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Is Capitalism Dead or Merely Dying?
« on: October 23, 2017, 06:08:41 PM »
https://www.theautomaticearth.com/2017/10/is-capitalism-dead-or-merely-dying/

Is Capitalism Dead or Merely Dying?
 
 October 22, 2017  Posted by Raúl Ilargi Meijer at 2:02 pm Finance Tagged with: AI, Ardern, Artemis, capitalism, Google, mathematics, redistribution, snake, tail, UBI, Varoufakis


Alfred Wertheimer Elvis 1956

 
New Zealand’s new prime minister Jacinda Ardern calls capitalism a blatant failure. Former Greek finance minister Yanis Varoufakis says capitalism is ‘merely’ coming to an end because it is making itself obsolete. Mathematics professor Bruce Boghosian claims that without redistribution of wealth, our market economy would not be stable, because wealth always tends to concentrate. The people at Artemis Capital Management write that the stock market has begun self-cannibalizing like a snake eating its tail, and the only reason we’re not in a recession already is ‘financial alchemy’.

At the very least we can say that the system is under pressure. But what system is that? It would be nice to have a clearcut definition of capitalism, but alas, there are many, about as many as there are different forms of it. That doesn’t make this any easier. Americans call many European economies ‘socialist’, which seems to mean they are not capitalist. But Scandinavian countries don’t function like the Soviet Union either.

And if you see how much money is involved in transfer payments to citizens in the US, the supposed bastion of free market capitalism, it’s tempting to conclude the system has already failed. But even with transfer payments, inequality is at record levels. That would seem to confirm Boghosian’s statement that “even if a society does redistribute wealth, if it’s too small an amount, “a partial oligarchy will result..” So what then?

 


Varoufakis and others want a “universal basic dividend”, or “universal basic income”. Would that be the end of capitalism as we know it? Or is it just a -perhaps more extreme- form of ‘state capitalism’? Varoufakis deems it inevitable because technology will eradicate so many jobs from societies that people won’t be able to make money from work. Personally, I’ve long thought that the pending large-scale demise of pensions systems will lead to some form of UBI.

37-year-young Jacinda Ardern is very clear in her assessment of New Zealand’s form of capitalism. If you’ve got the worst homelessness in the developed world, you have a broken system. If the system fails the people, it’s no good. Other people might argue that capitalism never promised to take care of everyone. Or rather, not through state interference. Labour’s Ardern has her view:

 

New Zealand’s New Prime Minister Brands Capitalism A ‘Blatant Failure’

    [Jacinda] Ardern, has pledged her government will increase the minimum wage, write child poverty reduction targets into law, and build thousands of affordable homes. In her first full interview since becoming prime minister-elect, she told current affairs programme The Nation that capitalism had “failed our people”. “If you have hundreds of thousands of children living in homes without enough to survive, that’s a blatant failure,” she said. [..] “When you have a market economy, it all comes down to whether or not you acknowledge where the market has failed and where intervention is required. Has it failed our people in recent times? Yes. How can you claim you’ve been successful when you have growth roughly 3%, but you’ve got the worst homelessness in the developed world?”

So to which extent should a state interfere in markets, and in society at large? There are obviously wide ideological divides when it comes to answering that one. Does that mean there is no answer possible at all? Perhaps not. Perhaps the answer lies in the fact that the system is predestined to fail, as Boghosian’s mathematical models suggest: “Our work refutes the idea that free markets, by virtually leaving people up to their own devices, will be fair..”

That doesn’t necessarily demand a lot of interference, we could ‘simply’ write the rules of the game in such a way that the ‘natural tendency’ towards wealth concentration is blocked. An example is the history of the top US income tax rate. Arguably, the nation was doing a lot better under Eisenhower and Kennedy, with a top rate of 91%, than it is today. If you put a few rules like that in play, perhaps including Varoufakis’ idea of a ‘common welfare fund’, maybe the state doesn’t have to interfere much otherwise.

 


One of the main underlying claims of capitalism, and of macroeconomics in general, is that markets -and societies- will sort themselves out if left alone. Bruce Boghosian says this is not true, and that he has the math to prove it. The entire notion of markets tending towards a ‘supply-demand equilibrium’ is nonsense, he says (echoing Minsky, Steve Keen et al). Trickle-down economics is a figment of the imagination, while trickle up-economics flourishes.

