Supply Side University Lesson 4
What’s the difference between a casino and current global equity markets? Answer….not much! In this episode we explore Lesson 4 in Jude Wanniski’s Supply Side University. We talk about gambling, mal-investment, and more. How do taxes condition the choices we make in terms of productive asset allocation instead of wild and destructive speculation?
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📍 Hey everybody, Jonathan Doyle with you. Once again, welcome back to the supply side podcast. This time we’re up to episode four in Jude Wanniski supply side university. The great master Yoda of supply side, classical economics. He’s no longer with us, but it’s a great joy to slowly work through his archive and in between.
The great guests that we’re bringing you hear regularly on the supplier’s side podcast. It’s great to work through. What he left us. So we’re looking at a lesson number four here, which is a little bit about gambling. And I read through this. This is lesson number four in supply side university. And it’s really quite prescient. Gambling’s interesting, right? Because.
At the moment here in Australia. We had James packer from crown casinos, knocked back with a casino license for the massive new casino here in Sydney. So there was a report that came out late yesterday based on a whole bunch of issues that had played out across some of the crown properties.
Here and overseas, and basically they turned the license down, but it’s interesting to think as we get into this short episode, About this concept of gambling within political economy. So we junior, we’re all familiar with casinos. But I think it’s fair to say in some of you will understand what I mean by this, that our stock market equities markets at the moment are looking very similar.
The last few weeks I got through who did I, Jim Ricards latest book. On a sort of the depression caused by COVID. And yesterday I was listening to an interview with Jeff Snyder from Alhambra partners. And both of them made the point that, markets are not efficient. Equity markets are not efficient. People seem to think of course, that there.
Saving and rescind us receiving and sending signals in real time, but it’s not actually what’s happening. They’re massively manipulated and it raises the question. Of course. At what point are they like gambling? At what point is our current inflated global equity market reality. Basically some form of gambling. So yesterday Elon Musk came out of course, and a flag, the Tesla was buying 1.5 billion of Bitcoin.
And this morning I was on a 70 K training ride, listening to Peter Schiff as I do. And Peter just went forensically through this and just talked about a whole lot of problematic aspects to how that was done, but it really, he talks a lot about doge coin, another one of the crypto coins and it strikes me just how much.
This is all starting to look like some massive form of gambling. To the point that after listening to Peter, I. I went and jumped on the crypto exchange in crypto. I’m sorry. I did it. I sold crypto a few weeks ago, and I know I considered gold, my absolute gold and silver, my absolute hedge. But and I just put my hand up and say, this is a gamble. This is speculation.
I guess that makes me part of the problem today have mercy, everybody, but what we’re talking about here is this concept of gambling within. Our economies. And so lesson four here from Jude Wanniski kicks off. Where he talks about the concept of gambling and he says nothing is actually being created.
No wealth that is in addition, the money and time spent are diverted from other areas of the economy. Where wealth can be created. And this takes us of course, straight to the Von misses. Mel investment concepts, right? Where, when gambling is basically the underpinning modus operandi of the equity markets, then all sorts of liquidity capital, it could be gainfully employed in productive enterprise is of course being driven into high-end speculation.
So this all works well, I guess until the musical chairs eventually stop. With enormous implications. And again, listening to Peter shift this morning. Listening to one of his earlier. Interviews. It was way back in 2006 and it was fascinating to listen to it because he was just highlighting the truth. That in terms of,
Glo global macro and us current account stuff. It’s as simple as the fact that no president wants the blow up to happen on their watch. So a lot of this malinvestment and excess liquidity happens because nobody wants to be the president, the fed reserve chair. When the whole thing finally collapses. So let’s press on a couple more things from lesson four here.
In Jude when he skis. Supply side at university. Great quote here. He says this all growth. This is a simple one. Listen, carefully. All growth is the result of risk taking. I like that. What do you think. Leave a comment on what you think about that. All growth is the result of risk-taking. I guess that explains what command economies. And I guess that explains why communist countries.
Have just never really got there. All growth as a result of risk-taking. In a command economy, it’s we’re going to tell you. What to do. We’re not going to let you actually risk. And if you do happen to risk, we’re going to make sure we take it all off you. And. This is the great thing about behavioral economics, about philosophical anthropology. It’s this idea that humans actually have certain traits and when we risk things,
We tend to reward. So I think we’re at a moment, of course, where risk is just being driven into highly speculative enterprise or enterprise, probably isn’t the word, but you get my point, right? Where. Risk used to be that you would take capital and deploy it in areas where you think. It might lead to a growth.
In your ability to buy future goods and services, right? So you would take the capital that you had, you do something risky with it. And he gives the example of your he’s talking about a barber shops, and he’s also talking about people that cut grass, and he’s making the point that with your excess capital, the Baba might open a biggest shop and employ extra barbers. And his Rose get interesting, gets interesting because.
