supporting this growth.

What utter nonsense, the war has pushed maybe $100 billion into the economy, and $100 billion is NOT all that much money considering our 10-12 TRILLION dollar economy. It will help local economies, but it is a DROP in the bucket nationally.

It is also money that has been removed from the economy through taxes already, so it is not new money, it is stolen money. It also does not compete in the open market like other money, so it actually buys LESS then it would were it in the real economy and not the government buying. Do you get that? $100 billion spent by the government is actually WORTH LESS then if it were in the private economy, because it BUYS LESS.

So, the infusion of $100 billion dollars by the government is a drop in the bucket, and doesn't help the economy nationally AT all....

A trillion dollars through tax cuts, or $100 billion from taxes, hmm, which is worth more, which is more likely to make a BIGGER impact?

Yeah, pretty simple stuff here guys.....

Now, onto the deficit, that will, "land on our childrens shoulders."

First off, the government pays interest on the money that they borrow for the deficit, and when interest rates are low, as they are now, money is cheap.

Let me give you an example. Let's say that you can afford $1000 a month for a house, just the payment, forget about taxes and all that crap.

If the interest rate is at 10%, you are going to be able to afford a house that costs about $100,000. BUT at 3%, you can afford a house that is worth $350,000.

So, yeah, you're in debt 2 1/2 times more, but your still paying the SAME amount of money for it.

Get it? you can NOW afford to borrow 3 1/2 times MORE money then you could with interest rates high.

This deficit is NOTHING, because it is costing us the same as the lower deficit would have 5 years ago. We can AFFORD to borrow MORE money, because it costs less money to borrow it....

Do you get it?

Now, the other thing that everyone forgets, is that once the economy gets a kick in the butt through the tax cuts, the government revenue through taxes actually GO UP!!! So we may be running deficits now, but once the economy catches up, we will be in the same position that Clinton inherited from the Reagan economy.

That is BASIC economics 101, it is simple, it is easy to understand, and it is factual.

It destroys every one of your silly arguments about how A: Tax cuts do NOT help the economy and trickle down econoics does not work, which is proven to be utter nonsense, because tax cuts and trickle down economics does work and ALWAYS works.

B: The war the only thing helping the economy, again, NONSENSE, it is a drop in the bucket compared to the national economy.

C: Record deficits are going to destroy us, again, NONSENSE, the HIGHER deficit is actually costing us the SAME if not LESS then the lower deficits of past years.

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I went a bit more in depth in my explanation then I normally would because you guys aren't getting it, and completely fail to understand it.

So I made it as SIMPLE as I possibly could for you.

Read it VERY carefully, and maybe you will begin to see the BIG picture...

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quote:

Originally posted by Jaguar:

This money DID NOT exist before, it is BRAND new money..... Do you get it? Do you understand?


Hmmm... I would argue that this is just redistribution, not creation of new money. After all, the guy who bought it already had the cash so it would have already been part of the economy, right? Unless of course he has a press in his basement and mints it as needed.

Your example is one more of perceived value and the increase/decrease of said value rather than hard dollars. Which leads to the other fact that our money is not worth the paper it's printed on, which directly equates to the loss of the gold standard.

An economy exists only in our heads and is influenced far more by perceived value than anything truly tangible. I'm not saying it's unnecessary, just rather silly when you think about it.

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quote:

Originally posted by Cadrian Almondo:

Yeah why did they get rid of the gold standard?

For control, because if you can base your money on the value of a known commodities c=value, then you cannot inflate that value without getting caught.

Grizzle is absolutely correct, our money is NOT worth the paper it's printed on, it's value is in the promise by the government that the value is REALLY the actual value, which in reality it is not.

In this case, I am forced to agree with Grizzle, no matter how much I hate too agree with him on anything....LOL

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quote:

4 years ago, the year 2000, a developer comes up to me and wants to buy my land to develop into a neighborhood, he offers me $10,000 an acre, well wow, after 20 years, he is offering me 20 times what I payed for it, $200,000. Not bad for just sitting on bare land for 16 years.

Ah, here is the big flaw in your argument.

Everyone knows that today's liberal city and county governments will just take your land by eminent domain and only offer you $10,000 for the whole lot.

Local governments have been abusing eminent domain lately. Their argument is that the property is worth more to the "community" if they can get more tax dollars for it by developing shopping malls or high-density housing. Your little field with trees and animals may be generating some property tax to the local government, but it is not generating its true maximum potential as a revenue source for the city.

Eminent domain was supposed to be for taking minimal amounts of land for highways and other civic uses when no other alternatives existed. This is the kind of logic that liberal governments are now using to abuse property rights and confiscate land that has been in many family's possession for generations.

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Why we were taken off the Gold standard, by Alan Greenspan

Jag,

You're going to love that link. My guess is you have already perused it

If you take that as the gospel, then I can see your vehement opposition to The Welfare State.

On the positive side: It shows, that we as a nation, take care of our own.

A single person who has fallen on hard times for whatever reason, can only recieve enough financial assistance to survive on. "Barely"

On the negative side: There are those people in business and government who abuse it for personal gain.

That abuse, in and of itself is what has created the monstrous deficits in government spending in recent times.

The sooner we redress our elected officials to cease doling out millions of dollars to people who already have millions of dollars, the sooner we can get the Federal deficit back on track.

"nuff said. Time for action. Congress->

And now, the real problem: We don't know which statesmen are in on the scams. I figure rough guesstimate-- about 95% of them. That's why nothing changes on Capitol Hill.

Those who introduce any measure to cease the big money give away, are soon chastised by public ridicule campaigns and scandals. Even if the statesman is clean as a whistle, he/she is subject to this treatment.

Extortion to the extreme by people who are well trained in subverting any opposition.

NOVUS ORDO SECLORUM

The battlecry of the WASP Warriors.

Bow down ye Wankers.

All your stuff are belong to us

[ 05-23-2004, 11:01 AM: Message edited by: Wolferz ]

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