Welcome back to Gary’s Economics.

Today we're going to talk about burning money.

All right.

So this is a question which I've been asked recently

in a few interviews which is, all right Gary,

if you are successful

in taxing the rich significantly more

what would you do with the money?

And I've given this answer in a few interviews

which is kind of me being intentionally controversial,

which is to say that

if you were to tax the rich significantly more

and literally burn the money,

you would see a significant increase

in living standards.

And there's a degree to which I say

that to be controversial,

but I think I also want to illustrate

a really important point, which is that

I think it is actually true.

If you were to take this money to burn it,

you would increase living standards.

And the reason for this is,

if you were to do this

really significantly, tax the rich and burn the money,

you'd be basically exactly reversing

what we did economically as a society during Covid.

So the reason I started this channel, for those of you

who don't know, the first channel we did on this,

the first video we did on

this channel was a video called

How do the rich get rich from Covid 19?

It was in June 2020,

and that's because it was very clear to me

very early on that during Covid,

the government would give out

an enormous amount of money.

That money would end up with rich people

and that would cause a collapse in living standards.

I reference this video a lot on the channel,

if you haven't seen it,

you really should go and watch it,

because it enabled me at the very beginning of Covid

to make a lot

of very accurate predictions

about what would happen after lockdown,

which was that inequality would increase massively,

house prices would increase massively,

there'd be a big increase in inflation,

there'd be a big collapse in living standards,

there'd be big increases

in stock prices and the gold price.

All these things happened basically.

Now, at the time,

at the very beginning of Covid,

to anyone who

would have bothered to look and do that analysis.

It was actually very obvious

early on that an enormous amount of money would flow

from the government to the rich.

And again, if you want to know how that mechanism works,

we'll put the link to the video in the

description.

The amount of money that went

from the government to the rich during Covid,

the total government deficit

since the beginning of Covid

is £800

billion,

which would be enough to give

every single adult in the country £16,000 each.

So if we make the simplifying assumption

that that went to the top 5%,

obviously it's a little bit

more complicated than that,

but most of it

did end up with the very rich,

that would be enough

to give the top 5% of adults in the country

£320,000 each. Absolutely enormous amount of money.

So let's think about what would happen

if we were to tax

all of these very rich people £320,000 each.

That's per adult, right, not per family,

and burn the money.

Because I think it's

actually really interesting, it helps

you understand what has happened and how money works.

First of all, it's a massive amount of money.

£320,000 per adult

is a lot of money, even for rich people.

The top 5% is not all super, super, super millionaires.

All right.

If we say the top 1%,

suddenly we're talking about £1.6 million

for every one of the top 1%.

That’s a huge amount of money

these guys would straight away in many cases...

Well, first thing to say is a lot of

these guys have accumulated

a huge amount of money and are sitting on the money.

So you get rid of that money.

Now the government through the Bank of England

pays them interest on the money.

So straight away

you collapse government interest payments,

which means government deficit disappears.

And the government doesn't have to do austerity.

So number one, austerity finishes end of austerity.

Number two is in a lot of cases

these guys don't have that cash

and they would have to sell assets.

Now one of the biggest things that has changed

since Covid is a transfer of assets

away from the middle class and towards the rich.

The way that you see that

as an ordinary family is that if you are young,

you can't afford the house,

rich people are buying instead with cash.

Or if you are older, your kids can't afford the house

because the rich people's kids are buying it with cash.

So the rich have to start selling assets.

They can't all sell them without somebody buying them.

So assets transfer back from the government...

assets transfer back from the rich to the middle class

so that inequality decreases. Money flows back.

The next thing is because they have to spend

an enormous amount of money on tax,

they probably have to reduce their spending,

which means you will see

a significant decrease in inflation.

It's a lot of money £1.6 million.

If these guys all stopped spending,

you will see inflation collapse down,

possibly into negative territory.

So the next thing you see is

inflation goes negative,

which means that the massive price increases

we've seen start to reverse.

So again

you see a reversal of what happened during Covid.

Well if that inflation collapses

well the central bank will have to act

because their job is to make sure

inflation say that 2%. So straight away

Bank of England interest rate collapses.

It'll be the same if you're an America.

Fed interest rate collapses.

So assets go back to the middle class

inequality reduces, prices go down,

interest rates go down, your mortgage payments go down.

Every single one of these...

Oh, and the government debt goes down, government

deficit goes down.

Every single one of these is the exact reversal

of what happened during Covid.

And every single one of these is driving up

the living standards

of ordinary families in the middle class.

