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Steve Roth — “If you tax investment income what will people do? Stuff their money in the mattress?”

Summary:
A lot of pseudo-problems arise from confusion about use of terms, especially when key terms are ambiguous. For example, "capital" can be either financial or non-finanacial ("real" or actual).  "Investment" has two different meanings. Financial "investment" is portfolio wealth held as financial instruments a form of savings in contrast to real goods like real estate, physical precious metals, and collectibles like art. "Savings" denotes a stock, and "saving" denotes a flow.  "Savings" denotes portfolio holdings that can be held either in financial instruments or non-fiancial goods. "Saving" is defined in macroeconomics as income not spent ("consumed") in an accounting period. Failure to recognize these ambiguities results in conflation of concepts and confusion about finance

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A lot of pseudo-problems arise from confusion about use of terms, especially when key terms are ambiguous.

For example, "capital" can be either financial or non-finanacial ("real" or actual). 

"Investment" has two different meanings. Financial "investment" is portfolio wealth held as financial instruments a form of savings in contrast to real goods like real estate, physical precious metals, and collectibles like art.

"Savings" denotes a stock, and "saving" denotes a flow.  "Savings" denotes portfolio holdings that can be held either in financial instruments or non-fiancial goods. "Saving" is defined in macroeconomics as income not spent ("consumed") in an accounting period.

Failure to recognize these ambiguities results in conflation of concepts and confusion about finance and economics.

Steve Roth
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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