Warren Buffet speaks common sense; alarms most Republicans

[Aeson]

Giving people more money doesn't make bread appear. There's still the same amount of bread in the country as there was before you taxed Warren Buffett.

Giving people who can't afford bread (taking it from people who will still be able to afford bread) would increase demand for bread and thus the market will adjust to increase production of bread.

It may decrease demand for something else, but it certainly would result in more bread given the current situation.

[Ben Kenobi]

Gribbler:

You aren't aware of the fact that Obama's put black folks back to the early 80's? Obamanomics has hurt minorities especially. He's put more black men outta work since Jim Crow.

[Dauphin]

I swear; the more I read of this thread the more I can feel my IQ drop. And I am also reminded of this quote:

"Yeah, I was faced with that terrible thing, when somebody shows you their work and everything about it is so ****… so… you don’t really know where to start"

[Aeson]

The government can achieve precisely the same end by just printing dollars and then giving them to people. The "tax Warren Buffet" step is completely unnecessary and irrelevant.

If we follow to the logical conclusion of this statement, we can just get rid of taxes on Buffet altogether. Then the next richest taxpayer. And so on and so forth until none of us pay taxes. Then everyone will have piles of cash to burn (literally)

[Kuciwalker]

Giving people who can't afford bread (taking it from people who will still be able to afford bread) would increase demand for bread and thus the market will adjust to increase production of bread.

It may decrease demand for something else, but it certainly would result in more bread given the current situation.

Prices will increase because there are more dollars chasing after the same quantity of goods. Some production will be diverted from other products to bread; but the entire weight of this change will fall on people who aren't Warren Buffet.

Imagine there are three groups of people:

1. The poor, who only buy bread, and who will spend any additional dollar given to them on more bread.
2. The middle class, who buy bread and meat, and who will spend any additional dollars given to them on some combination of more bread and more meat.
3. Warren Buffet, who buys bread, meat, and caviar, and whose consumption of all three is completely fixed (unless you take away some incredibly large fraction of his wealth, he won't alter his consumption patterns at all).

You then tax (3) and give the money to (1). What happens?

Well, the poor spend more money on bread. This increases the price of bread, and causes some people who were previously producing meat and caviar to now prefer producing bread, increasing the total quantity of bread produced. But Warren Buffet is the only consumer of caviar, and he is not going to buy less of it just because the price rose or he has less money, so no caviar-producers actually become bread-producers; Buffet just pays them more money. Thus, all of the additional bread production comes at the expense of meat production. Thus the middle class consume less meat (and pay more for it).

The net result? In real terms what you've actually done is tax the middle class and give the proceeds to the poor.

[giblets]

Gribbler:

You aren't aware of the fact that Obama's put black folks back to the early 80's? Obamanomics has hurt minorities especially. He's put more black men outta work since Jim Crow.

Exactly which policies of Obama's do you think target minorities?

[C0ckney]

a lot of people have talked the mechanics of QE but not a lot about the actual effects.

QE creates money and that money to go somewhere, firstly it goes to banks and helps to keep them afloat, afterwards it seems to go into stocks and commodities. so the two effects here are that just as everything appears to be going into the crapper, unemployment is rising, poverty increasingly, demand is falling and growth is flat, yet the stock market is still above 11,000. the other effect is that the money created by QE goes into commodities, so the price of things, like food and energy rise. obviously this is great for big argo and oil companies but pretty rotten for everybody else. especially the worlds poorest who find it harder and harder to afford the necessities of life. what it has not done is to provide money to the real economy, and do things like create jobs.

it's amazing that people want to see the world's poorest ****ed once again for the benefit of US banks and big business.

[C0ckney]

also inflation is great for people who borrow money, but the other side of that of that coin is that it is very bad for savers.

[Ben Kenobi]

Now what happens when you tax people less, Kuci?

[Lorizael]

Well, the poor spend more money on bread. This increases the price of bread, and causes some people who were previously producing meat and caviar to now prefer producing bread, increasing the total quantity of bread produced. But Warren Buffet is the only consumer of caviar, and he is not going to buy less of it just because the price rose or he has less money, so no caviar-producers actually become bread-producers; Buffet just pays them more money. Thus, all of the additional bread production comes at the expense of meat production. Thus the middle class consume less meat (and pay more for it).

This seems to assume that production of bread, meat, and caviar is a zero sum game. Why would that be the case?

[C0ckney]

yes exactly, why wouldn't someone who previously wasn't producing food enter the market producing bread to meet the increased demand.

[Kuciwalker]

C0ckney: money can't "go in" to stocks or commodities. When I buy a stock the money I spent doesn't just disappear into "the stock market", it goes to some specific person who I bought the stock from (and the same for gold, oil, etc.) That person now has a bunch of dollars, dollars that are worth precisely as much as the asset he sold me. Unless he really likes just holding onto dollar bills, he is going to spend them on something else. Eventually someone is going to spend those dollars on something that isn't an asset, like, say, ice cream.

When the Fed prints $100 and uses it to buy $100 worth of assets (say US bonds) off of some bank (measured by market price) it is not (directly) doing that bank any favors; the bank could have gotten the same $100 by selling that asset on the market. In fact, the fact that the bank hadn't already done so implies that the bank actually weakly preferred holding those bonds to holding $100, and so it will probably take the $100 the Fed just gave it and use that to buy $100 worth of bonds from someone else. And so on, and so forth. Each person or firm wants to get rid of the extra money and get something real with it; the whole point of monetary stimulus is that as a group they can't get rid of the new dollars short of lighting them on fire.

[Kuciwalker]

This seems to assume that production of bread, meat, and caviar is a zero sum game. Why would that be the case?

Because in non-recession times that is the case; production is at capacity. During a recession you would increase production, but you could achieve the same increase merely by printing dollars so why go to all the trouble of fiddling with taxes?

[Kuciwalker]

also inflation is great for people who borrow money, but the other side of that of that coin is that it is very bad for savers.

Bzzzt.

Inflation is good for people who owe debts denominated in dollars. Inflation is bad for people who own debts denominated in dollars. Inflation is good for people who own real productive assets (e.g. stocks).

And inflation can be good for all three classes of people if, absent inflation, many of those debts would be defaulted on. Especially since there are extraordinarily few people whose assets are exclusively in fixed-income securities.

edit: to be clear, in all of these cases I refer to unexpected inflation. Expected inflation is already built into interest rates, etc. Note that unexpected collapse in inflation in 2008 represented a real transfer from the first category to the second; it can't possibly be unjust to reverse that transfer.

[Ben Kenobi]

Exactly which policies of Obama's do you think target minorities?

Well let's see.

Obamacare raises the price of healthcare, pricing minorities out of coverage (since they are the marginal cost on a cost benefit ratio).

QE1 and QE2, have raised the price of basic good and fuel, costs which diksproportionately hit working poor, and who just happen to be minorites.

He's raised business and payroll tasxes, reporting requirements, which means that business are going to fire people last in first out. This hits minorities particularly hard. Which is why we're seeing the workforce participation plummetting.

He's supported increaseing benefits and handouts, meaning that there's less incentive to work, especially if you are a minority.

So he's been the greatest foe of workplace integration since Jim Crow. And best of all, he's still getting 85 percent support! Talk about an abusive relationship.