This refutes much of what our economic systems are based on, which would appear to indicate that we need an urgent revision of these systems. Unless we would agree that Darwin-on-Steroids is a good idea. We don’t and won’t, because it would mean Stephen Foster’s “frail forms fainting at the door” all over the place. A market ideology that causes widespread misery has no future.

 

The Mathematics of Inequality

    Seven years ago, the combined wealth of 388 billionaires equaled that of the poorest half of humanity , according to Oxfam International. This past January the equation was even more unbalanced: it took only eight billionaires, marking an unmistakable march toward increased concentration of wealth. Today that number has been reduced to five billionaires.

    Trying to understand such growing inequality is usually the purview of economists, but Bruce Boghosian, a professor of mathematics, thinks he has found another explanation—and a warning. Using a mathematical model devised to mimic a simplified version of the free market, he and colleagues are finding that, without redistribution, wealth becomes increasingly more concentrated, and inequality grows until almost all assets are held by an extremely small percent of people.

    “Our work refutes the idea that free markets, by virtually leaving people up to their own devices, will be fair,” he said. “Our model, which is able to explain the form of the actual wealth distribution with remarkable accuracy, also shows that free markets cannot be stable without redistribution mechanisms. The reality is precisely the opposite of what so-called ‘market fundamentalists’ would have us believe.”

    While economists use math for their models, they seek to show that an economy governed by supply and demand will result in a steady state or equilibrium, while Boghosian’s efforts “don’t try to engineer a supply-demand equilibrium, and we don’t find one,” he said. [..] The model tracks the data with remarkable accuracy, he said. He and his team will soon publish a paper on how it relates to U.S. wealth data from 1989 to 2013.

    “We have also begun to apply it to wealth data from the ECB, and so far it seems to work very well for certain European countries as well,” he said [..] It turns out that when agents do well in early transactions, the odds are so increasingly stacked in their favor that—without redistribution from taxes or other wealth-transfer mechanisms—they will get more money, and keep accruing wealth inevitably.

    “Without redistribution of wealth, our market economy would not be stable,” said Boghosian. “One person would run away with all the wealth, and it would keep going until it came to complete oligarchy.” And even if a society does redistribute wealth, if it’s too small an amount, “a partial oligarchy will result,” Boghosian said.

If markets and societies cannot survive under current rules, theories and ideologies, what do we do? The Artemis guys strongly suggest we stop the practice of excessive stock buybacks- even if they’re the only thing propping up the whole market system. Because they’re leading us straight into a recession. Because they’re making that recession a lot worse.

 

Volatility and the Alchemy of Risk

    The Ouroboros, a Greek word meaning ‘tail devourer’, is the ancient symbol of a snake consuming its own body in perfect symmetry. The imagery of the Ouroboros evokes the infinite nature of creation from destruction. The sign appears across cultures and is an important icon in the esoteric tradition of Alchemy. Egyptian mystics first derived the symbol from a real phenomenon in nature. In extreme heat a snake, unable to self-regulate its body temperature,will experience an out-of-control spike in its metabolism. In a state of mania, the snake is unable to differentiate its own tail from its prey,and will attack itself, self-cannibalizing until it perishes. In nature and markets, when randomness self-organizes into too perfect symmetry, order becomes the source of chaos.

    The Ouroboros is a metaphor for the financial alchemy driving the modern Bear Market in Fear. Volatility across asset classes is at multi-generational lows. A dangerous feedback loop now exists between ultra-low interest rates, debt expansion, asset volatility, and financial engineering that allocates risk based on that volatility. In this self-reflexive loop volatility can reinforce itself both lower and higher. In a market where stocks and bonds are both overvalued, financial alchemy is the only way to feed our global hunger for yield, until it kills the very system it is nourishing.

