In their ignorance of economics, Warren and Sanders et al. are misled by the government’s inflation of the money supply into believing that the stagnation and decline of our economic system in recent decades is the result of growing economic inequality.
The truth is that both the appearance of increasing wealth of the rich and the reality of declining actual wealth are the result of the government’s pouring new and additional money into the stock and real estate markets, where the effect is to raise prices.
Since the rich own far more stock and real estate than the average person, the effect of this rise in prices is that economic inequality appears to increase. (Somehow the sharp declines in apparent economic inequality that necessarily accompany market busts, are not reported.)
While the rich appear to gain because of the rise in the prices of their assets, in reality they lose.
This is because the taxation of their profits on the sale of stocks and real estate prevents the funds accruing to them from keeping pace with the rise in prices. Their funds grow only to the extent of what remains after the payment of taxes.
For example, imagine that the infusion of new and additional money into the stock and real estate markets increases prices there by 10%. Originally, one had an asset worth $1 million. Now it can be sold for $1.1 million.
But if the capital gains tax is 25%, the seller ends up with only $1.075 million, a 7.5% gain, while the prices of the assets available for him to purchase have increased by 10% on average.
This is a major way in which inflation—the government’s expansion of the money supply—destroys an economic system. It creates the appearance of business prosperity along with the fact of general impoverishment, which results in blaming poverty on business and profits.
To understand how this proposition applies in terms of business accounting for inventories and plant and equipment, see my Capitalism: A Treatise on Economics, pp. 229-30 and 931-33. (My book is available at https://amzn.to/2PM19ut.)
The solution is a money the government can’t create, namely, gold. The gold standard must be an essential part of the program of advocates of capitalism. It would put an end to the artificial creation of profits and capital gains causing higher taxes and reduced buying power.
Ironically, what our economy has been suffering from in the last decades is precisely the effects of a wealth tax—a wealth tax created by the ballooning of profits and capital gains caused by the inflation of the money supply.
The resulting additional taxes on the inflation-created profits and capital gains make after-tax profits and capital gains insufficient to keep pace with the rise in prices. The result is a shrinkage in actual assets. The Democrat dunces want still more of this.
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