Five tweets and four PS: When shares and houses will want or need to transition from here to there, what will happen?

Huge QE, large fiscal deficits, and generous bank credit pushed on by very low capital requirements, injected huge amounts of liquidity that, among others, caused the price of shares, and the price of houses that morphed from homes into investment assets, to increase immensely.

Soon many of the elderly owners of shares and houses, will want to reconvert these assets again into main-street purchase capacity, whether voluntarily, in order to cover for their retirement costs, or involuntary, by having these assets becoming part of an inheritance.

The sale of shares and houses will then face: An extremely indebted economy that includes huge unfunded social obligations. Gig jobs, robots that tend to hold down wages, and pension funds and insurance companies also needing to sell assets in order to meet their own commitments.

How is all that going to play out? Since there are no possibilities of reenacting Troubled Asset Relief Program (TARP), or placing all shares and houses on central bank’s balances, it has me very troubled and finding very little that could bring me, a grandfather, some relief.

Is someone somewhere preparing financial or economic counter measures that could alleviate the problems brewing in the horizon? I really doubt it! As Einstein said, “We can't solve problems by using the same kind of thinking we used when we created them.”

PS. All this could be further much complicated by social tensions caused by lack of employment. Therefore I would ignore all the redistribution profiteers’ natural objections, and immediately enact an Unconditional Universal Basic Income. Even $100 per month would do for a start.

PS. That UBI could be partially funded by a high tax on carbon emissions. That would allow us to use market signaling more, in order to avoid that whatever little resources we might have available for fighting climate change, are captured by green-profiteers.

PS. Bank regulators messed it up for us. Their risk-weighted capital requirements only guarantee banks building up especially large exposures, to what’s perceived as especially safe, against especially little capital, dooming bank systems to especially large crises

PS. If our descendants are to stand a chance they must understand that risk-taking is the oxygen of any development, and so they must be wary of any loony runaway risk aversion, imposed by expert besserwisser nannies. God make us daring!

Stock markets and the real economy, c’est pas la meme chose.

Do not confuse the strength of the stock market with the strength of the economy.

The strength of the stock market can have to do only with the strength of owning what little there is to own. 

If central banks fueled share buybacks continue, we might end up with the strongest of stock markets, and the weakest of the real economies.

Thomas Piketty. Would you tax wealth if this only benefited even more some few oligarchs?

We begin to hear proposals about taxing wealth, like that presented by Thomas Piketty in “Capital in the Twenty First Century”

Taxing wealth might reduce the fever of inequality, but it does not attack its causes. In fact, forcing the sale of assets, which is where wealth is stored, in order to increase the consumption of the less well off, might direction the funds away from those who have earned their wealth naturally, to those who earn it thanks to market imperfections, or to outright crony capitalism. An in such a way it could undermine even more the meritocratic values on which democratic societies are based, something that Piketty himself would seem to abhor.

In other words, if in Russia, would you tax wealth if that benefited the oligarchs?

I believe it would be better to concentrate on what is causing unjust artificial inequality and in this respect I could mention the following possibilities.

Like to eliminate the concept of risk weighted capital requirements for banks which channels bank credit away from “the risky”, in much a proxy for the poor, to “the infallible”, in much a proxy for the wealthy.

Like to increase the tax on all those profits which have originated under the protection of intellectual property rights. There is no reason for these to be taxed at the same rate as profits obtained from competing naked in the markets.

Finally, let´s give it a thought to what would have happened to all that unequally accumulated wealth, had not TARP and Quantitative Easing come to its rescue.

Just the fact that, except for religious considerations, when in the grave, we’re all equal, and the Gini coefficient is zero, should not mean we should hurry to get there... I think.

Is not the interest that is not earned on public debt because of public policies a tax?

In terms of taxation, who is affected by a higher real tax rate?

Someone earning 5 percent in interest on public debt and, supposing a tax rate of 20 percent, then has to pay 1 percent in taxes, resulting in net earnings of 4 percent, or, 

Someone only earning only 3 percent on public debt, because of QEs, lower capital requirements for banks when lending to sovereign, and other fancy stuff causes lower interest rates on public debt.

You tell me, or better yet, tell them! on public