 


    [..] At the head of the Great Snake of Risk is unprecedented monetary policy. Since 2009 Global Central Banks have pumped in $15 trillion in stimulus creating an imbalance in the investment demand for and supply of quality assets. Long term government bond yields are now the lowest levels in the history of human civilization dating back to 1285. As of this summer there was $9.5 trillion worth of negative yielding debt globally. Last month Austria issued a 100-year bond with a coupon of only 2.1%(6) that will lose close to half its value if interest rates rise 1% or more. The global demand for yield is now unmatched in human history. None of this makes sense outside a framework of financial repression.

    Amid this mania for investment, the stock market has begun self-cannibalizing… literally. Since 2009, US companies have spent a record $3.8 trillion on share buy-backs financed by historic levels of debt issuance. Share buybacks are a form of financial alchemy that uses balance sheet leverage to reduce liquidity generating the illusion of growth. A shocking +40% of the earning-per-share growth and +30% of the stock market gains since 2009 are from share buy-backs. Absent this financial engineering we would already be in an earnings recession.

    Any strategy that systematically buys declines in markets is mathematically shorting volatility. To this effect, the trillions of dollars spent on share buybacks are equivalent to a giant short volatility position that enhances mean reversion. Every decline in markets is aggressively bought by the market itself, further lowing volatility. Stock price valuations are now at levels which in the past have preceded depressions including 1928, 1999, and 2007. The role of active investors is to find value, but when all asset classes are overvalued, the only way to survive is by using financial engineering to short volatility in some form.

Yanis Varoufakis doesn’t so much argue that capitalism has already failed, he says it is bound to fail in the near future. Because new technology, including artificial intelligence, will destroy too many jobs for society to continue to function intact. That is already happening, in that we both produce and consume Google’s ‘products’, but we get none of the profits. An example:

 

Google’s Plan To Revolutionise Cities Is A Takeover In All But Name

    Alphabet’s weapons are impressive. Cheap, modular buildings to be assembled quickly; sensors monitoring air quality and building conditions; adaptive traffic lights prioritising pedestrians and cyclists; parking systems directing cars to available slots. Not to mention delivery robots, advanced energy grids, automated waste sorting, and, of course, ubiquitous self-driving cars. Alphabet essentially wants to be the default platform for other municipal services. Cities, it says, have always been platforms; now they are simply going digital.

    “The world’s great cities are all hubs of growth and innovation because they leveraged platforms put in place by visionary leaders,” states the proposal. “Rome had aqueducts, London the Underground, Manhattan the street grid.” Toronto, led by its own visionary leaders, will have Alphabet. Amid all this platformaphoria, one could easily forget that the street grid is not typically the property of a private entity, capable of excluding some and indulging others. Would we want Trump Inc to own it? Probably not. So why hurry to give its digital equivalent to Alphabet?

Google aims at taking over our entire communities, and claims this will be to our benefit. We let the new technology companies expand far and wide, to a large extent because our ‘leaders’ don’t understand what is happening any better than we do. But that is not a good thing, for many different reasons. It’ll be very hard to whistle them back later, both because of the wealth they’re building, and because of the intensifying links they have to government, including -or especially- the intelligence community.

 

Capitalism Is Ending Because It Has Made Itself Obsolete

    Former Greek finance minister Yanis Varoufakis has claimed capitalism is coming to an end because it is making itself obsolete. The former economics professor told an audience at University College London that the rise of giant technology corporations and artificial intelligence will cause the current economic system to undermine itself.

    Mr Varoufakis [..] said companies such as Google and Facebook, for the first time ever, are having their capital bought and produced by consumers. “Firstly the technologies were funded by some government grant; secondly every time you search for something on Google, you contribute to Google’s capital,” he said. “And who gets the returns from capital? Google, not you. “So now there is no doubt capital is being socially produced, and the returns are being privatised. This with artificial intelligence is going to be the end of capitalism.”

    Warning Karl Marx “will have his revenge ”, the 56-year-old said for the first time since capitalism started, new technology “is going to destroy a lot more jobs than it creates”. He added: “Capitalism is going to undermine capitalism , because they are producing all these technologies that will make corporations and the private means of production obsolete. “And then what happens? I have no idea.”

    Describing the present economic situation as “unsustainable” and fearing the rise of “toxic nationalism”, Mr Varoufakis said governments needed to prepare for post-capitalism by introducing redistributive wealth policies. He suggested one effective policy would be for 10% of all future issue of shares to be put into a “common welfare fund” owned by the people. Out of this a “universal basic dividend” could be paid to every citizen.

