Economic Divide Hypothetical

[Orcbert]

This is not something that I suggest or in anyway think it's ethical. I was just talking with some friends today about the growing divide between the most wealthy Americans and the lower and middle class. This suggestion is unconstitutional and wrong, but do you think it would work?

If the Government seized a large chunk of money and assets from the richest Americans and used it to pay off debts, would it increase the value of the dollar and lower inflation? Assuming this isn't a wealth redistribution and just a straight tool to pay off the national debt, would your average American see a large change in their quality of life?

[Tierbook]

If anything it would cause the wealthy to leave the country and basically cause any economic growth to grind to a halt so fast even the politicians wouldn't be able to make it out in time

[Sunseeker]

If anything it would cause the wealthy to leave the country and basically cause any economic growth to grind to a halt so fast even the politicians wouldn't be able to make it out in time

Cool, they can have their money, we get to keep their property, their assets, their businesses. Oh well so the dollars are gone. The fact that there are still some 325 million people in the country would mean we'd have plenty of room to start over.

I hate this dependance on the rich for "jobs" or the "economy". Life goes on. Might be rough, but with or without them, we will do just fine.

[Drekker17]

Just seizing the wealthiest peoples assets is extremely wrong.

No it won't improve the average Americans life, it will temporarily pay off our debts, but the widening divide isn't simply because of the debt. Too many laws aid corporations over average people and smaller businesses, lobbying, minimum wage...all that doesn't get fixed just because the debt is paid off.

Doing this would probably lead to the downfall of the US if anything...nobody likes their stuff taken away, I'd expect the rich to backlash extremely before anything is taken, leading to economic turmoil.

[Aktillum]

I think you'd have a tough time convincing the government to do that.

http://ballotpedia.org/Net_worth_of_...epresentatives

That's not what they're hiding either.

[Orcbert]

Well, like I said there is no possible way this would happen and it shouldn't because it's a massive violation of freedom and people's rights.

You don't need to convince me it was wrong. We were discussing the effect on the US economy in this hypothetical. The major feeling we were having is that the immediate impact would make quality of life easier on most Americans since of the deflated dollar. Those wealthy who leave as a result would be replaced quickly enough by those who are happy to do their jobs for a lot less money.

[satimy]

What are you going to seize? Rich people don't generally have billions of dollars sitting in bank accounts. Its in stocks, properties, companies etc. Are you going to seize stocks? Have fun selling them all and crashing the market. Are you going to seize property? Might work but again if your end goal is cash youre going to have to sell them for fractions of what they are worth. This of course ignores the whole illegal and unconstitutional part of it.

[mvaliz]

He's not asking about the merits of the method - he's asking what impact would it have on the economy IF it hypothetically happened. He himself said the method is bad and wouldn't happen... he's simply asking "What IF it happened, how would the interest/inflation be effected."

To that, I have no idea. That's something an economist should answer....

[Kokolums]

This is not something that I suggest or in anyway think it's ethical. I was just talking with some friends today about the growing divide between the most wealthy Americans and the lower and middle class. This suggestion is unconstitutional and wrong, but do you think it would work?

If the Government seized a large chunk of money and assets from the richest Americans and used it to pay off debts, would it increase the value of the dollar and lower inflation? Assuming this isn't a wealth redistribution and just a straight tool to pay off the national debt, would your average American see a large change in their quality of life?

Before the Federal Reserve existed, this is actually how things worked during economic panics, more or less.

J.P. Morgan was instrumental in bailing out the US Army in 1871. He used tons of his own personal wealth to bail out the US Government in various ways in the panic of 1907. Morgan famously rounded up $25 million of cash in 30 minutes, some of it his own, and others by pressuring other super rich, to bail out the New York Stock Exchange and keep it open in 1907.

The problem people had with this arrangement was that people realized it was giving J.P. Morgan a LOT of power in the halls of government. During a crisis, the government had to run to Morgan, and everyone knew it.

This is why the government passed the Federal Reserve Act in 1913. So the federal reserve could fill the role of J.P. Morgan. While not a perfect solution, relying on the federal reserve in a crisis was viewed as a VASTLY superior situation compared to just relying on Morgan all the time.

What you are suggesting is to go back to the days of relying on J.P. Morgan. The modern equivalent I guess would be to take a chunk of Warren Buffet's wealth to pay down debt. What would happen is that it would raise a LOT of questions regarding conflicts of interest. Rumors would fly that Buffet now owns part of the government as part of this deal, or some deal was struck in some backroom giving Buffet a lot of power over Washington in return.

[Vizardlorde]

If anything it would cause the wealthy to leave the country and basically cause any economic growth to grind to a halt so fast even the politicians wouldn't be able to make it out in time

Nope, new people would rise from the remnants to replace them.