The government will have less assets.

The government have less consumption.

Those assets will go to ordinary families,

and that consumption will go to ordinary families,

and living standards will significantly increase.

So what this highlights for me,

the most important

thing to understand is at the beginning of Covid,

when I said

the rich will accumulate an enormous amount of money

from the government,

a lot of people said, why does that matter?

Why does it matter if the rich accumulate money?

This is politics of envy.

You shouldn't care about the rich being rich.

This shouldn't bother you.

What underlies this,

I think,

is a fundamental misconception,

misunderstanding of what money is.

And I think

what it is, is a confusion of money for real resources.

Now, if we suddenly magicked up out of thin air

a tonne of real resources,

productive resources, and we gave it to the rich.

This would not be a bad thing.

Society would become more productive.

Things would become cheaper.

We've certainly got loads more stuff

now, we can all be richer.

But money is not real resources.

If you conjure up out of thin air

a tonne of money,

most of this money was printed,

and give it to the rich,

that does not make society any more productive.

Money is not a real resource.

Money is not a productive resource.

Money is a relative resource.

Money is a competitive resource.

Money is the resource which we use to determine

the distribution of the real resources.

So if we give the rich a tonne of money

and we don't give you a tonne of money,

they will use that money

to take a bigger share of the assets,

to take a bigger share of the resources

to outcompete

you and your kids for assets and resources.

And what you see is your family

losing its share of real resources,

government losing its share of real resources,

and in many cases, families

losing their share of basic essentials

like housing, like food, like energy.

Money is a relative resource.

This is why when we give a tonne of money to the rich

and we don't give a tonne of money to you,

you lose out in terms of real consumption.

And what you see is inflation.

If we were to reverse that,

you would get a bigger share of assets.

You get a bigger share of consumption.

And what you would see is deflation.

Now, I think this highlights the absurdity

and the stupidity of the way we handled Covid.

Not that I'm against lockdowns.

Sometimes people try to say I'm against lockdowns,

so I don't really have an opinion.

I'm not a doctor on these things.

We should have recognised from the beginning

that it was going to be massive...

There was going to be a massive distributional effect

that was going to massively increase

inequality, a massive decrease in living standards.

We didn't talk about it, but I should point out,

I don't actually support this as a policy.

I don't think we should burn the money.

I think that would be

a quite absurd thing to do with the money.

We can use that money, we can distribute directly.

This amount of money would be enough

to give £16,000 to every adult in the country.

Not every household, every adult.

So this means if you are an adult, £16,000 to you,

to your mum, to your dad,

to your brother, to your sister, to your girlfriend,

to your boyfriend,

to your husband, to your wife, to your kids,

if they're over 18, to every single one of your mates,

this money could be used to make you

much, much, much richer.

And once you realise the scale of it,

it should be obvious

that it is the cause of the decrease

in your living standards.

And I think what the point

I'm trying to make, the underlying point is

when I talk about taxation of the rich,

it is not about politics of envy.

It is about the politics of power.

It is about the politics of distribution.

There is a group in society

which is getting rapidly, aggressively,

richer and is massively increasing

its share of assets and wealth

and ownership and consumption

at the expense of the government and the middle class.

It’s making the middle class poor, is making your kids

poor, it's going to make your grandkids poor.

And it's closing down the welfare state

and the government.

Listen, taxation is not about envy.

Taxation is about power.

These guys are going to eat you.

They’re eating you alive.

They're going to eat your kids.

There is no way to stop them

other than taxation policy.

You know, when I talk about...

when people...

when I talk about this and people

turn around to me and say, this is politics of envy,

I feel like I'm sitting here

on a battlefield and there is an army invading

that is going to take all of your stuff.

And I'm saying

maybe we should stop them from doing that.

And you’re turning around to me and saying,

that's politics of envy.

There is competition in our society.

These guys are getting more powerful.

They're getting richer. They're taking your stuff.

If you allow them to take all your stuff,

you're going to be poor

and your kids lives will be poor.

They're not paying taxes.

You're paying taxes. That's an unfair system.

Raise their taxes.

Cut your taxes.

Protect your kids from their kids.

Allow ordinary families to afford things like housing.

To afford things like a decent standard of life.

It's the only way to prevent the country

from collapsing into poverty.

We campaign for it every week here on Gary's Economics.

Watch the videos. Share the videos.

Tell your friends. Tell your mum.

If we reverse it, we can make things better.

If we don't, then we can't. I'm going to keep trying.

I hope you do too. Thank you. Good luck.