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The rich get richer #finance #economy

There was a big sell-off on stock markets around the world yesterday. Investors are very nervous. Here in the UK, we have continued uncertainty because of Brexit which was madness when we were only just beginning to recover from the 2008 crash. The top FTSE 100 companies appear to be riding high with share prices soaring since the Brexit referendum but the reality is they have only become more profitable in terms of our own currency. The value of the pound crashed against the US dollar which we should remember is the reserve currency. While British importers are paying more in dollars for imports, exporters appear to be making bigger profits, at least on paper.

Smoke and mirrors

The success of many companies isn’t a real success, it’s all smoke and mirrors and dodgy accounting. The US president is trying to put pressure on the Federal Reserve to stop them raising interest rates but pension funds rely on decent interest rates to provide for their pensioners. In reality, many companies borrow to invest and hope that inflation will inflate away the debt. This is particularly true of property speculators and that is President Trump area of business. He made his money by exploiting a property market that was rigged in favour of a continual shortage of property and housing.

The US President did cut taxes, particularly corporation tax which makes exporting companies more competitive. I think a cut in corporation tax here in the UK would make most FTSE 100 companies more competitive or make them more profitable. Of course, there are those who hate big companies making a profit at all, but profitability leads to investment.

The rich get richer

Yes, the rich get richer and the poor get poorer but companies aren’t people, they are legal entities and increasing taxes on companies simply makes them less competitive. Increasing taxes on people will make people poorer but the rich can often give themselves a pay rise so even tax increases are not the answer to wealth inequality. A financial transaction tax collected by banks might be helpful and it could possibly fund a universal income. The United Kingdom and the major economies certainly have some challenges to face in the next few years.

As the rich get richer and accumulate wealth they often experience moral poverty. Money doesn’t buy happiness and we have to remember there are other ways to feel content with life. The wealthy can afford to spend millions on a Monet or a Cezanne but never experience the pleasure of actually being able to create art. They can afford the best champagne but can’t enjoy it as much as a worker enjoys a beer after a hard days work. The rich have their illusions, their grandeur, they believe in all the glitter and glamour.

There is a royal wedding today. A show put on for the naive to gawp at as it is beamed across the globe as a statement of royal superiority but that superiority is as fake as the emperor’s new clothes. The poor can at least stay grounded in reality or at least a version of reality.

That’s all for today. If you would like to follow my blog just enter your email address at the top of the sidebar or follow me on Twitter for links to the latest posts. There are also links on my Facebook page.

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