The solution to the credit crisis

Many of the issues I was talking about last year on this blog are now part of the mainstream dialog. Some of my suggestions are now being discussed as actual legislation. Not because of how many people that view this bog for sure, but maybe because of the Butterfly Effect. So, I will give my analysis and solution to the credit crisis, volatile markets and our downward spiraling economy.

Macro-Analysis:
Much of the downward spin of the economy is the loss of access to free flowing credit. This loss is due to a lack of confidence in the banking and investment institutions. The lack of confidence stems from the irresponsible profiteering these institutions foisted upon America choosing short term gains over long term stability.

The volatile markets are a function of both our new easy access to news (much of it wrong or misleading), the speed at which both news and the reaction to news travels, our loss of faith in the economy (see downward spin above), the continuation of valuing short term profits over long term stability, and finally...nobody knowing what is going to come next.

Solution:

Create three terms of capital gains tax that encourage long term investment thereby increasing the availability of cash, stability of the markets, and turn the tide of short term profiteering to create an environment of long term, slow, but steady growth.

The 1 year or less investment:
Raise these short term capital gains tax to 80%. This is to almost completely discourage this kind of investment and yet people can still make money on their gains if shrewdly invested based on factual analysis and not market hype.

The 1-5 year investment:
Put these capital gains taxes at 50%.

The 5 year or more investment:
Drop these taxes to 10%. This allows all investors to see real gains over long term choices. This rewards long term commitments while the overall structure of these new taxes punish short term greed. Because of this almost elimination of tax on these long term investments, money will pour into the most stable institutions of our country.

Looking forward to seeing this enter the public discourse.