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Posts Tagged ‘income’

A 90 Percent Tax???

28 Mar
Is it worth saving for the future?

Is it worth saving for the future?

Steve Landsburg, at his blog, tells a little fairy tale about taxes. His conclusion is that because some income gets taxed several times, a dollar earned today might be taxed at a rate of 95% before it gets used. A valid criticism of his parable is that it only applies to the uber-rich in the USA. Well, I decided to see how the fairy story would play out under different circumstances. Specifically,

  • Instead of taking place in the USA, the story below happens in Australia.
  • Instead of happening to one of the wealthiest of the wealthy, it happens to family on a mid-range income – a typical “Aussie Battler” as one Prime Minister Past was fond of saying.

So….

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Inflation and the Prisoner’s Dilemma

01 May

To combat inflation, the reserve bank raises interest rates. Have you ever wondered why? What do interest rates have to do with inflation, after all?

At first glance, you might think raising interest rates should increase inflation. After all, when interest rates go up, zillions of people find their banks charging more interest on their mortgages. So : why do reserve banks raise interest rates to fight inflation?

The answer is surprising.

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