That entirely depends on the elasticity in supply and demand of those markets and the rate of the capital gains taxes. All actual study and inquiry into the situation however has found that the peak revenue is very likely much higher than our current marginal rate.

That is not to say its a good idea to increase taxes, but it is to say that increasing taxes will likely increase revenues.[As decreasing taxes has, pretty much unfailingly decreased revenues in the past]

The issue is not the rate charged for making a profit on capital investments. The issue for the government should be at what price charged the taxpayer does the government realize the most revenues. This is the same issue that every retailer faces when deciding upon a price to charge for an item.

Can you give me your thoughts?

BTW – your book is some of the best and most interesting stuff that I’ve read in a long time.

Simply put, fiscal and monetary policy over the past 8 years has been geared toward collapsing the value of the dollar against the Asian currencies. While the policies have been effective at collapsing the dollar, they have also wrecked the ability of US consumers and firms to purchase assets or commodities from abroad. The collapse in the dollar has been the main reason behind the outlandishly high inflation rates in the US, and has also led foreign investors (namely soverign wealth funds) to shy away from US debt instruments.

Add to that a troubled housing market and viola, the entire house of cards that is the financial system collapses.

Simply put, instead of trying to shore up this administration’s place in history by inflating the currency, the Fed should have started raising interest rates a year and a half ago to choke out dollar price inflation in assets and commodities. Sure we would have had a mild recession, but since when were recessions events comparable to the sun blinking out.

The problem probably is a capital market problem, but that doesn’t mean that the problem will be fixed with an increase in liquidity or that it won’t cause other problems.

It seems to me, that if the problem is, as you describe it, a problem with the perceived value of mortgage backed securities, the solution will be in regulating those securities so that their true value can be seen. The market will only regulate itself when the knowledge base regarding the problem securities is brought up to speed, but before then, no amount of liquidity is going to stabilize a market when no one trusts assets backed by the “the largest asset class for every American family”. All then, you would do with an influx of money into the capital economy would do is induce inflation, which can have all sorts of other problems regarding the real value of fixed return investments.

Also, can someone please tell me [i]when[/i] its a good time to talk about increasing taxes. I mean, besides “as soon as i am no longer a tax payer”. The U.S. government is facing real problems regarding future expenditures and long term debt. If we don’t start increasing taxes now, we’re going to have to increase taxes to likely unsupportable levels later. Frankly i would rather pay more taxes now and stay on the right side of the laffer curve than risk dropping off the back end. Think of it as a capital investment in the nations solvency.

You say, in regards to the Fed;
“…..That means providing clarity and visibility over after-tax returns and it means providing adequate liquidity until markets open again;”
and
“…that means providing liquidity.”

How EXACTLY would you desire the Fed do this?

If the capital markets are frozen and the “true” value of underlying cash flow streams mis-represented by the markets, how does one then establish the “true” value.

Should the Fed just buy those bonds that the market refuses to buy, and after the mess is all settled, re-sell them, at a profit, on the open market? (Presumably, the “true” value will, by then, be re-established).

Your response will be greatly appreciated.

AL