Category Archives: Media

Media

Video: Escape from the Central Bank Trap presentation at the Heritage Foundation, Washington

Conferences, Media

In this video I explain the main messages of my book “Escape from the Central Bank Trap” (available now at amazon)

Escape from the Central Bank Trap. 
How to Escape From the $20 Trillion Monetary Expansion Unharmed
Daniel Lacalle
“The central bank trap is clearly anything but an easy one to get out of.” “In addition to structural reforms to promote lower government spending and higher efficiency, Lacalle recommends tax cuts to let households and SMEs thrive”.
“Daniel Lacalle offers the right mix of realism and optimism”

Available NOW:

UK: Amazon.co.uk

“To escape the trap of money printing, one has to understand why the trap didn’t work to begin with. Lacalle is one of the leading next generation economists who can simplify the complex. He’s neither a mainstream academic nor a flailing economic pundit. His teachings come from a market practitioner’s perspective. This book is about the economic truth.”

Keith R. McCullough. Chief Executive Officer, Hedgeye Risk Management

“Escape from the Central Bank Trap provides a penetrating framework for understanding the co-dependencies among today’s monetary policy, the economy and the financial markets. Lacalle’s book draws out how these co-dependencies developed, the risks that have since evolved, and outlines the necessary tough medicine needed to return to a more sustainable condition. By distilling today’s complex economic and monetary challenges succinctly, Lacalle provides us with a road map that an economist, market practitioner, or anyone who cares about long term economic health can grab hold of.”

Michael Purves. Chief Global Strategist, Weeden & Co.

“Cheap money becomes very expensive in the long run.” With this quote, Daniel Lacalle captures succinctly the myriad fallacies associated with modern, activist, inflationist central banking and misguided economic policy more generally. This book is a tour-de-force expose and critique of many such popular policy delusions which might appeal to self-serving politicians seeking to avoid hard choices, but undermine the economic health of their constituents. As Daniel Lacalle makes clear, reality is a harsh mistress, even if this only becomes evident in the long-run. Indeed, this time-inconsistency between the interests of economic officials and their constituents is itself a huge part of the problem. Fortunately, in this book, Daniel offers up some compelling solutions. Anyone seeking a deeper understanding of the mess that central banks have created should read this book. Moreover, readers can take the proposed, practical solutions therein to their political representatives and apply pressure for the fundamental monetary and economic policy reforms required to “escape from the central bank trap.”
John Butler, Economist and author of “The Golden Revolution”
Summary:
Central banks do not print growth.
The financial crisis was much more than the result of an excess of risk. The same policies that created each subsequent bust are the ones that have been implemented in recent years. This book is about realistic solutions for the threat of zero-interest rates and excessive liquidity.
The United States needs to take the first step, defending sound money and a balanced budget, recovering the middle-class by focusing on increasing disposable income. The rest will follow. Our future should not be low growth and high debt. Cheap money becomes very expensive in the long run.
There is an escape from the Central Bank Trap.
Biography:
Daniel Lacalle is a PhD economist, chief investment officer at Tressis Gestión, and professor of global economy. Holds a PhD in economics, the certified international investment analyst title, a post graduate degree in IESE, and a master’s degree in economic investigation (UCV). He is a member of the advisory board of the Rafael del Pino Foundation, and professor at IE business school and the Institute of Stock Market Studies (IEB). He was ranked one of the Top 20 most influential economists in the world in 2016 (Richtopia).
Twitter: @dlacalle_IA
website: dlacalle.com

 

The “Tax The Rich” Fallacy Always Means More Taxes To Everyone. Here is Why.

Media

Why does the promise of raising taxes to the rich always end with higher taxes to the middle class? In this short video, we explain it.

The interventionists promise large funds and expenditure plans for all kinds of projects that they intend to finance by “raising taxes on the rich”.

Those expenses, of course, are true, real ones. However, their revenue estimates are simply overoptimistic. Under Obama, the average federal tax rate paid by the top 1% of households went gone up more than 6 percentage points to an estimated 33.8%, according to the Tax Policy Center.

What ensued was: Debt and deficits still ballooned and the middle class suffered even more tax increases.

How does this happen?

First: Spend more. The historical average of over-spending on budget is 10% in the past eight years. Federal outlays far exceeded the government plans and estimates, raising the debt ceiling in three occasions. This has been an issue in almost every administration of the past twenty years. From 2008 to 2009, federal spending jumped 17.9 percent, reaching $3.5 trillion, going to $3.9 trillion in 2016.

Second: Revenue estimates are not even remotely enough to cover the rise in spending. Tax revenues did increase in absolute and relative to GDP terms. However, spending increased even more.

When its recovery plan was announced, the White House predicted an average growth in the economy of 4-4.5 percent, and the budget deficit would shrink to 3.5 percent of GDP . Public debt ballooned from 48% to 75% of GDP and average annual deficit was 5.2%. Total receipts, despite the recovery, low unemployment and a massive stimulus, fell short of estimates by almost $110 billion in 2016 alone.

After $1.5 trillion in new taxes, debt increased by $10 trillion. In 2013, increasing the employee payroll tax from 4.2% to 6.2% made an average worker earning $50k a year pay $1k more in taxes.

We must remember that the average error in estimates of new tax revenue in the OECD has ranged between 20% and 50%.

At the end of the day, it is plan and simple maths. The estimates of revenue increases are made by the same government officials that benefit from increasing federal outlays because it increases their power, and when those revenues fall short of magic and unachievable expectations, you pay. They win.

You cannot fund trillions of dollars by raising taxes on a few thousand, as rich as they might be. The promises of billions in spending funded by the rich becomes the reality of more debt and higher taxes to everyone.

Very real expenditures, very real debt increases, and very idealistic optimistic tax receipt estimates. An equation that always ends in “raising taxes to all”.

The next time you read that billions of new public spending will be financed by the wealthy, remember it will be you who pays.

Daniel Lacalle is Chief Economist at Tressis, SV a PhD in Economics and author of Life In The Financial Markets, The Energy World Is Flat (Wiley) and Escape from the Central Bank Trap (BEP)

 

Further read:

https://faculty.chicagobooth.edu/austan.goolsbee/research/taxrich.pdf

http://assets.press.princeton.edu/chapters/s10674.pdf

https://pdfs.semanticscholar.org/0589/69ee69e57ffd296b76dbf4504bb8766a4197.pdf

http://www.aei.org/publication/should-the-top-marginal-income-tax-rate-be-73-percent/