He makes the point that, where this gets problematic, cause within the tax system, Because as soon as the government. Makes it more painful. Two or takes more from you as you pursue risk and productive enterprise, then people will just be basically driven. Towards speculative outcomes. So he’s, he talks a lot of your back casinos and give you this quote where is it here? He basically says that a.
At some point. We get to a point where people are just, they just think what’s the point. Why bother. Trying to invent or create or produce. If I’m just going to be texted the So my marginal tax rate here in Australia, the moments in the 40% range, 45%. I don’t remember saying this to Karen many times. It’s we have bootstrapped over the last 20 years and built successful businesses.
But every time, So much of that’s being appropriated. And of course, as many we’re at a moment in history where, the public sector grows and grows and the government trough gets bigger and bigger. And that’s of course funded with all sorts of deficit spending, which is funded from either magical MMT, unicorn fairy money.
Or increased taxes. And just quickly on the increased Texas stuff. I leave in the Australian capital territory. We have a population of about 400,000 people in this area. We became a self governing territory, maybe on an old 25 years ago, 30 years ago. My favorite was that there was a political party at the time called no self government party. They wanted to win. So they get immediately end the ridiculous experiments. Basically where I live was the size of a municipal council area. And rather than just being administered.
Some people felt we needed to have our own government. And my listeners of course know what happens when we get more government. And yesterday. I was buying a new, a firearm taking my youngest son hunting. And I went on the government website to pay a $36 fee just so I could hand some paperwork over a counter.
And I took that. I jumped on the website and there’s a part where it says online payments and it blew my mind. There was just this vast array. Of potential payments. Like I couldn’t believe it. I’d have to pull it up again. To give you some of them, but let me see if I can do it. I’m sitting here in the studio. I’ll see if I can pull this up in real time so I can read you some of these because they were good. And let me see if I can pull this up now with the incidence fast enough, because some of them just grew. I got it. I got it. Let’s see what we can find here.
Online forms and payments. Oh, come on. Here we go. Got it. Let me read you some of these. What’s it going to let me do it and here we go. No. Yeah. So I’m looking at this now and it’s ranked, I write down to Z or Zed. And what have we got? We have a national multicultural festival stole hold a payment.
We have a tobacco license application. We have a construction occupation, nominees appointment or removal payment. Electrical safety certificate, payment, plants, soil, and stone license for non-commercial and scientific purposes. Ah, do you have friends? Where do we stop? You have to pay in the Le in the GI section for a guest start of work. Notice.
Now I have a feeling that if you’re paying for a guest start of work, notice, you’re probably also paying for some bureaucrat to come out and watch you stop. The guests works. Yeah, I get it in the past. Maybe a few people exploded because they didn’t do it right. But saying we should go back to that. I’m just making a point that if you could see the website that I’m looking at right now,
Wow. And this is just for 400,000 people. This isn’t like for the country or for. Southeast Asia. Stone license, stormwater, easement clearances, residential land rent payments. Instrument or deed application to search payment. You get the point. I could be here a long time lottery approval.
Alright, I gotta stop. I gotta stop looking at this. So as government grows, they just find more and more ways to extrapolate have meant to say extort too. Extract was the word I was looking for. I don’t mean extort. I might’ve thought it, but in say it. So the last thing here is he says, That the best thing you can do is cut tax rights. If you want to, if you want to diminish gambling in a society now by gambling, I don’t just mean casinos. Speculative gambling on cryptocurrencies and all sorts of other craziness, or just.
Dumping universal basic income payments into equities markets and jumping on Robin hood and becoming an overnight day trader. We want reduced taxes because those handed, we want people to go. If I take this risk, if I take this capital. Is there a chance that I will get some kind of positive benefit.
So the final thing here is he quotes the famous Jack Kemp, where he talks about, The best way to do this is by cutting tax rights, where they most discouraged people from investing in each other. And he goes on to reference Jack Kemp and he says, Jack Kemp was really big on getting rid of capital gains taxes.
I’m not an expert on capital gains taxes, but I guess the idea is governments are like we created these, the infrastructure in the system where you made profit. Therefore we need to get a cut. So in summary. I think we’re at a moment of a lot of gambling and why wouldn’t we be right? Because with the, all the liquidity, as I’ve said in every episode,
This last few days. We’re looking at 20 trillion and growing in excess liquidity since COVID started. And as I always say, every dollar finds a home, right? So there are tons of people who didn’t need the money. Or I’ve got access to extra discretionary money, courtesy of government that are now looking for a place to put it. So wouldn’t it be good supply side is if, instead of.
I guess this money. Heading into speculative and risky areas. It was put into areas of risk that led to productive outcomes and grew the genuine. Wealth of the nation. All right. That’s it from me. We’ll have some more guests coming up for you soon. Stay tuned. I’m trying to record each day. Just short snippets.
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Bang it on Twitter, hashtag fin twit and get it out there. That’s it from me. My name’s jonathan doyle this has been a lesson four of June Wanniski supply side at university and i’ll have another message for you very soon
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