Thursday, October 3, 2013

A Populist Government will Impose a Confiscatory Wealth Tax

Marc Faber : My asset allocation consists of 25% in equities, 25% in gold, 25% in bonds and cash, and 25% in real estate. I am hoping for the best. But I detect a growing movement toward populist governments in the Western world. Most governments are on good terms with the well-to-do. They have softened them with easy monetary policies, which have benefited people with access to capital. But the day will come when a wealth tax is instituted.

TGR: How will wealth be defined?

Marc Faber : If I were running a populist government, I would go to the people and say, "The reason why your economic conditions have worsened over the last 20 years is because of the super rich. They are stealing from the people." And then I would declare that anyone with assets over $20M must pay a 50% one-time wealth tax. That can also be accomplished with an estate duty of 50%. The asset bar has to be sufficiently high, however, because 99.9% of Americans and Europeans do not have $20M or $50M stashed away. The higher the cut-off point, the more likely the voters will approve a confiscatory wealth tax.

TGR: Would such a tax have economic repercussions?

Marc Faber : It would be a disaster. But, regardless, people think that democracies work well. Democratic leaders bribe the electors by introducing popular measures, by handing out money to the voters and by taxing it away from the rich. That has happened again and again throughout history. - in The Gold Report

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.


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