Wednesday, December 24, 2008

German politican has an idea similar to mine, so ...

it might be useful to distinguish between his idea and mine - and to outline the pros and cons of each idea.

Torsten Schäfer-Gümbel, the Social Democrat candidate for governor of the western German state of Hesse (the election is scheduled for January 18), has come up with an interesting idea to raise €50 billion to help fight the looming recession in Germany.

Rich people, he says, should be forced to invest two percent of their wealth in 15-year government bonds paying a maximum interest of 2.5 percent. For us Indians, as for many others, that may not seem like a particularly high interest rate, but interest rates have always tended to be low on the European Continent, and of course rates are low everywhere at present, so that is not a particular problem. However, his idea seems even less likely to gain favour than my idea, even though his idea has attracted a lot of media attention:,1518,597945,00.html

His definition of a "rich person" is someone with cash and real estate assets exceeding €750,000 ($1.04 million). The bond would be used for funding energy-saving buses and trains for public transport, new research projects and energy savings technologies.

Buses and trains, where they are publicly owned - of course. But it is entirely unclear to me why the state would be able to make intelligent decisions regarding where to invest in new research and energy-saving technologies.

To ensure that you recollect my idea accurately: only a defined number (say 100 in a region) of the richest families would be required to put their money into micro-investments for businesses owned by the poorest in society.

My plan has the advantage that there is no politician arbitrarily defining what "wealth" is.

Also, my plan requires the relevant people to INVEST not loan to any government. Investors are of course entirely free to invest in whatever they like (within the criteria set).

Further, the investments directly help the poorest, who can of course come up also with research or industrial among other business plans themselves.

Finally, by putting the profits (eventually) in the hands of the poorest businesspeople, my plan more or less guarantees that that the profits will actually be spent or invested (the poorest usually have little ability to save) - and that will provide a direct and immediate fillip to the economy, whereas profits going to richer individuals may (or, more likely, may not) find their way into the economy in the current climate.

Oh, and we shouldn't forget that many if not most governments are bankrupt anyway - do you really want a bond from a government at this time? Sphere: Related Content

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