Propaganda and miscalculation
La Tribune today runs a nice story about how much rich the French people are. According to the Ministry of Finance, their assets doubled since 2001 to reach 10 000 billion euros. That is 8 years of revenue or 5 years of National Income.
Nice thing is that 61% of this incredible wealth is in real estate. Logically, big brains in Bercy (the ugly place where the French Ministry of Finance is) start to brag about taxing more real estate. It’s easy with such an illiquid asset and it’s rewarding.
I’m not going to argue about propaganda as the story initially appeared in Le Figaro, a rightist newspaper with strong ties to the Sarkozy’s government, at the moment when this own government is openly thinking about increasing taxation on housing. Always amazing to see how stupid they think we are.
I’m just going to underline that this incredible growth in wealth is based on a bubble in housing prices. Real estate prices in France are overvalued by 40% if we were to consider the true economic status of France (I found that in Paul Kedrosky’s Infectious Greed, one of the most serious source about French economics). Thus, the housing part of the wealth is not 10000x61%=6100 billion euros but more likely 10000x61%x60%=3700 billion euros.
Now, the Frenchies total wealth is 3900+3700=7600 billion euros. Hence, the growth since 2001 is not a double by adding 5000 billion euros, but a mere +50% by adding 2600 billion euros. Take off inflation and it’s close to +30% if you take into account 18.5% cumulated inflation since 2001.
Mr TaxMan, our wealth did NOT double since 2001, it merely grew by +30%.
Remember this story next time you vote. Politicians don’t know what they are talking about and they like to tax you on virtual assets. You are the one who will feel the pain when the housing bubble will burst, not them.
Sources:
http://www.latribune.fr/actualites/economie/france/20110121trib000594252/les-francais-sont-deux-fois-plus-riches-qu-en-2001.html
http://paul.kedrosky.com/ (Have no time to find the reference article, please do it by yourself)
