this post was submitted on 30 Aug 2023
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Free investor money ran out with the higher interest rates. The higher interest rates that were made to combat inflation, which again are mostly because of corporate greed.
Basically wages were going up, workers were getting a bigger slice of the pie against corporate profits - not that profits were dropping mind you, just not going up as fast as wages for a bit. So corporations as a block decided that the shock from supply chain distruptions means they get to raise prices. Somehow supply chain disruptions didn't show up on the bottom line though, so they got to make record profit, but we got record inflation. The gutted governments instead of taxing the windfall profits, because they can't do that because politics, were just watching as central banks increased interest rates that clobbered wages back.
It's just the system in action, when the 200 oligarchs holding the reins in America decide the workers of the "free world" have a bit too much, they crank up prices, which decreases wages even beyond the effect of said price increases.
I wonder how do you think taxes would reduce inflation? It could only work if you taxed low wage workers to hell.
Citation needed.
Citation for what? What do you expect taxes to do?
Citation needed to show that we can't curb inflation by taxing the wealthy but that the only way is to tax low wage workers more.
But let's say you do provide a citation that proves taxing the poor, as close to death as possible, is the only way to make capitalism continue working - then I'd say let's eat the rich because their promises of a better life are only meant for themselves.
Taxing the wealth was tried numerous times all over the world since Ancient Rome and it NEVER worked. Recent example is that in 1990 12 OECD countries had wealth tax, only 5 have it these days. More info here.
So the only two option you have is to either increase income tax or VAT. Income taxes do not affect the rich as they rarely have any income and live off their wealth and dividends. Increasing VAT will also disproportionately affect the poor. This is why I said that taxes will just kill off the poor.
What's the solution? Increase base rates! Yes, they do affect mortgages of home owners from lower and middle classes, but they affect the rich a lot more. Let me explain.
So, let's rewind a few years back when rates were super low. Imagine you're rich, live in London and you either own your £20m house outright or you have a mortgage, but your equity is high, like 50%+. Now you don't have an income, but you need £50k cash for pocket money and you also want to buy a new car for £150k. You don't want to sell your equities and stocks, that's just dumb. And you don't want to buy a car through financing because interest rates will be high like 8% or so. Plus financing won't give you a deposit and £50k pocket money. So what do you do? You remortgage your house, lower your equity by £200k, you get an interest rate something like 1.2% and you pay zero bloody taxes. And you get £200k cash in hand to buy your car outright.
But now the governments all over the world are increasing the rates and you can't remortgage your house at 1.2% anymore. Now your interest rate will be 8% for example. Now you will be losing quite a lot of money if you do so. So will you remortgage? I won't in their shoes. I would rather wait for a bit for the markets to calm down. And those who can't wait will inject quite a bit of money into the state budget.
So, to sum things up. Taxes affect the poor, base rates affect the rich. What needs to be done additionally is a safety net for home buyers from low and middle classes to help them out during these times. This is the bit that's missing, not taxes.
More money in the hands of working class people + equal or less of working class goods = essentials worth more
The problem would be that working class people need different stuff than rich people spend/invest a bulk of their money on. If a billionaire can't afford a yacht or a mansion that won't effect the price of bread or single family homes if the working class still has an inflated money supply.
I'm not an economists, nor do I have the solutions to any problems, but I think the above concept is pretty set in stone.
Or maybe instead of building a yacht they would build more public housing. If the workers could decide between the two, then I would think there would be more homes and less mega yachts.
These idiots think that inflation is driven by spending, so if people are buying and investing that prices will rise.
So they think that raising rates will reduce access to loans/debt which will reduce consumer spending which will reduce inflation.
The running explanation is that an inflation rate of 2% is "healthy" and prevents hoarding.
2% inflation means that my money is worth less tomorrow, and experts seem to agree that that means I'm going to spend my money "correctly".
2% deflation means that my money is worth more tomorrow, and experts seem to agree that that means I'm going to starve myself and live like a hermit while hoarding my money because nobody would ever buy anything if it would be cheaper next year.
It's all bullshit.
It's not bullshit, that's the thing.