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Author: Jim2B Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 134176  
Subject: Re: Best move for Republicans Date: 11/18/2012 11:58 AM
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No, that's not how it works. All asset prices are marginally higher (possibly), meaning that everyone pays and gets higher prices for their assets, not only the guy who got the tax cut.

Actually, that is not how it works.

You play around with averages and equilibrium concepts but the market definitely does not work that way.

You might buy a car with your tax break. I might buy new windows for my house. In each case we invest our money in what we perceive to bring us the highest value for the money spent. In my case, that would be reduced energy bills. In your case it might be decreased fuel bills.

In each case we receive (or at least perceive) a return greater than our investment! This is almost always true.

The government also works on averages and equilibrium concepts and CANNOT make the correct decisions for us. Instead it invest in green energy companies (which go bankrupt) and automobile makers (who lose value). Investments made by the government almost always destroy wealth by earning returns less than the investment.

Here's a simple rule of thumb, not always true but on average it is true:

Government investments of $1, return < $1
Private investments of $1, return > $1

Jim
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