How Human Response To A Messed Up Global Economy Part 3

By Lawrence


Continue from part 2

Governments are running out of excuses to stop bartering from growing. The only issue left is how far bartering can reach in our economic structure. There was no historical period telling us where this development will take us so it is not possible to tell what the actual impacts will be. One thing we know for sure though is that governments will figure out new ways to fend off this movement.

Taxing Ownership Of Assets

Governments around the world will not settle with bartering eating into their tax base significantly. Excuses will be made and new laws will be introduced to stop bartering from spreading. One key area is the taxation on ownership of any assets.

Asset taxation on limited classes of assets is there all along. Property tax on your house has the excuse of maintenance cost of infrastructure provided to your house is an on-going expense. Taxing on capital gain is based on the principle that you are gaining from the country’s overall environment making it possible to conduct your business.

Other than that you seldom see governments taxing on usage of your own assets until you spend some time in other countries. Some places on Earth, however, tax the usage advantage you have on your own property as if you have made money off the property. That means on top of the property tax you have to pay for the house you own, you also have to pay for the expected income you can generate from the property if you live there yourself. The twisted logic is that you have gained the value of potential rent from the use of the property. Thus you need to pay income tax on that hidden gain.

The other form of taxation on asset is the use of licensing to enforce a fee on certain activities. For example, government can go as far as banning farming on your own backyard or require a license before you can do so. This concept, however, cannot be enforced effectively as long as fiat money is not involved in the activity itself.

Governments Auto Expansion By Design

When governments grew too big, they will not try to reduce their spending and overall sizes to accommodate the downsizing of the economy they are managing. Instead, they will just find ways to look for more money from things they can control. Assets that you cannot move out of the country like your house are primary targets.

People who cannot emigrant to another country are the other targets. These people who do not have a choice to emigrant are those who do not have a lot of money. This the the reason why we see the vicious cycle of more tax on middle class and lower class people all the time.

Look at France, the moment they tried to tax their higher income earners, they became citizens of Russia and other European countries the very next day. It shows how stupid (or to put it nicely, naive) the French politicians are but that is not the point. The point is that you simply cannot tax the rich people directly in a democratic country.

Another good example is Japan. Their economy is a mess for 30 years and still is. Almost all jobs for the younger generations are in the low income category. Graduating from universities is mainly a road to a future of semi-permanent low income jobs. The Japanese government should have shrink its presence in its economy to about one fifth its current size so that its cost to the society do not put a burden on the younger generations.

As oppose to operate more efficiently and control its spending to accommodate a country with smaller income tax based due to change in demographic, the Japanese government spends more. It expands its size in the name of stimulating its economy. All normal people in Japan know it is not a solution but politicians are paid to not understand.

Bartering Is Just One Of The Many Natural Responses

The way governments reacted to the changing environment force the people to find a way out. Bartering is just one of the many solutions popping up everywhere. Bitcoin and two tier currency systems are the other obviously routes people taking to survive this changing environment.

I have discussed what Bitcoin is and how it is shaping up to replace the current financial system. I am not going to spend time here on the subject. It takes a lot more than a paragraph to understand what it is.

Two-tier currency systems, however, is something different. It is in fact a model endorsed by the struggling governments around the world. Some have success while others like Cuba find that limiting the power of the government is not desirable by their ruling party. To understand more about the concept, you can check out the video from Bernard Lietaer.

One important thing with bartering is that it cannot be mixed with other money based solutions. Should any form of money is involved in the exchange of goods and services, bartering becomes a business transaction in the eyes of the governments which can lead to tax liability for the involved parties. This limitation makes bartering a very personal experience. It is very difficult to scale bartering to work with industrial productions.


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