Re: AltInst: Means of production.

On Tue, 30 Jun 1998, George L. O'Brien wrote:

> > john@dwaf-hri.pwv.gov.za (John Carter) writes:
> >>If the state believes an asset is undervalued on a form by more than
> >>50% and can prove it by publically finding a buyer at twice the stated
> >>value, the state can repossess that asset and sell it to that
> >>buyer. The stated value goes to the owner, and the rest goes to the
> >>state.
>
> I am curious about the method a prospective buyer uses in valuing an asset.
> Current valuation methods assume that business assets are valued as the
> discounted present values of future cash flows. In theory, where a stream
> of cash payments and an end cash value have similar risk factors, the
> difference in amounts is the implicit time value of money (pure interest)
> buried in the future value of property.

I'm struggling a bit to unwind your language/logic here, you are using
a jargon set semi-orthogonal to any I possess. So excuse me if I have
missed your point...

Let's see, you saying the value of the assets of a business can be
computed by looking at the cash flows?

Umm. Yes. No. This seems to be price has something to do with value
and/or cost of production fallacy. Umm. When last did you buy a can of
Coke? Looking at the cash flows will tell you more about the
marketing, the competence of the managers/workers, the state of the
market for the widgets produced by that company, the phase of the
moon, than it will tell you about the assets owned by that company.

> To the degree that the lump sum liquidation value is "capped" but
> there is no offsetting factor for the failue to meet said value (ie
> matching of gains and losses as is the case in the U.S. tax system);
> the incentives will be entirely toward short term cash returns over
> value enhancement.

Umm. Is your point that the people will sell out, take the money and
run? Or perhaps that the buyer will buy and liquidate? Why? Both side
can do the sums, if in the long term its better to operate than to
liquidate, then having bought it, the new buyer will operate not
liquidate. The state in my scheme, places no cap on the value of a
entity, only on personal wealth and the amount you can cheat the
taxman by. Liquidating doesn't save your bacon, since you merely have
to account the proceeds of the sale.

> This was the general impact of Third World nationalizations beginning in
> the late 1950's. The overall effect was economic stagnation. By the late
> '70's, nationalization was abandoned and often reversed. However, it is
> very hard to find buyers when the risk of having enhanced asset values
> being seized remains high (witness the problems in Russia).

My scheme has no risk of frivolous seizure. If you believe your assets
are worth X, then you place X on your form, and in event of been found
to be undervalued (by virtue of a cash up front offer) by more than
the legislated amount, you are gauranteed to get X out of the proceeds
of the sale. If you really don't want to sell up, you can shift X
higher than the market could possibly offer.

You should be happy, no risk.

The flip side being your tax would be slightly higher, or you may be
forced to split some of your assets amongst your cronies. However the
asset splitting only occurs when you so stinking rich that getting
richer is not going to make any difference to your life anyway. Also
there is no random seizure in this scheme. You can compute the numbers
and if you really are so rich you going to get hit, you can timeously
give your wife (umm, perhaps future ex-wife) a marvellous birthday
present.

As I say, this scheme has nothing to do with justice, merely a
pragmatic way of relatively painlessly splitting up large
concentrations of assets.

John Carter EMail: ece@dwaf-hri.pwv.gov.za
Telephone : 27-12-808-0374x194 Fax:- 27-12-808-0338
<http://www.geocities.com/SoHo/Cafe/5947> or <http://iwqs.pwv.gov.za>

There is ever only one enemy - And that is the military.
It matters not on which side they purport to be.

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Received on Wed Jul 1 18:49:34 1998