|
|
The Magic Formula I am referring
to is this: low taxes, stable money. This is a tried-and-true, proven
method for virtually any country to enjoy rapid economic progress. By "low
taxes," something like a "flat-tax" system with rates below
20% would work, as has worked brilliantly for Hong Kong and is now working
brilliantly for anyone else who tries it, which now includes much of Eastern
Europe. In the extreme case, it means no taxes at all, which was largely the
case for the U.S. pre-1913 (the Federal Government was almost entirely funded
by a tariff), or Japan pre-1913 (the central government was almost entirely
funded by a modest property tax, and a tax on alcohol). It is possible to
have "low taxes" even with high tax rates, if those rates impinge
on very high incomes while the great majority of people have light taxes.
This was the case in Germany after World War II, for example, when the top
tax rate was 50% but applied to incomes equivalent to millions of dollars
today -- while capital gains were tax-free.
The "stable money" aspect is what my
book Hard Money is mostly about, and means a currency stable in value,
with the gold standard the best solution in this regard. (I also have a good
chapter on "low taxes.") The result of stable money is low interest
rates and a minimum of disruptive exchange rate fluctuations, which allows
commerce to flourish.
One could cite a few other things necessary
for a properly functioning capitalist economy, such as reliable legal system
and basis of private property ownership. However, you might find that not
even this is quite necessary, as neither Russia nor China (two powerhouses
today) can claim great success in that regard, although both have low taxes
and stable money. I find that countries that manage to maintain low taxes and
stable money create an environment where it is politically easy and desirable
to also form a sound legal structure and advantageous regulatory environment.
Thus, these issues tend to fix themselves once the big picture -- low taxes,
stable money -- is in place.
I honestly believe that it is possible to
parachute into a despair-ridden locality -- a Haiti, Sierra Leone, or Laos --
and turn it into a successful developing economy, on the path of becoming a
Singapore or Dubai, within a decade or so, by applying these principles. The
main problem of such a plan would be to be able to maintain political
stability long enough to put it into place. One thing that happens -- it is
happening now in Russia -- is that, when taxes are low and money is stable,
people discover that it is easier to achieve security and success by
following the laws than by breaking them. Thus, people tend to become
law-abiders, which in turn solves all manner of other problems.
When a person fully understands the Magic
Formula -- I am talking about you, dear reader -- it dawns upon then
that they now hold the secrets of economic success and failure.
Thus, I was most intrigued when reading about
something called the National Economic Recovery and Stabilization Act, or
NESARA. There are a lot of phony NESARAs out there (a bit of obfuscating propoganda it appears). The one I am referring to can be see at http://www.NESARA.org/.
What is NESARA's proposal? Would you believe,
a gold standard for the US dollar (stable money), and a single sales tax,
with a modest rate, to provide all government revenue (low taxes)! In other
words, the Magic Formula, done in first-class style! (There are
some oddities in NESARA, such as provisions for the repayments of debt, but I
can overlook a bit of "originality" on this front.)
All of this may become a lot more relevant
over the next twenty-four months or so, as an economic downturn pops the
present bubble of complacency and begins the search for new solutions.
Hooray for NESARA! It is sooooo
rare to see any economic proposal that gets so close to the true solution.
Nathan
Lewis
Nathan Lewis was formerly the chief international
economist of a leading economic forecasting firm. He now works in asset
management. Lewis has written for the Financial Times, the Wall Street
Journal Asia, the Japan Times, Pravda, and other publications. He has appeared
on financial television in the United States,
Japan, and the Middle East. About the Book: Gold: The Once and Future
Money (Wiley, 2007, ISBN: 978-0-470-04766-8, $27.95) is available at
bookstores nationwide, from all major online booksellers, and direct from the
publisher at www.wileyfinance.com or 800-225-5945. In Canada,
call 800-567-4797.
|
|
