09 Jul

Welcome to Wealth Economics

The markets have incorrectly predicted a recovery in interest rates and the economy in 2009, 2010, 2011, 2012, 2013, 2014, and are currently predicting the recovery in 2015.

They have no idea what’s going on.

Real wages are falling downwards or stagnating and house prices are spiralling upwards, and economists have no idea why.

While trading interest rates in financial markets I developed a theory that enabled me to become Citibank’s most profitable trader globally in 2011.

The theory explains why interest rates have stayed low for 6 years longer than expected.

It also explains why real wages have fallen and houses have become less affordable, and why these trends will continue indefinitely until we take action.

This theory has been, and continues to be very profitable for predicting global markets.  I could make money from it, and you can make money from it, but it will be impossible for us to increase wages or improve housing affordability unless this theory becomes widely understood, so I have chosen to try and go public with the theory.

If you are new to this site, I recommend starting with the introduction.  It explains a little about the theory and how I developed it.

The theory is then explained in three parts.  It takes about 30 minutes to cover the whole theory, and is written very simply, so that anyone can understand.  No advanced economics of the theory is needed.

I have also included a short piece on how to fix the problem, raise wages and make housing more affordable.

If you like my writing so much that you want to read more of it, I will be sporadically posting blog entries.

2 thoughts on “Welcome to Wealth Economics

  1. thank you for putting this out there Gary.

    I agree wholeheartedly with everything you have to say, except the solution. I think putting time frames on the ownership of assets would be a disincentive to the development of those assets, particularly land, which would have a detrimental effect.

    I would prefer to see a tax structure that allows some accumulation of wealth but provides a disincentive to accumulate excess wealth. It is reasonable to allow the accumulation of wealth so that the majority of people are able to support themselves in retirement and provide some limited support for their children as they set out on their own.

    I would aim for:

    1. The limitation of the attractiveness of tax havens – disallow any transfer payments to regions with distortionary tax rates

    2. Broad-based land taxes – reduces the incentive of holding land that is not being used in a productive way, allows for steady govt income streams to support services related to that land and acts as quasi wealth tax

    3. Progressive tax scales – allowing for modest contributions up to an income large enough for a basic lifestyle, more punitive at incomes that exceed the basic income by many multiples. If most of that income is being saved, amplifying wealth inequality, then part of that excess income should be used to reduce the effects of that inequality

    4. Wealth taxes – Less attractive and administratively difficult but should be designed in a way that captures the growth in wealth each year. There is little practical difference been capital growth and yield in a portfolio of assets but tax on capital growth is generally not captured until an asset is sold. This should be coupled with estate tax to capture hidden gains not previously declared.

    Unfortunately however, our reality is that these ideas are smacked down time and again because with wealth, comes power and that power allows the blocking of any regime that would seek to limit the ability of those powerful and wealthy people to accumulate more wealth.

    above all else, education is the key, and your contribution helps to add to that and for that, I thank you.

    • Hi there Mark and thank you for your detailed message. Sorry for my delay in replying, I put this website up 5 years ago and only recently realised it has been getting traffic since my Guardian article!

      At this particular moment in time, I am not overly concerned with disincentivising investment. The reason I say this is that, as I guess you are probably aware since you seem quite well informed on economics, we have, since 2008, been in a near-enough permanent state of central banks struggling to encourage people to spend more and save less. As such, until we have gotten the economy out of the low-demand, zero-interest rate world that we have been in for a long time now, I think it would actually be a good thing to encourage people to spend more, rather than to invest. You are of course right that investment is important, and in the future, under my policy, underinvestment could become a problem, but I think the more pressing concern right now, and since 2008, has actually been underspending.

      That said, I am not at all tied to any one specific way of reducing wealth inequality. My time limit idea is more of an interesting thought experiment at this point, to get people thinking about possible ideas. The most important thing, in my opinion, is to find a way to reduce wealth inequality, and there are many possible ways to do that, such as some of the ideas that you have suggested. The most important thing is that we choose one of them, and prevent wealth from becoming even more concentrated.


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