Has capitalism failed already, as Jacinda Ardern claims, or will that happen only in the future, as Varoufakis says? It may be a moot question once the system and the markets start collapsing. That they will, and must, is not a question but a certainty, even a mathematical one. Whatever your ideology, that is not a good thing. And the current ideology has caused this, that much is clear.

If the remaining wealth is not divided better than it is today, those who have gathered most of it will also find themselves in non-functioning societies and communities. Unless perhaps you’re George W. and have property in Paraguay.

But even then. We’re eating our tails.
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https://wolfstreet.com/2017/11/22/private-sector-debt-implode-next-us-eurozone-japan-china-or-canada/


Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?




 

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?

Canadians, fasten your seat-belt. Here are the charts.

The Financial Crisis in the US was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the US just hit $20.5 trillion, or 105% of GDP. But that can’t hold a candle to Japan’s national debt, now at 250% of GDP.

And private-sector debt, which includes household and business debts — how has it fared in the era of easy money?

In the US, total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14% from the $25 trillion at the crazy peak of the Financial Crisis and up 63% from 2004.

In relationship to the economy, private sector debt soared from 147% of GDP in 2004 to 170% of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to add to their debts once again.

But the economy began growing again too, and private-sector debt as a percent of GDP fell to a low of 148% in Q1 2015. It has since picked up steam, growing once again faster than the economy, and now is at 151.7% of GDP, back where it was in 2005. This chart shows US private sector debt to the non-financial sector, in trillion dollars (blue line, left scale) and as a percent of GDP (red line, right scale):

In the Eurozone, the pattern looks similar before the Financial Crisis, with total debt growing sharply both in euros and as a percent of GDP. But after the Financial Crisis, private-sector debt continued to grow in euro terms. As a percent of GDP, it largely leveled off, and as the economy picked up steam over the past two years, this debt declined to 163% of GDP:

These charts are based on data from the Bank for International Settlements and the St. Louis Fed.

In Japan, private-sector debt declined over much of the period but over the last three years picked up a little. Debt as percent of GDP has zigzagged lower, though it recently bounced to 160% — higher than in the US but lower than in the Eurozone.

Japan occupies a unique place in the developed world. The private sector experienced a phenomenal credit bubble in the 1980s, with debt peaking at 219.5% of GDP in Q3 of 1993. This private-sector credit bubble then imploded in a more or less orderly fashion over the next decades:

But as Japan’s private-sector debt bubble deflated, the government went on a gigantic no-holds-barred deficit-spending spree. As a consequence, the national debt skyrocketed from 55% of GDP in 1981 to 250% of GDP in 2017, by far the highest in the world. The Bank of Japan has been monetizing much of this debt under the guise of QE to keep it under control:

China is now where Japan was before its credit bubble blew up in the early 1990s. China’s private-sector debt – the part that has been officially acknowledged – surged from 20% of GDP in 2008 to 211% of GDP in 2017. This is the danger Zone where Japan got in trouble. It also assumes that China’s GDP numbers are not inflated. If GDP numbers are inflated, as many observers suspect, China’s private-sector debt as percent of GDP would be much higher:

But wait, Canada rules! Private sector debt in Canada has more than doubled, from C$2.2 trillion in 2006 to C$4.5 trillion, and private sector debt as percent of GDP has soared to 217%, within a hair of where Japan was in Q3 1993, before the credit bubble imploded. Also note how eerily similar the charts for China’s debt and Canada’s debt are:

So Canada and China stand out in this group of debtor economies. The chart below shows private-sector debt as a percent of GDP with China (red) and Canada (black) up in their own universe, competing with each other to see whose debt will implode first. By comparison, the US, the Eurozone, and Japan look practically tame. Note how in 2008 Canada was right in their neighborhood:

Within this group of economies, when it comes to the next private-sector-debt bubble implosion, there are really two places to look: Canada and China. In Canada households are on the hook, being among the most indebted in the world. In China, the debt binge has spread across businesses and households alike.

