When I work for financial advisors and investors I like to get them talking. It's not hard to do. I do the same when I'm with bankers or people in the insurance industry. It's really easy to get people talking about their own lives and business culture. They usually air the grievances of their particular perspective, one from within their industry.
Everyone else is the bad guy. They are (for the most part) the pure ones. There's corruption everywhere. No one for a moment disputes that. But it's always the other sector and if there's corruption in their own facet of the industry then it's the other division, the other office, the competitor with the different logo.
Listening to all of this as an outsider my perspective is different. I'm very interested and try and ask reasonably intelligent questions. If people detect my interest and if I'm at all conversant they begin to open up. It's very interesting.
My wife and not a few of my friends joke that I should have been a bartender. There's something about me that makes people want to unload. I learn a lot not just about this or that business but about people. They rarely know what I'm thinking. When it comes to these particular industries I'm usually not having very nice thoughts but they don't seem to be able to tell. They're unloading and venting... I'm listening and learning.
In the end I'm sure it will be no surprise if I point out that they're all corrupt in their own way, even those who are blind to their own part in the overall functioning of the machine.
Capitalism has its own set of ethics. It's really a parallel or even a competing worldview with Christianity. So many people have confused the two.
Efficiency is a moral imperative in the Capitalist system. You owe it to your investors and it's a good in and of itself.
Living wages and loyalty to workers? No, that's established by contract. There's no moral obligation there beyond what is contracted.
At least that's what we hear and there are not a few who will work diligently to contort Bible passages to support this view. In truth, they're syncretists and by reading one system into another they have created a hybrid.
So it's a big racket. What do we do about it?
Dave Ramsey would say that we more or less embrace it. If someone puts it that way to him he will deny it. He wouldn't want the issue framed that way. But after listening to his programme for many years... while driving in the car... I have concluded that's more or less his standpoint. He's down on debt but his overall attitude toward money and business are essentially in agreement with what we find in the world.
The person I mentioned at the beginning of part one, when facing the winds of economic opposition took a different tack. Well, maybe. It depends on how you want to look at it.
We briefly talked about the Federal Reserve System. He was hinting at the conspiratorial elements... Jekyll Island etc.... I didn't want to go there. I don't really consider that stuff to be that unusual and sometimes people are reading more into it than what's actually there. As I've said before I believe the 'conspiracy' is open. It's simply the way power works. It's not hidden, it's just not broadcasted. It's complicated but can be understood.
There are conspiracies out there but again if you understand how warfare works, how intelligence agencies learn to think asymmetrically then some of it isn't terribly shocking or controversial.
So we agreed, the whole thing is a big racket. By tinkering with the interest rates and through fractional reserve banking the powers that be are trying to create permanent low-scale inflation. They want to control the cash flow, restricting it by raising rates and at times promote investment through lowering of rates. Inflation is built in to the system to promote investment. Through these mechanisms they're trying to eliminate the swings and surges of the business cycle. They're trying to soften the periods of 'adjustment' that can sometimes be devastating to an economy. Permanent inflation promotes investment and is viewed as a greater good.
And as I've mentioned before in a technological society and an age of Total War these 'swings' and 'adjustments' can be seen as threats to security. Even the economy is integrated into the war machine. Actually that's hardly anything new.
Of course permanent inflation means a steady devaluation of our money. None of this will be information to Ron Paul followers. This is pretty standard stuff. This is the part they get really upset about. Devaluation to them is thievery.
However I don't think their solutions will work either. One I think they have a simplistic view of how the economy is integrated in with other national concerns related to everything from security to resources. Two, I think their adherence to the Gold Standard also reflects this misunderstanding. While the Gold Standard seems a responsible and sensible in an era of global economic activity it can prove disastrous. The Paulians won't agree but many economists believe the adherence to the Gold Standard played a large role in perpetuating the Great Depression and few want to see a return to it.
Even on the gold standard the value of money is subject to fluctuation. I guess in that case they're okay with it because it's the force of the market, an aspect of the Invisible Hand which determines the value not any deliberate administrative attempt.
Fiat money is rather disconcerting to many. Instead of the market deciding value it's determined by a secretive cabal. And yet the cabal wants to see the nation prosper. It keeps them rich too. They're highly invested in the American project.
While fiat currencies may seem unethical to some, I find many of the basic definitions of 'money' employed by Conservatives can be childish and reductionist and utterly failing to understand what money actually represents. Power (which is what money is) ebbs and flows with cultural and geo-political tides. Its value is often tied more to emotion and perception than any tangible value whether it's pegged to shiny bars and bullion or not. Many of the scientific objective definitions of money fail because they are divorced from both emotional perception and ethics.
