And crypto wealth is more imaginary than most.
It’s $659,000 I believe (he has a later tweet). Still a long way off $2.2bn!
The Jane Austen manner of describing wealth as x amount per year is much simpler.
It's also been hilarious seeing the anti-fractional reserve nuts melt down. Crypto was supposed to be their Fed-free goldbug fantasy. Now they're learning why the Fed and FDIC exist.
It seems to me — as someone who knows nothing about anything — that the imaginary nature of much of the world’s wealth should terrify us. It’s a house of cards, built by and for a tiny subset of the human population, that could come crashing down in the slightest ill wind, with horrifying consequences for the rest of us. And that should outrage us.
So thinking one of the reasons people go ballistic over the idea of a wealth tax is just this very problem. It may be a very tiny tax, say 1/10th of a percent, but your 'billion dollar company' because Noah brought 1 share for $1 now means you owe $1M!
But if you did have this, I wonder if it might cap the creation of bubbles? If large 'wealth hoards' that are produced by pricing assets to market (even though the assets are thinly traded) have to produce a token amount of cash each year to pay a wealth tax, does this force finance to stay more connected to the real economy?
I hope this is over of Noah’s free articles because there’s a few ppl I would like to share this with so I can stop having to try and answer some of these questions (thinking of you in particular dad) just because I studied economics in high school
The famous Michael Lewis story about Icelandic bankers remains apposite: Suppose you have a dog, and I have a cat. We agree that you will sell me your dog, in exchange for an IOU for $1B. Then I sell you my cat for $1B, and accept cancellation of the debt as payment. Now we are no longer pet owners. We are banks, each with $1B in capital.
I would be interested in your take on whether Harberger taxation of the sort advocated by Glen Weyl would fix this.
On your last point about how rich people really are...how does all of this relate to the super-rich tendency to take out loans at absurd low interest rates to live on vs regular income?
Congrats on the outstanding article! So true, concise and enlightening! This is critical thinking at its best! thank you!
"Oh! OHHH! It went to ZE-RO! Yoooooooooh!"
I have been so glad to have read your June post about how wealth vanishes. It has helped me understand this absurd Bahamian soap opera. I see that SBF told Kelsey Piper that regulations and controls don't actually do any good even for mainstream banking and assets. It would be great if you'd tell me that's not true, or at least not entirely true.
Double-like for the Dr Manhattan meme.
A similar issue occurs, but in reverse in a way, for carried interest. If the day after a fund was raised, a hedge fund tried to sell its carried 20% interest, what would it sell for? Very little, especially to a 3rd party. In fact, it could sell it to a new entity for a dollar if it wished. This ability to value or transfer the carried interest at a very low book value is what leads to the great tax benefit.
In the absence of capital markets, wealth is still a claim on something: the profits of a business, the services provided by a house, the interest on a bond etc. In the case of Bitcoin, it's something like "an input to a hash function that produces a suitably low output", or, with NFTs, "a piece of code giving a unique link to a picture of a monkey". The value of these claims is uncertain, but it can generally be specified in principle. Bitcoin is the easy case - the value is zero. NFTs might be worth something if people are silly enough which they probably are.