In the US, the yield spread of Treasury securities has collapsed to lowest level since 2007, and even the Fed is fretting about it. Read…  The US Treasury Market Smells a Rat

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American Brainwash: Guess what, Ma, capitalism is not Americanness!
« Reply #2 on: November 25, 2017, 12:57:08 AM »
http://www.greanvillepost.com/2017/11/21/the-american-brainwash-guess-what-ma-capitalism-is-not-americanness/

American Brainwash: Guess what, Ma, capitalism is not Americanness!
November 21, 2017

Patrice Greanville
Iterations: March 18, 2017, August 1982)


(Photo: Mary Crandall, Flickr)

Virtually unchallenged to this day, corporate media are accustomed to using a number of misleading “cultural equations” to hide the existence of undemocratic institutions at the core of the American system. Thus, capitalism, a “hierarchic tyranny” as Chomsky calls it, is usually identified by its euphemisms: “Free Enterprise,” “market system,” “private enterprise.” “the American Way,” etc. Academia also cheerfully participates in this deliberate cosmetisation of what otherwise many people would begin to recognize as something unhealthy and malodorous in their midst. But of all these quaint labels and false equations the most outrageous and cynically deceptive is that which makes “Americanness”—the very national identity of the United States— identical with capitalism, both concepts one and inseparable.

Consistent with this practice, overt and pervasive partisanship in support of capitalism is not regarded by the American media as an ideological bias negating their vaunted professional “objectivity” but rather something akin to the serene acceptance of natural law.

Yet, despite its currency, the idea that capitalism is synonymous with “Americanness” is as spurious as the equally widespread delusion that capitalism equals human nature, another fraud, we should hasten to point, bandied about by pretty much the same crowd of conservatives and free marketers.

It is surely anticlimactic to state it, but these myths have been deliberately injected into the American political consciousness by the system’s mind managers.  Alex Carey, Herbert Schiller, Noam Chomsky, Ed Herman, Bob McChesney, and Michael Parenti, among other leading political scientists, have amply documented that such notions do not materialize out of thin air, that they are deliberately manufactured, and that a huge apparatus of propaganda is used to keep them in circulation.

Cui bono?

Great political benefits can be reaped from this kind of sleazy political legerdemain. For by successfully equating loyalty to capitalism with loyalty to the motherland (a ruse that reminds us uncomfortably of another system that continually elevated loyalty to the motherland and its underlying supremacist system as sacred), the ruling orders can more easily whip up support and legitimacy for policies which chiefly safeguard their interests.

    Did the French revolution deny the French some of their precious “Frenchiness”?

Besides invading the notion of “American nationhood,” like a giant, Alien-like parasite, US capitalism has also embedded itself behind “freedom”. One of its most popular deceiving masques, “the Free Enterprise System” exudes unconditional love for freedom. But is this so? The record again hardly supports such claims. For if “free enterprise” is so respectful of individual liberty and human rights, why does it thrive under Nazism?
.
The ploy has been particularly effective in the area of foreign policy, where the global interests of American business and the native plutocracy have long been sold to the public as those of the nation. As anyone can easily infer, this has often served to silence and isolate critics, who have been thus conveniently smeared with the brush of disloyalty, suspicion, nuttiness or even treason. An informational ghetto has been created in America, partly to maintain the illusion that free speech still matters. In extreme cases, home dissidents have been carted away under charges of “sedition,” ingrates “intent on subverting the hallowed political system of the United States,” and similarly dubious statutes and charges.

Given the success of these grand manipulations, there is little doubt that the American ruling class has carried the art of mass deception to truly unprecedented heights. No other western nation would have the audacity of requiring loyalty to capitalism–however camouflaged–as a prerequisite for good citizenship. Only in a nation where political illiteracy is high, and kept artificially that way  by the powers that be, can such a fraud be propagated without too much challenge or any challenge at all. Indeed, why should a historically transient system such as capitalism, one frequently suspect and deservedly despised by large numbers of people, be equated with the more enduring essence of the nation, itself an extraordinarily elusive and historically ephemeral concept?