Is economics more than merely a scientific systemic arrangement of man's financial transactions? Absolutely.
Do I like or support fiat currencies? Of course not. But I don't see any other way in our complex system. If anyone hasn't noticed, our world is fallen. We're not here to reform Caesar's currency. We render to him the taxes that are due, which he gets to set. If he's playing with the value of money, then that too should be no surprise. It's nothing new. The system is not moral and never will be.
Besides, there are other ways to affect the value of currency, even commodity currency. Economic shifts and security threats change behaviour and the value of the currency changes because demand itself changes. That's the way the cycle works. Finding moral confirmation in the Invisible Hand is little more than philosophical speculation. Those Christians who equate Smith's Hand with Providence have not understood it. Again, Smith wasn't thinking of God's reign and rule but a universal law of nature akin to gravity. But there's one difference, Smith's law cannot be empirically verified. That's not a problem for me but it sure would be for those of that school. Capitalism in the end is from my vantage point, a faith-based system, a religion in and of itself with its own set of ethics.
Again (back to my conversation) we agreed, it's all a big racket. The system is rigged, and I contend it would end up just as rigged even if the Ron Paul faction took over and reformed it. Laissez-faire leads to monopolies and for monopolies the next move is to restrict the market itself and keep it protected. The only way to stop this is... regulation. And if you regulate then the Invisible Hand and Laissez-faire are repudiated. Once you start regulating you no longer arguing over whether there ought to be regulation but simply how much of it.
The person I was talking with has decided to beat the system. By this I mean he's going to beat them at their own game.
His solution to this problem was to make as much money as he could and find ways to insulate the money and protect it from the tax regime. He had formed a family trust. This is an old trick utilized by the Uber-rich to hide their assets. You personally own next to nothing. The trust owns the assets but you are allowed to 'use' them. You 'use' the house, the furniture, the vehicles etc. without actually owning them. There are tax protections and numerous other advantages. They can be expensive to maintain but for some people it's well worth it.
In addition the trust moneys are of course invested and the goal is to keep up a good rate of return that will beat the rate of inflation. You're always trying to keep ahead of your money being devalued. If it's parked in a bank account you're literally losing money. Today's interest rates are well below the inflation rate.
Even irrevocable trusts can be subject to audit and at times the IRS will recognize them for what they are... a sham, an attempt to hide money and avoid taxation.
Trusts are an old secret among the wealthy. On the one hand it's a way to lock up and protect your money. On the other hand it's just another way to avoid taxes. We often hear a lot of criticism in this country about the progressive income tax but when you really look into the issue you will discover that in fact it is just one facet of a larger question.
The progressive income tax helps (in part) to even the tax playing field. But the wealthy have established so many loopholes that in many ways it really only hurts the upper end of the middle class.
The Social Security Tax is in fact regressive. Once you pass about $115,000 in income you no longer pay it. The guy making $100,000 a year pays the same amount as the guy making a million or ten million.
Capital Gains tax rates are considerably lower that the income tax rate. This was briefly in the public spotlight during the 2012 US presidential election when it was revealed that Romney paid a tax rate under 15%, considerably less than someone making $100,000 a year.
Trusts simply represent another way to avoid paying taxes. These are all ways to beat the system.
Right now there's a great deal of criticism over all the tax breaks and subsidies that are passed on to the middle and lower classes. The Republicans would like to eliminate the mortgage interest tax deduction and many would like to see the child tax credit eliminated. There's rampant criticism over the fact that through these deductions many middle and lower class Americans avoid having to pay any income tax at all.
And yet these things have been passed because the progressive income tax system hasn't worked. There are too many people that classify their income as something other than 'income'... wages and tips. No one can actually seem to reform the tax code, so all the credits and deductions and stop gaps are provisional measures to help the middle and lower classes which are progressively being crushed.
Would a flat tax even things up? There are many facets to this question as well. But before you could even engage such a question, many legal terms would have to be changed. Capital Gains would need to be treated as 'income' etc...
As I've mentioned before many 'ministries' play a similar game. While not exactly the same as a Trust, they play a financial game which locks up assets in the 'ministry' but still allow them to be utilized. Houses, cars, utilities, travel, clothes allowances etc... can all be paid for by the ministry. The ministry is essentially a non-profit corporation. The pastor or other agent can greatly reduce taxable income and yet live a fairly lavish lifestyle. Of course when you move up into the upper echelon of scam television ministers the assets can include mansions and jets. And yet they belong to the ministry, not the individual person.
Many of these ministries, even the ones that are supposedly sound employ wives and family members who are permitted to make pretty exorbitant salaries and depending on the circumstance can also utilize some of the tax sheltering aspects.
CONTINUE READING PART 3
CONTINUE READING PART 3