Romain Hatchuel – who manages an asset management firm –
wrote an article and had it published in the Wall Street Journal on December 3,
2013 under the title: “The coming Global Wealth Tax” and the subtitle: “Indebted
governments may soon consider a big one-time levy on capital assets.” Like the
title and subtitle indicate, the author is warning the wealthy about the way
that he believes some governments will treat them and their wealth. He gives a
number of examples which are enough to convince anyone that what he fears is
real and not the product of paranoia.
For example, the island nation of Cyprus has confiscated as much as
100% of the amounts exceeding 100,000 euros in the savings accounts of
depositors. And the author says that the Japanese people, who have the largest
pool of savings in the world, should worry that something similar may happen to
them because their government has the highest debt to GDP ratio in the world
... standing at 2.4 to 1. Well, this is the possibility but what the author of
the article does not explain is how we got to this point in the first place.
It looks like there are three parts to this situation. The
first is that the abuses committed by the wealthy are the reason why there has
been a shift in the thinking of the public. The second is that such abuses made
it increasingly acceptable for the public to think in terms of raising taxes on
the wealthy; even confiscating some of the money in their accounts to alleviate
the problems that they caused. The third part is that ordinary people everywhere
have ceased to believe that feudal lords – be they political masters or
economic moguls – have the divine right to rule over them as they wish or
interfere with their economic well being.
People still tolerate the idea of stars in sports,
entertainment or industry becoming fabulously rich and living the life of fairy
tales, but they question someone's right to break out beyond that and
accumulate such amounts as to serve no purpose but to inflate the ego of those
who play the game of getting on some list as being one of the richest people in
the world. More and more the ordinary people are rejecting the idea that a
mogul with economic powers that reach up to feudal levels, is worth having if
it means that millions of their fellow citizens will live below the poverty
line as a consequence.
Still, you see money managers like Romain Hatchuel work hard
to put more money in the hands of people who cannot spend it all even while
“voices from the International Monetary Fund [IMF] to billionaire Bill Gross
increasingly make the case” for higher taxes especially on the wealthy. To give
substance to his fears, Hatchuel tells of the commentary that was made by Bill
Gross asking the wealthy to stop expecting capital to be taxed at lower rates
than labor. He also tells of the IMF that expects the ratio of the national
debt to GDP in the advanced economies to reach 110% next year, a level that is
35 points above the one preceding the financial meltdown of 2008.
And this is where we stop and ask: What is the national
debt, and how does it come to be in the first place? The answer is that the
debt happens when the government borrows money not from the central bank at
say, a 2% interest rate – which it can do – but borrows from the wealthy at
say, a 3% rate. In turn the wealthy borrow from the central bank at the 2% rate
thus make a profit of 1% having done nothing more to earn the privilege than be
designated “prime rate worthy borrower” by some self-appointed “credit rater”
that happens to be on the payroll of the borrower. What a racket of
self-serving charlatans!
Now consider this: To make a profit of 1% on each billion
dollars that the government borrows will net the prime rate borrowers 10
million dollars a year in profit – a handsome salary that is rolled at
maturity, thus maintained indefinitely. And who will be asked to make such
payment to those people? It will be the public; the very people who were not
designated as credit worthy to borrow the money in the first place. What a
shame!
And this is why the IMF has suggested solutions; the reason
why Hatchuel cries out: “With a chilling candor, the IMF admits that its
approach takes no account of the well-being of top earners.” And this should
cue the hilarious question: How do you look at a “top earner” and pretend to
weep: poor, poor, poor fellow ... your plight gets me right here at the heart.
Is there something I can do to help?