Crisis of Democracy
Lähetetty: 08.01.2012 13:59The development of society is funded by taxation. Taxes are paid on nearly all trading (VAT), earnings, and income. However, for some reason, tax exemption has been granted to the financial markets, for example on stock, bond, and currency trading activities. According to some conservative estimates, the size of the financial markets is more than five times the size of all the national budgets of the world. Other business areas have to pay high taxes, because most of the financial earning activities do not pay any taxes at all.
The money used in business, trade, and industry, will gradually be returned to society. However, the money that accumulates in the financial markets is not “recycled”, because they do not pay taxes. Currently we have a number of systems, which automatically pump money from physical product markets into financial markets beyond the reach of taxation. For example, an interest rate of a few percent on a loan sounds small, but the compound interest on state loans calculated over ten or fifty years is huge. The banks create loan money out of nothing, so their production profits are high.
The steady development of society is desirable, because rational decisions are easier to make in stable conditions. However, the financial markets have just the opposite target, because capitals and funds are easier and faster to grow within unstable markets, where boom-bust cycles continuously follow each other. The current sad situation is that financial markets collect the profits and society bears the risks when states buy junk bonds from private banks.
We need a new sustainable economic system, where money flows through the whole society and runs industry, trade and transport, like water runs power plants and is recycled from rain to rivers, sea and back to clouds. The first step is the taxation of the stock and currency markets using the so-called Tobin tax. This will open the dam that has blocked the fruitful recycling of money in society. This type of taxation will also guide the markets from short-term to long-term investments, which will stabilize the development of our society. Taxation and registration of transactions are powerful tools, which helps to regulate currency markets fluctuations.
The main duty of the financial markets is the funding of the real economy, which produces our goods and services. However, the situation is turned upside down - the tool has become a dictator of the society. Society has gradually drifted into the same kind of blind alley as a hundred years ago, when most of the funds, resources, and land properties were accumulated by the nobility, who had various privileges including tax exemption. A hundred years ago, the removal of privileges and releasing of locked property for “recycling” using taxation solved this problem. Today we must again open the deadlocks of our economic system and start the sustainable recycling of money.
Skilful statesmen also put the wheels in motion after both World Wars when the infrastructure of the whole society was broken. The current situation is much easier, because we do not have a lack of resources, raw materials, knowledge, or even money. The main problem is that the electronic money is lying in the wrong places or running useless activities. Again we need wise statesmen, who will return the power to democratically elected parliaments using taxation and tight worldwide registration of financial transactions with heavy sanctions for criminal activities.
The current democratic system encourages states to fund their budgets using excessive loans, because even incompetent parliamentarians can offer quick profits to the voters with loans. This fundamental issue does not depend on the name of the currency, because most major democratic states are up to the neck in debt. Nor does this problem depend on the size of the state. The main reason is that a clear ban or limit on borrowing is missing from the constitution of our nations.
In China, this kind of problem does not exist, because politicians do not need to woo the voters. The party chooses 15 qualified engineers in different fields to lead the building of society. In democratic countries, the media and tabloid press focus on secondary issues. This makes it difficult to find qualified candidates for the most important tasks of society, because they will be sacrificed on the altar of hungry journalists and paparazzi, who do not need solid evidence. This means that people who like to talk and enjoy publicity will be elected to the parliaments. They do not know how to create new material and emotional welfare, but they focus on arguing and splitting up existing assets. Inventing new names for old solutions is not enough; we need new innovative solutions and the courage to apply them.
Quantitative easing is the traditional way to solve excess loan problems, i.e. the central bank simply prints more notes. Today, they do not even need to run the printing machines; they simply create electronic money out of thin air. However, the essential question is: [u]Who will get this money?[/u] It seems that this money will end up in private banks and financial markets, because states buy junk bonds without getting any return. This simply means that states reward financial institutions for their freewheeling business. Instead, in my opinion, states should take over the banks and financial institutions which cannot survive without selling their junk loans. We should follow the normal rules of the market economy. Later on, states may sell these back to the private markets in boom conditions to get our money back.
Quantitative easing will evaporate the debts and money in the bank accounts, because it will speed up inflation. It will also lead to a massive redistribution of assets, which will particularly benefit those who have a lot of loans, real estate and shares. At the same time, the value of our currency will devalue and prices of foreign goods will rise. However, this means that our vital foreign trade will pick up again. The damage of quantitative easing may be reduced by focusing taxation on the people who gain the most benefit from inflation.
A return back to national sovereign states and currencies is not a wise solution; we have already tested these options with depressing results. Instead, we need much more tighter economic rules for states and federations. We need majority rule, because the requirement for consensus paralyzes decision-making. We also need controlled quantitative easing, which will decrease the value of our currency to a competitive level with the Chinese currency. The present exchange rate is killing our industry and economy. However, the most important challenge is to restore power back to democratic parliaments from the financial markets and to criminalize the tax heavens.
