Extraneous sentence carried over from last week above the fold.
I was surprised to learn that not even multibillionaires who pay taxes normally report income of no more than a few tens of millions, but it makes sense on reflection.
Is this sentence supposed to not contain either the "not" or the "no", or am I just bad at reading?
It makes sense on reflection. Hold your monitor up to a mirror.
1: Look, I'm on vacation, and cleaning the apartment properly for once. Posting standards are going to drop.
I have a hard time telling whether Piketty is really making the perfect the enemy of the good here, or holding it up as an ideal standard, a yardstick to judge actual policies by.
In the buildup chapters (12-14) P. has recognised that this is a problem at least implicitly, suggesting that wealth taxes in e.g. the EU or the US would be at least a start. I'm on record agreeing with Minivet in questioning the feasibility of this.
The first problem with capital controls as a way to enforce local wealth tax is that it would kibosh overseas investment, which is the principal means by which rich countries stay rich and get richer. I imagine there are other objections, but I'll wait until they occur to me or somebody else brings them up.
6: See. It's like I keep saying.
I thought capital controls usually exempted direct investment - they're laws against moving money around for its own sake.
But, if you have capital controls, you discourage direct investment because the controls would block repatriation of profits.
Anyway, back when I studied political economy, all the theory was about capital controls as related to trade, international borrowing, and investment. And then at the end of the course, they'd explain how international capital movement now happens so often for currency arbitrage that the theory does not work anymore. Or something. It's been a while.
4: I'm pleased that unlike neb some you generally acknowledge the existence of the precipitating blemish.
Who would have thought that the rich and powerful would exploit sovereignty.
Shorter me: Countries are for suckers.
I have a hard time telling whether Piketty is really making the perfect the enemy of the good here, or holding it up as an ideal standard, a yardstick to judge actual policies by.
Regardless of the author's intent, he does offer a useful yardstick.
One can go overboard in criticizing economists' spherical cows and assumed can openers. It really is occasionally useful to identify an answer that would be correct in an idealized world.
I don't think Piketty is suggesting an outright Eurofederal wealth tax administered from Brussels. He's suggesting EU states cooperate in all adopting some level of wealth tax the proceeds of which are retained by the taxing government. That might indeed be driven by legislation pushed by the European Commission though.
We have several high profile examples of capital controls in recent years, so it's not exactly theoretical stuff. Cyprus imposed them last year in the wake of its banking system collapsing and, outside the EU, Ukraine has them right now.
14 with a nod to Neal Stephenson and Buckminster Fuller.
I don't think Piketty is suggesting an outright Eurofederal wealth tax administered from Brussels. He's suggesting EU states cooperate in all adopting some level of wealth tax the proceeds of which are retained by the taxing government. That might indeed be driven by legislation pushed by the European Commission though.
In theory, sure. In practice, the EU member states can't even agree on harmonising corporation tax or a financial transaction tax, despite the Commission pushing for both.
17: And South Africa for along time, right? But has anyone done them not in extremis?
20: well, not in Europe, because free movement of capital, goods and labour is pretty much the whole point of the European Union.
20. How far back are you looking? I think they were much more common before Reagan/Thatcher, probably even more so before WWII. P. no doubt has the series on a spreadsheet somewhere. In extremis is relative of course.
20. How far back are you looking? I think they were much more common before Reagan/Thatcher, probably even more so before WWII. P. no doubt has the series on a spreadsheet somewhere. In extremis is relative of course.
I think it was mostly because of the slow death of Bretton Woods.
There was a time of course when the right was strongly opposed to free trade:*
http://bodley30.bodley.ox.ac.uk:8180/luna/servlet/s/9p2km5
http://bodley30.bodley.ox.ac.uk:8180/luna/servlet/s/pt93xo
http://bodley30.bodley.ox.ac.uk:8180/luna/servlet/s/6wcnj5
* excellent [deeply racist] posters.**
** Tories, never change.
20. How far back are you looking? I think they were much more common before Reagan/Thatcher, probably even more so before WWII. P. no doubt has the series on a spreadsheet somewhere. In extremis is relative of course.
Yeah, they were pretty much the norm until the end of Bretton Woods. And many countries outside the west still had them post-BW. As for modern times not in extremis, China has fairly restrictive controls (though gradually easing) and doesn't let the yuan float freely.
capital controls...... Cyprus imposed them last year in the wake of its banking system collapsing and, outside the EU, Ukraine has them right now.
