Sunday, February 9, 2014

The sanctity of contract

Money is a bearer contract between an individual and the labour force of a country. The government guarantees that the contract will be accepted by any part of its labour force.

It also guarantees or tries to make an environment where these contracts take part, by having an army to protect a territory against attack, by building roads and other infrastructure for the activities to carry on smoothly.

This is what gives money value - the certainty that it will be accepted within a certain territory as a labour contract.

Tuesday, January 21, 2014

On taxes, tax avoidance and real resources

Following the thread of thought that money are worthless for a government, but real resources are a Good Thing, both for the government and for the country at large, then that corporations pay tax, which might then drive them to manufacture stuff abroad, is very counter-productive. Manufacturing should be encouraged to stay in the country.

A general move towards consumption-based tax, like VAT, will also help, and place the tax more equitably and where it matters, as the tax is generally aimed at reducing aggregate demand to a level that government spending does not cause inflation.

Taxes also serve a social purpose, by applying them differently we encourage some sectors of the economy above others. To this end, maybe manufacturing should be receiving a lower tax rate.