Antti Roine, Ulvila 18.12.2011
The money used in business, trade, and industry, will gradually be returned to society. However, the money that accumulates in the financial markets is not “recycled”, because they do not pay taxes. Currently we have a number of systems, which automatically pump money from physical product markets into financial markets beyond the reach of taxation. For example, an interest rate of a few percent on a loan sounds small, but the compound interest on state loans calculated over ten or fifty years is huge. The banks create loan money out of nothing, so their production profits are high.
The steady development of society is desirable, because rational decisions are easier to make in stable conditions. However, the financial markets have just the opposite target, because capitals and funds are easier and faster to grow within unstable markets, where boom-bust cycles continuously follow each other. The current sad situation is that financial markets collect the profits and society bears the risks when states buy junk bonds from private banks.
We need a new sustainable economic system, where money flows through the whole society and runs industry, trade and transport, like water runs power plants and is recycled from rain to rivers, sea and back to clouds. The first step is the taxation of the stock and currency markets using the so-called Tobin tax. This will open the dam that has blocked the fruitful recycling of money in society. This type of taxation will also guide the markets from short-term to long-term investments, which will stabilize the development of our society. Taxation and registration of transactions are powerful tools, which helps to regulate currency markets fluctuations.
The main duty of the financial markets is the funding of the real economy, which produces our goods and services. However, the situation is turned upside down - the tool has become a dictator of the society. Society has gradually drifted into the same kind of blind alley as a hundred years ago, when most of the funds, resources, and land properties were accumulated by the nobility, who had various privileges including tax exemption. A hundred years ago, the removal of privileges and releasing of locked property for “recycling” using taxation solved this problem. Today we must again open the deadlocks of our economic system and start the sustainable recycling of money.
Skilful statesmen also put the wheels in motion after both World Wars when the infrastructure of the whole society was broken. The current situation is much easier, because we do not have a lack of resources, raw materials, knowledge, or even money. The main problem is that the electronic money is lying in the wrong places or running useless activities. Again we need wise statesmen, who will return the power to democratically elected parliaments using taxation and tight worldwide registration of financial transactions with heavy sanctions for criminal activities.
The current democratic system encourages states to fund their budgets using excessive loans, because even incompetent parliamentarians can offer quick profits to the voters with loans. This fundamental issue does not depend on the name of the currency, because most major democratic states are up to the neck in debt. Nor does this problem depend on the size of the state. The main reason is that a clear ban or limit on borrowing is missing from the constitution of our nations.
In China, this kind of problem does not exist, because politicians do not need to woo the voters. The party chooses 15 qualified engineers in different fields to lead the building of society. In democratic countries, the media and tabloid press focus on secondary issues. This makes it difficult to find qualified candidates for the most important tasks of society, because they will be sacrificed on the altar of hungry journalists and paparazzi, who do not need solid evidence. This means that people who like to talk and enjoy publicity will be elected to the parliaments. They do not know how to create new material and emotional welfare, but they focus on arguing and splitting up existing assets. Inventing new names for old solutions is not enough; we need new innovative solutions and the courage to apply them.
Quantitative easing is the traditional way to solve excess loan problems, i.e. the central bank simply prints more notes. Today, they do not even need to run the printing machines; they simply create electronic money out of thin air. However, the essential question is: [u]Who will get this money?[/u] It seems that this money will end up in private banks and financial markets, because states buy junk bonds without getting any return. This simply means that states reward financial institutions for their freewheeling business. Instead, in my opinion, states should take over the banks and financial institutions which cannot survive without selling their junk loans. We should follow the normal rules of the market economy. Later on, states may sell these back to the private markets in boom conditions to get our money back.
Quantitative easing will evaporate the debts and money in the bank accounts, because it will speed up inflation. It will also lead to a massive redistribution of assets, which will particularly benefit those who have a lot of loans, real estate and shares. At the same time, the value of our currency will devalue and prices of foreign goods will rise. However, this means that our vital foreign trade will pick up again. The damage of quantitative easing may be reduced by focusing taxation on the people who gain the most benefit from inflation.
A return back to national sovereign states and currencies is not a wise solution; we have already tested these options with depressing results. Instead, we need much more tighter economic rules for states and federations. We need majority rule, because the requirement for consensus paralyzes decision-making. We also need controlled quantitative easing, which will decrease the value of our currency to a competitive level with the Chinese currency. The present exchange rate is killing our industry and economy. However, the most important challenge is to restore power back to democratic parliaments from the financial markets and to criminalize the tax heavens.
Antti Roine, Ulvila 18.12.2011