As I understand it, Cypriots bought a shitload of bitcoin as one means of evading capital controls. In the future, hiding money inside of anatomized digital assets is increasingly going to be a thing, and any new system is going to have to contend with that.
So people will store money in their fingers?
I had the impression that except for maybe in emergencies, imposing capital controls makes you an international pariah. China is important enough to be able to ignore that, but few others are.
It's not really a pariah thing though your bankers won't be fans. It's that capital controls aren't really compatible with a floating fiat currency. If you don't float you have to peg to something, either USD, a currency basket, or a commodity, and then you lose levers on the money supply, or some other country or the mining industry sets your interest rates. It might work ok for small countries for a while but look at the messes the UK and Argentina got into with pegging exchange rates.
31, 32: Semi-repressed urges from graduate school.
My dearth of economic history knowledge, let me demonstrate it on the internet.
It's starting to come back to me.
Next question, was it all that bad to have arbitrary fixed exchange rates? They were adjusted from time to time as circumstances changed, but in a planned rather than floating way. Would George Soros have been able to do what he did if capital controls remained in place?
Piketty might point out, but doesn't as far as I recall, that les trente glorieuses coincided with the heyday of Bretton Woods and currency controls. If you're interested in leashing the rentiers, that might hold some lessons for you.
35
Trying to remember the appropriate econ class...
Isn't the issue with fixed exchange rates that when the for-real value of the currency goes up or down it means no one wants to use the "official" rate? States like Cuba and Venezuela have a fixed rate that everyone ignores as much as possible and uses the black market. Such countries are usually economic basket cases.
I remember huge currency "crises" back in the day when they were forced to (e.g.) devalue the UK pound. Governments fell.
37. That is the problem. If country A devalues its currency, people in country B who hold significant amounts of it take a bath. And they have no way of affecting the decision except to complain politically, because it's a political decision to devalue.
When Harold Wilson devalued the pound (from $2.76 to $2.40!), the government didn't fall. If anything it was strengthened.
I liked it better when British governments fell because of naked women in swimming pools.
39: Could be swimming pools full of money.
39. Remarkably the government didn't fall. The minister involved resigned - for lying to the House, not for shagging a woman who was also involved with a Soviet spy - but the government carried on for over a year and only lost the election by four seats.
There was a French President in the Belle Epoque whose heart gave out while he was on the job with his mistress (contemporary euphemism: connaissance). The first journo on the scene wanted to know if the great man had been conscious before he died, so he asked the cop who was fielding the press, "Avait-il sa connaissance?", to which the gendarme replied, "Non, elle est partie par l'autre escalier."
Didn't Super Mac resign well before the election? I guess that doesn't count as a government falling.
a good time to get some thoughts together about the book as a whole.
That sounds like something Walt can do.
Macmillan resigned due to ill health. It looked pretty genuine - he spent some days in hospital and was thought to have inoperable cancer. Home very much carried on where Macmillan left off.
35: I think Soros was able to break the exchange rate mechanism because the British government was trying to straddle all three points of the triangle in 33. They were keeping the currency trading within a set range while allowing the free flow of capital and retaining control over interest rates. Arguably they were trying to give up the latter in the run up to creating the Euro. But at any rate Soros basically called bullshit with millions of pounds because by then it was clear the UK had come in at the wrong exchange rate.
That's what I thought. So if we abandon this fixation on unfettered movement of capital, we can achieve more of what really matters to people.
Capital's pretty useful stuff for any trading economy. Not everyone can be a huge exporter like China. China also uses its capital controls and fixed interest rates to suppress local investment return for retail investors. Extreme reading of same:
http://brontecapital.blogspot.sg/2012/06/macroeconomics-of-chinese-kleptocracy.html
If you fix your exchange rate then you have to flap up and down with interest rates to adjust when your imports and exports change in value. Deciding that centrally is a heck of an information burden and easy to get wrong. Like any price control. Hence the black markets etc mentioned in 35.
The dilemma with most of this stuff is you want the capital without all the capitalists, ie without the rich dominating everything. If the problem is specific wealthy people, why not make that the policy solution too? That's why Piketty focuses on a wealth tax.