Posted Apr 13, 2014 by Martin Armstrong
Just what we need – another economist with ZERO real work experience. The latest economist destined to destroy the world in the same manner as Karl Marx is Thomas Piketty and his new book Capital in the Twenty-First Century that is destined to perhaps kill more people than Marx ever did.
Piketty is only focused on the disparity between rich and poor. He too sees this as evil rather than trying to figure out HOW the economy functions. Piketty is off on a quest to control the world and place even more of our rights, privileges, and immunities into the hands of guess who – government! They will love this guy in Congress and Parliaments of Europe for he is indeed a man of the times and right up the alley that corrupt politicians are looking for – someone to justify the total destruction of anyone who produces wealth and to hand it to those who do not – namely them.
Piketty, of course, fails to address the fact that we have payroll taxes and that the government is borrowing from the poor every year and hand them refund checks that they are too stupid to realize is their own money the politicians stole and did not have the decency to pay them ANY interest. Government rob the average person and possess the guns and tanks whenever the people get upset. It is like their treatment of Snowden that he is a traitor for telling the people what the government has been doing is illegal.
Piketty claims the current level of rising wealth inequality imperils the very future of capitalism. He claims he has proved it with his book – good one! He totally fails to even comprehend HOW the global economy functions or that John Maynard Keynes (1883-1946) in the end admitted his ideas were wrong and that he had hoped that Adam Smith’s Invisible Hand would save Britain. Here is a picture of Keynes at Bretton Woods discussing how to save the world with government intervention speaking to Roosevelts’ Henry Morgenthau, Jr. (1891- 1967) – Secretary of the Treasury.
I have received many emails arguing that they went after Princeton Economics for two reasons – (1) we stood against the NYC manipulating banks and (2) we demonstrated that Smith was right and that the academic community in economics is out to destroy the world with good intentions. I never took this second part as serious, but I concede, it is a startling to see Piketty’s thesis being so embraced. I truly fear for the future of my family with another Marxist on the loose like this. Will there even be a future? Somebody needs to tell this guy that even the Ten Commandments says he is DEAD WRONG! As I have stated before, start in schools and just give everyone the same grade regardless if they show up to class or not. There is “social justice” in education.
Piketty fails to understand that capitalism is not about money, but freedom, and socialism is all about government control. He fails to address the results of this socialism that 70% of the national debt is accumulative interest that did nothing to create “social justice”. He does not comprehend that if 40% of a nation’s debt is held offshore, then 40% of that interest stimulates foreign markets undermining his “social justice”.
Piketty actually argues that capitalism and inequality need each other insofar as capitalism requires inequality of wealth to function and stimulates risk-taking and creates work effort and the counter-balance is governments try to stem this inequality with taxes on wealth, capital, inheritance and property to create “social justice”, or in plain words, to kill the goose that lays the golden egg.
Piketty then, amazingly claims, he has studied 200 years of data to prove capitalism is wrong. Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially. In other words, those who invest and save make more money than those who do not. Gee! This is astonishing. Note that within his little sample of just 200 years, he has to concede there are exceptions to his theory. There should be NONE if you are going to destroy the world!
Thomas Piketty then argues you should not be allowed effectively to leave your children anything – it belongs to the state. He claims the process is made worse by inheritance. He then argues against performance pay for a job and that CEOs of companies should not be allowed extravagant pay for what he calls “super managers”. High executive pay has nothing to do with real merit, Piketty argues. He then refers to Europe and Japan as examples, but fails to mention their economies are the worst. He argues that these “super managers” are unique to Anglo-Saxon culture where it is the social norm permitted by the ideology of “meritocratic extremism”. Effectively, because he is incapable of starting a business and making big money, nobody else should be allowed to do so either. He calls this self-serving greed to keep up with the other rich. This is the cornerstone of Piketty’s thinking – it is the same as Marx and is simply jealous of what others have and he does not. Therefore, he creates fictional studies to argue against the very same thing Marx did – inequality of wealth.
This Inequality of wealth in Europe and US, he points out, is twice the inequality of income for the top 10%. Piketty focuses on what they have, rather than what they produce, and is fixated with their wealth being 60% to 70% of all wealth while their income is only about 25% to 35%. He argues that this concentration of wealth is at pre-First World War levels and will move only higher like global warming to 19th century levels. He argues that the interaction between wealth and income is key and he argues that the great wealth adds unearned “rentier” income to “earned” income.
Piketty glosses over a lot a critical issues here. First, Marx was especially angry at the British system of long-lease where the poor paid the value of the property once every 100 years but could never own it – freehold. This is what sent many packing to the USA where no such system was in place. He totally FAILS to realize that the British long-lease system has merely been displaced with local taxes in the USA. The average person will pay an equal amount of taxes on the property over the course of 30 years and then they are fooled thinking they made a profit looking at only their original cost EXCLUDING taxes. Just as under the British long-lease system that PREVENTED the property from transferring to the poor, government has exploited the same result with taxes. If you retire and earn NO income, you still have to pay taxes or they will seize your home. You can NEVER own your property free and clear.
