IMF: Wealth Inequality Harms Economies

March 5, 2014

For the past three decades; we have been subjected to the mythology that when the Rich get richer “it’s good for the economy”. This mythology has been debunked in several of my own previous commentaries, most notably The Pareto Threshold.

In that piece; it was explained that wealth-inequality was not merely “harmful” to economies, but rather when it becomes too extreme it literally destroys economies. This is all just simple arithmetic/economics. Proof of this principle requires nothing more than simply visualizing an inverted “wealth pyramid” – where a small number of people at the top hold all the wealth, and the masses hold nothing.

Obviously such an economic phenomenon is the literal representation of “instability”, reflecting a hollowed-out economy which cannot possibly survive. Conversely, elementary economic theory (i.e. the “marginal propensity to consume”) proves that an economy must be healthier/more robust if most of the wealth is held by most of the people.

Now the International Monetary Fund, one of the central institutions of the Western banking empire, has come out and stated the obvious. Nations with higher wealth-inequality consistently exhibit poorer economic performance than nations with less inequality. We have had empirical proof of this for decades.

Year after year, decade after decade; the Scandinavian nations of northern Europe, with centralist governments and economic policies, consistently rank at the top of all international surveys of “quality of life”. Many in the mainstream media (and the Right-Wing media, in particular) mistakenly label these governments as being “socialist”. However this cannot possibly be true.

It is these same banking institutions and “right-wing think-tanks” which tell us all the time that socialism destroys economies. However, the centralist governments of Northern Europe also rank at the top of all international surveys on prosperity. The societies with the least wealth-inequality in the West are also its strongest economies.

While the “more capitalist” nations in the West (dominated by Western banking) all have debt-to-GDP ratios approaching 100% or worse; these Scandinavian nations have debt-to-GDP ratios of 25% or less. Surely the right-wingers at Fox “News” don’t want to assert that all of the best-managed (and most-prosperous) economies in the Western world are “socialist”?

Why is a commentator who generally specializes in “precious metals” even covering the subject of wealth-inequality? The glib answer would be that I first spotted this news at Kitco Gold. The more thoughtful answer is that it provides us with yet more illumination on our Lemming Economies.

Wealth inequality is bad for economies. Too much wealth-inequality is fatal for an economy. Wealth-inequality in (most) Western societies is at the worst extreme in history, and continues to get worse by the day. Conclusion: all these Lemming Economies will soon go “kaboom”, and so we hold gold/silver in anticipation of this collapse.

What makes analysis of wealth-inequality so productive is that it tells us why our economies are about to go “kaboom” (contrary to the daily mythology from the Corporate media). It also tells us how to prevent our economies from going  “kaboom” (assuming anyone in our Traitor Governments still care).

Furthermore, any analysis of wealth-inequality also immediately leads us to the real reason why our nations are all insolvent, in the first place, and about to go bankrupt: because of taxation inequality. The Misers at the top, the fraction of the Top-1% who hoard most of our wealth refuse to pay taxes on their gigantic hoards.

The “tax base” across the Western world has collapsed, as those on the bottom have nothing left to tax, while those at the top (hoarding all the wealth) are taxed at the lowest rates in history. This has resulted in what I previously described (and documented) as “the Great Western Revenue Crisis”. In real dollars; spending is flat, but tax receipts have collapsed.

This is another reason why lying about inflation is so important to the Oligarchs. By pretending that inflation is only a tiny fraction of its actual level, they can skew the numbers, making spending appear to be rising, and revenues appear to be (at least somewhat stable). But the two charts below completely debunk that fiction.

[courtesy of]

This brings me to the even more significant conclusion in the IMF study which was cited in the article by The Guardian. Contrary to (more) right-wing mythology; reforming a taxation system to promote greater wealth-equality has a “neutral effect” on economies. One must realize that this rather lukewarm endorsement of wealth redistribution comes from the center of a financial empire which has exclusively preached the mantra that the Rich should get richer.

This is nothing less than a mea culpa. Since the same IMF study already tells us that our economies will get stronger as they get “more equal”; we know that wealth-redistribution is, in fact, an unequivocally beneficial policy in any society where wealth-inequality has reached an extreme (such as our own).

Regular readers already know the means by which a fair system of taxation can be instituted: a “flat” wealth tax. Wealth-taxation is the least-punitive form of taxation which can be devised (because it is a system which has the lowest tax rate). It’s also the simplest and most-efficient system of taxation, along with being the most-difficult system to cheat. It’s for all of these reasons (especially the last one) that wealth-taxation is utterly despised by the Oligarchs.

With wealth taxation; the very-wealthy can no longer hide their hoards. If all of the wealth of our societies was taxed, this would mean (for at least ¾ of the population) lower taxes. Wealth taxation will be revenue-neutral for roughly another 10% of the population; while only those in the top 15% (currently taxed at the lowest rates in history) will see any substantial increase in their taxes.

As a simple matter of logic; no economy can remain strong if more than half its wealth is hidden (and sitting idle) in huge, obscene hoards. As a simple matter of logic; no economy can remain solvent if most of its wealth is immune from any taxation, thus starving governments of revenues.

Now we have the Bankers themselves validating these basic Truths, via one of their own, primary mouthpieces: the IMF. From this point onward; any/all attempts to promote “trickle-down economics” or any other rich-get-richer policy will be revealed for what it is: nothing but an attempt (by those on top) to steal even more from those on the bottom.

Note as we see confirmation that wealth redistribution (toward greater equality) helps economies what this implies. All of the taxation policies over recent decades which have slashed taxes for the Rich (most-infamously, the “Bush tax-cuts”) have harmed our economies.

But this has never been a secret. Roughly 2,000 years ago (and 1,500 years before the birth of “socialism”); Greek philosopher Plutarch immortalized this basic economic Truth:

An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.

Allowing the pendulum of wealth-redistribution to (finally) swing back is not “a wealth-grab”. It is a wealth retrieval. There was never any justification for the last three decades of tax hand-outs for those on top. Allowing those on top to enjoy decades of this tax-welfare is effectively no different than if the wealthy simply stole that money directly out of the pockets of the Average Person – since that’s who has been paying their taxes all these years.

This also means there is now nowhere for our Traitor Governments to hide. The Truth is now exposed. If we don’t see these regimes immediately move toward economic policies which promote economic equality (rather than more policies which destroy equality) it will confirm these Thieves for what they really are.

Equality is “good for our economies”. I’ve written this before, again and again, and now this simple fact of economics has been validated by one of our most-respected/most-infamous banking institutions. Justice leads to prosperity.

Jeff Nielson

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is

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