Would Dem's upend the tax preferences of retirement accounts like 401(k) ?

Discussion in 'Political Discussions' started by Lerner, Oct 18, 2020.

  1. Johann

    Johann Well-Known Member

    They could -- but maybe they don't want to do more damage ... I think it was Steve F. who reported in Sept. that something like 22% of all the US Dollars in existence had been printed during 2020. That's a WHOLE bunch of "quantitative easing" that could have far-reaching consequences. The medicine appears to work - till the patient becomes addicted. Then you find you've only masked the symptoms. There is no cure.

    I've tried to tell the patient, but he's in serious denial. I'll let you other docs take over the case. My golf day.
    Last edited: Nov 6, 2020
  2. Stanislav

    Stanislav Well-Known Member

    ...which is approximately the value of an average mortgage. Most families can feed their children and service the mortgage at the same time; and the rate US can borrow on is like 0.1% pa.
    It's just THIS family decided that children are not to be fed and are to fend for themselves as a moral choice - "to build character" or something. OTOH borrowing money so Daddy can inflate his stock portfolio via buybacks is proper and right, praise Supply Side Jesus!
  3. Johann

    Johann Well-Known Member

    Odd - to say the least. There was a real guy, a POS who made the "moral choice" not to (1) work or (2) accept help from wealthy friends, because both were "against his principles." He went that route for at least 16 years (and his wife LET him) and at least one (and possibly others) of his children starved to death in consequence. His name - Karl Marx. What an odd and tragic juxtaposition, we have here!
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  4. Stanislav

    Stanislav Well-Known Member

  5. Rich Douglas

    Rich Douglas Well-Known Member


    It isn't just about math. There are a lot of other factors that enter into the perception of value. For example, a stock split is a good thing. But why? Just doubling the number of stocks issued should not change the value, right? It's like slicing a pizza into 6 pieces or 8--same amount of pizza, right? Yes and no. Yes, literally, but no if you're the 7th or 8th person in line. Well, a stock split leave you, technically, with the same proportion of the company, but those stock prices tend to go up, so a split is a good thing.

    Quantitative easing can have a similar, non-mathematical impact.
  6. Johann

    Johann Well-Known Member

    Stock splits and quantitative easing are markedly different - in reason and effect.

    A stock split makes shares sell better, due to the new, attractive lower price. More people can afford a $20 share than a $40 share. You haven't done anything to water down the capitalization. There were a million shares at $40. That's $40 million. Now there are two million shares at $20 - same $40 million. Also, in theory, (and often in practice) those $20 shares are likely to rise some. There will be increased bidding due to new entrants in the market and some holding-and-buying by the old crowd in anticipation of a price rise from $20. If that happens (as it often does) - Everyone who plays - wins. For how long, who knows? Stocks go up - stocks go down.

    "Quantitative easing" - Simply printing more money isn't like that. You DO water down the relative value of the dollars in the pile. I remember the "Lower Slobbovian Rasbucknik" situation in Al Capp's "Li'l Abner" cartoons in the 50s. There was only one thing on earth worth less than a billion Rasbuckniks - that was two billion of 'em. An object lesson for us then - and today.
    Last edited: Nov 7, 2020
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  7. Lerner

    Lerner Well-Known Member

    For most people is not the number but the value, what you can do with this the money.
    Food, Mortgage, Rent, Education, Medical expenses, Cloths, Gas etc etc.
    A good friend recently sold his mansion in NY and relocated to small town near Flagstaff, AZ.
    Everything is more affordable there. Nice clean town. The money for the house sale even after taxes should be huge addition to his retirement.
    He also has a condo in Florida. So value of his money in his opinion increased.

    With 401K one estimates and divides the supplemental funds to their SS pension and other pensions from employers if they have one.
    People I know if they look at last 10 years the value of their 401 K gave an ave 4% a year. So this maybe covering rise in the cost of living.
    Buying power maybe decreased depends on what one is trying to buy.
  8. Johann

    Johann Well-Known Member

    Exactly. And if you dilute it by printing more (increasing the quantity) of money - the purchasing power of each dollar is diluted. You get less for your dollar.

    Not like a stock split. You get the same proportion of a company's stock ($40). Before you got a $40 share. After, you get two $20 shares. You haven't devalued anything - just cut the product into two pieces and charge the same price for the same quantity - No overall change in the total value of all shares.

    The stock split is more like withdrawing a bunch of $10 bills from circulation and issuing two $5 bills for each one withdrawn. You've changed the denomination - but done nothing to the total. No increase in money - no devaluation in terms of purchasing power.
    Last edited: Nov 7, 2020
  9. SpoonyNix

    SpoonyNix Active Member

    US can borrow at under 1%..... until it can't. It's still generally the world's reserve currency at this point. That won't go on indefinitely. BRICS, petro$, swift, etc. We'll see a bigger redistribution of the currency basket.

    Total debt is over $27,000,000,000,000 now. 10-yr treasuries are under 1%. Net interest was around 8% of fed budget when I last looked, but that was pre-plandemic. It's probably a LOT less than that now, but this has been some kinda year. What happens when 10-year treasuries hit 3% again? 5%?

    What's "universal" medical going to add to the amount financed? "Free" college? Student loan forgiveness? The infrastructure improvements that keep getting pushed back? Federal pensions? The private pension bailouts that'll probably be coming? Municipal and state bailouts?

    That $1,300,000,000,000 annual figure for Medicare/Medicaid isn't going down. Nor is the $1,100,000,000,000 annually for social insecurity. Guaranteed annual income? Bwahahahaha- Reparations?!?

    Do you know what reserve ratios are for US banks now? Take a guess. https://www.federalreserve.gov/monetarypolicy/reservereq.htm
    You know, reserve ratios have plummeted, but derivatives exposure sure the heck hasn't!

    You say, well, we'll tax the rich. Tax revenues as a percentage of GDP only go so high. The truly wealthy have mobility and options. Many of them are behind the "populist" push.

    You're only able to kick the can for so long. The USA is not exceptional.
    Johann likes this.
  10. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Companies do forward stock splits because it make their stock more accessible to smaller investors. The bump comes from that and from the temporary increase in positive attention to the things the company is doing right that led their stock price to be higher than that of competitors.

    None of this applies to currencies.

    It's true there are aspects of economics that are not always about math, but we're not talking about an individual's perception of the value of something, we're talking about the demonstrable macroeconomic effects of currency inflation.
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  11. Maniac Craniac

    Maniac Craniac Moderator Staff Member

    Scarcity is an ineluctable requirement for currency to have value.

    Wandering Israelite #1: Hey, how many arrows would you trade me for 25 pounds of manna?

    Wandering Israelite #2: Bruh, I already got 25 pounds of manna.
    Johann likes this.
  12. Johann

    Johann Well-Known Member

    How about some propio MBAs then? What? ...You got EIGHTEEN of those? Oh, well... :(
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