Piketty argues that the period between 1910 and 1950 is when that inequality was reduced from the old extravagances of the robber baron era America. He totally misreads this period and claims that it took war and depression to arrest the inequality dynamic, along with the need to introduce high taxes on high incomes. This he sees as the solution to wipe out unearned incomes he claims will lead to sustained social peace. This assumes government is good and not corrupt and will not steal more for themselves as always. Piketty then writes that this alarming speed of the rich to make more money is “potentially terrifying”. He fails to understand that with Europe in World War I and II, the capital fled to the USA and created such a boom from that concentration that everyone benefited. It was not raising taxes and the New Deal. His timeline is complete exaggerated.
With the rise of government and billions regulations trying to rewrite the Ten Commandments, we are facing a trend that is scary. The only entities that are prospering and growing are the big corporations for they are the only entities capable of dealing with government. Look at Obamacare and the new regulations that kick in if you have more than 25 employees. This will keep small business small. In Europe, where taxes and regulation are higher, there are virtually no new entrepreneurs because people are conditioned to work for major companies rather than experience the risk to start something on their own.
In Russia, communism was replaced with oligarchy and economic growth has declined. In China, entrepreneurship exploded and so did their economy rising from the dust of communism to the second largest in the world passing Europe. Over-regulation can suppress economic growth faster than his imagined threat of the disparity of wealth. He still argues the same nonsense as Marx claiming the “past devours the future”. Because of the British Long-Lease system, the Duke of Westminster and the Earl of Cadogan are two of the richest men in Britain because their families owned the fields in Mayfair and Chelsea and those areas are on long-lease.
Piketty is completely fixated with people who earn more than he does and inherited something from their parents. He argues that if you have the capacity to own in an era when the returns exceed those of wages and output, you will quickly become disproportionately and progressively richer. The incentive is to be a “rentier” rather than a risk-taker. Piketty sees no value in anything, essentially, and claims further that big companies do not need money for innovation just sit back and harvest their returns and tax breaks, tax shelters and compound interest will do the rest. He saw no value in anything, yet cannot grasp the simplest concept – who will create the jobs? He argues that the “rich” are effective at protecting their wealth from taxation and that progressively the proportion of the total tax burden shouldered by those on middle incomes has risen. I seriously doubt this guy has ever been in a board meeting of a major firm.
If you look at the numbers, even in Britain the top 1% pays 33% of all income tax. The consumption taxes account for 45% of all revenue. He fails to address the total cost of government or the fact that they produce NOTHING towards the wealth of a nation and only consume it. You cannot reasonable expect the “rich” to continue to work as hard and pay 80% of all taxes as he advocates. Why work if you cannot keep your earnings? The more social programs government creates, the higher the burden of paying for public services fall upon the people who use them while politicians always argue they will force the rich to pay so they get something for nothing.
Piketty only looks at the fact that the rich get ever richer and more detached from the societies of which they are part: not by merit or hard work he insists, but simply because they are lucky enough to be in command of capital he does not have. Sound like Marx and it is simply envy. He fails completely to grasp the idea that if you smile at another person, the odds are they will smile back at you. Be critical of others, and they’ll respond in kind. Try to grab their money, and they will hide it and NOT invest. This you may call the Law of Reciprocity where whatever you project, you will get back. Even the Bible states that “Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver” (Corinthians 9:7). But Marxism is all about taking, not giving. The Bible was never as greedy as government for it simply stated you should give a tithe, which is defined as one tenth of your annual produce or earnings, formerly taken as a tax for the support of the church and clergy – not 80%.
Pikitty focuses on this human inherent sense of social justice claiming it has been suspended. He fails to address the wild changes in tax rates or the introductiuon of the payroll tax for World War II. Yet he further argues that the solution is more economic slavery where the top income tax rate should be raised to 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax. Piketty claims that the GOAL of economists is to make “social justice” and support total economic slavery where we are all just mindless drones working for the state.
Somebody need to tell this guy who may end up killing more people than Marx, that 200 years is not enough. Rome fell because of his “social justice” and they kept raising taxes on property that people just walked away. The first city to ever reach 1 million in population in 180AD was not matched until London in the Victorian period.
This is the problem with those who PRETEND to do research. They start with an ASSUMPTION and everything they look at is constructed to support that ASSUMPTION. Only Adam Smith approached his research to try to understand HOW it functions – Piketty began with an idea and merely extracted the data that supports it ignoring the facts. When I read this stuff, I just want to leave and live on a boat sailing in circles to stay as far away from these crazy people who will destroy the world under the pretense of making it better. The scary part – people are listening.