The fact that in the 21st century a cancerous capitalism is essentially eating away the very substance of the nation, a concept it finds narrow, inconvenient and outmoded to its compulsion for transnational depredation, does not reduce the need to dismantle this noxious myth, as it is still American capitalism, and its monstrous military muscle, that remains the linchpin in the imperialist global effort. It is capitalism’s dynamic that feeds Washington’s mad push for global supremacy at any cost, and it is capitalism again which stands to gain by imposing fascism on a semiconscious world.

Since no one ever bothers to point the obvious, that capitalism and Americanness—whatever that is—are not the same thing,  and that such notion is a raging fraud, we should stress for the record that the concept does not have the remotest iota of validity. And that even sixth-grade logic can prove it. In fact, here’s a simple set of questions for capitalist propagandists:

Will Americans be less “American” it they choose for themselves another social system?
For that matter, were the Russians certifiably less“Russian” after their October Revolution?
Did the French revolution deny the French some of their precious “Frenchiness”?
Are the millions of Italian communists less quintessentially Italian because they cherish Marx instead of Adam Smith?
Are pro-Castro Cubans demonstrably “less” Cuban than those living in exile?

The answers should be clear to anyone with a modicum of common sense.
NOTE: ALL IMAGE CAPTIONS, PULL QUOTES AND COMMENTARY BY THE EDITORS, NOT THE AUTHORS • PLEASE COMMENT AND DEBATE DIRECTLY ON OUR FACEBOOK GROUP CLICK HERE
A pioneer in the field of political media analysis, Patrice Greanville is TGP’s editor in chief. The above is an edited excerpt from the author’s First Catalog of Media Biases / Whitewashing the Face of Capitalism (Cyrano’s Journal, Premiere Issue, Fall 1982).

MAIN IMAGE: The American Way, by Margaret Bourke.
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Money Is Power and Billionaires Can Subvert Democracy
« Reply #3 on: December 03, 2017, 01:37:00 AM »
http://www.ianwelsh.net/money-is-power-and-billionaires-can-subvert-democracy/

Money Is Power and Billionaires Can Subvert Democracy
2017 November 27
tags: Bill Gates, Common Core Curriculum, Gates Foundation
by Ian Welsh


Money is the ability to tell other people how to spend their time: what to make, what to do. It is that simple.

The Washington Post has a story about how the Gates Foundation pushed the Common Core curriculum. The details are there, but the bottom line is that once they decided to do it, it happened fast:

    The result was astounding: Within just two years of the 2008 Seattle meeting, 45 states and the District of Columbia had fully adopted the Common Core State Standards.

This wasn’t done “democratically,” it was done with money, which bought officials.

The biggest problem with vast wealth isn’t that it directly makes other people poor, it is that it makes rich people disproportionately powerful. They have so much money that they can buy the state.

When they do so, they usually do so in their self-interest. Sometimes, as with the Gates’s in this case, they do so out of a desire to good.

But their idea of good may not be the same other people’s idea of good. They have vastly more weight than ordinary people, and in an unequal society, they can buy people.

It is that simple.

One way vast inequality corrupts is that it makes some people powerful enough to overthrow democracy; in general (as with Citizen’s United), and in particular cases.

Most rich people are not good people. It is well established now, in the academic literature, that rich people have an empathy deficit, that they give less as a percentage of their wealth and income, and that (to put it unscientifically) they tend to become assholes. They don’t need to care what other people think, or about others’ welfare.

And even when they do try to do good, well, they don’t need to go through normal democratic processes; they just buy the results.

Nor are they effective. There is a weird myth that “the private sector” is why solar power is cheap now. That’s effectively a lie. Solar power is cheap now because countries subsidized the markets for years (Germany in particular), and because China pushed it as a policy as well.

The Internet exists because of the public sector. Also, for decades, the US government bought the vast majority of all low-to-high-end computers. If they had not, you would not have cheap, modern electronics. Anyone who says otherwise is either a liar or doesn’t know the actual history.

Money is power. When the government relies on rich individuals and corporations to do what should be done by government, it takes longer and produces less welfare than it should, and it leads to the capture of the government by the rich.

A 90 percent top marginal tax rate and punitive capital and estate taxes aren’t necessary because “government needs the money,” they are necessary so that the rich don’t become so rich they buy the State.

And that includes the ones who try to do some good, like Gates.

(More on rich states vs. rich individuals soon.)
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