by tonytran2015 (Melbourne, Australia).
Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.
#bubble market, #market crash, #share market, #investment mania, #capital gain, #tax, #duty, #government,
Government may be behind Bubble Markets.
The arguments here use data and laws for only Australia but they are supposed to be applicable to other similar countries.
1. Government makes money on all transfer of wealth and all betting.
Let us say that any share trading market is only a place with zero sum for gains, just like a legalized casino (but with less requirements for transparency and fairness). There will always be winners and losers.
The government collects stamp duties on all transfer of wealth (ownership of shares) and betting (based on Contracts for Index Trading and Call and Put Options for shares).
The winners pay stamp duties and taxes on capital gains. The losers can ONLY deduct their capital losses against any current or future capital gains OF THE SAME NATURE!
That means you cannot deduct capital losses from shareholdings against capital gains in gold investment!
If a shareholder get very dispirited and decide never to own shares again, the Government win on the capital gain taxes he already paid on his IMAGINARY gains (during the growth of the Bubble)!
2. Government collects non-refundable stamp duties and capital gain taxes on all form of IMAGINARY capital gains.
During the bubble phase, most capital gains are imaginary and the government is quite happy collecting stamp duties and capital gain taxes on those imaginary capital gains!
3. There is more trading during any crash.
A crash of any market is only a (equitable or otherwise) transfer of wealth.
The computers for Share Trading have been overloaded and shut down in past crashes due to hectic trading. There will be obligations to complete the transfers of wealth after the trading.
A government always collect more stamp duties during crash despite its lip service that it shares the anguish of losers.
4. Australian government has been pumping up bank shares.
a. It allows shareholders to bet that bank shares would rise (by buying Call options and Selling put options) but penalize those shareholders who have “Put options” (by disqualifying them from offsetting company taxes against their personal income taxes)
b. It prohibits day traders (of shares) from selling first and buy back later the bank shares they don’t have. However it does not stop day traders from buying first resell later with the money they may not have ! (You are not allowed to sell in the morning the overpriced bank shares and buy them cheaper in the afternoon to fulfill the obligation caused by the contract in the morning).
Just follow the money then people can see that Australian government benefits more from Bubble Markets than from “Fair Markets”. It may advise caution to investors but actually it may enjoy the money it collects from Bubble Markets of any form (for shares, real estates, bitcoins, tulips, gold, etc…).
Therefore it may be unnatural to expect a government to stop the growth of any bubble in its markets. It may actually have lent a hand to their growth!
Figure: Predicting a share market crash is really difficult.
Figure: Tulips (currently at $2 a bulb).
Figures: 1 ounce gold slab.
Added after 2018 Mar 05:
RELATED MONEY Blogs