Hey guys it's sasha and over the last few days we've had some very troubling news news that can cause the biggest market collapse we have ever seen in history, and i am not exaggerating the us treasury secretary, janet yellen, is leading the charge to introduce a new Tax impose a tax on unrealized capital gains on liquid assets held by extremely wealthy individuals. Billionaires. I wouldn't call that a wealth tax. This is the tax on unrealized capital gains.

You might have heard of it. The social media has completely gone nuts, and everyone is up in arms about this tax, but everyone seems to be missing the biggest problem with this proposal, and the biggest problem for me is that if this tax was to pass, we are probably looking at the biggest Stock market crash in history that will make 1929 and 1987 look mild in comparison, and this is incredibly scary, because if this happens, it will do the exact opposite of what the us government is trying to do. It will hit poor people hard. It will create more poverty, not less and can plunge the global economy into a depression like we have never seen in this video.

I am going to explain why this is the case and share some details on how the economics here can play out and let me share a little secret with you. This isn't just going to affect the billionaires, as the narrative is saying. In fact, the billionaires are going to be just fine, don't you worry about them, it'll be the rest of us picking up the pieces if this bill passes and we are going to be left wondering how this level of stupidity could have ever happened. So what is this new tax that the democrat administration is proposing? Well, the details are still somewhat vague and uh apparently up for discussion, but the idea is that this new tax will pay for the huge bill which is all to do with social policy, climate and infrastructure that is currently being discussed by the lawmakers, and specifically they Want this new tax to pay for that bill, attacks on unrealized capital gains.

So to put that very simply, let's say you buy a share for one thousand dollars and then that share in the next year grows to two thousand dollars. So now you have an unrealized capital gain of one thousand dollars, so please be sure to hand over two hundred dollars in text to the irs yep. Even if you haven't sold that share, you have to go and find the money somewhere because currently in the us, and pretty much every country out there that understands how to do basic, math and economics. The capital gains tax is only due when you sell the asset, and you know realize the gain, because if share prices can go up, they can also go down, and i am suspecting here suspecting that the u.s government is not planning to pay people and when their Share price drops in value instead of going up, but don't worry, say the democrats do not worry.

This new tax will only affect the super rich. Only people who earned 100 million dollars per year or those who have one billion dollars worth of assets. Only those people will be taxed the super wealthy, so relax. This is just going to hit the wealthy people because they can afford to pay it.

Nothing to see here right, except this is so incredibly stupid that i am fascinated how people who came up with this proposal can figure out how to tie their own shoelaces in the morning, because if you actually try to think about the implications of what this tax Would actually do it looks grim now? I am not even going to talk about the long-term implications of this tax on regular people, because when income tax was first introduced in 1913, the starting level was just one percent and was designed to only tax. The super rich at the time, yet here we are 108 years later, and income tax is somehow paid by all a regular people who don't happen to be billionaires, but that's not. The problem i want to talk about here is how this scenario can play out. Much sooner than that, let's say that they go and pass this bill.

Suddenly, every billionaire or very high owner out there has to pay this annual tax and their tax rate on long-term capital gains will be 20 because you know they are in the top bracket. Right. Less for the sake of argument, assuming the bill doesn't charge income tax on assets that appreciate in value within 12 months and don't qualify. Therefore, for long-term us capital gains tax, because that would make this problem even worse.

Let's assume that all of this is taxed as capital gains. So now, let's look at the largest companies in the s. P. 500.

You know the likes of google, microsoft, tesla facebook, whatever those companies all have one thing in common, they all happen to have a billionaire or two and a few wealthy guys who happen to own a ton of that stock. Elon musk has just become yesterday. The richest guy on the planet and he owns 230 billion dollars worth of tesla shares almost a quarter of the company, let that number sink in so tomorrow. The law passes and elon has to go away and pay 20 in capital gains because he got his shares at a tiny fraction of today's value.

Let's keep the numbers simple and let's just do the rough maths elon owes irs 20 of 230 billion dollars nice right about 46 billion uh. The us government is going to collect a whole load of money. So how is elon going to pay this tax? Well, he has two options: option number one: let's discuss this one elon goes and sells his stock, and that is a very common thing when people exercise their options and would probably work in a similar way here, so elon has to go and sell 46 billion dollars Worth of tesla shares in a short space of time in order to pay his tax bill by whenever that due date is that's five percent of the total tesla market cap hitting the market in a short space of time, and then all the other rich people combined. All over the world who happen to also own tesla stock in their investment portfolios will have to go and sell theirs as well to pay that same tax.

So let's be super conservative and let's say that all the other rich people in the world combined only own three times the shares that elon owns all by himself. So we've got elon selling five percent of all the tesla stock and the others selling another 15. So we're selling 20 of tesla's stock in this short window just to pay this new beautiful tax, that's about 200 billion dollars worth of shares and tesla is about two percent of the total value of the s. P 500 and the s p.

500 is about 70 of the total u.s market. So let's do the mass here: let's just go and do 200 billion divided by 2 and then divided by 70. We get a total of 14.3 trillion dollars of assets on the stock market that have to be sold in a short period to pay for this wonderful new tax. That's over two-thirds of the us gdp, if you're trying to figure it out 14.3 trillion dollars.

That is more than the total trading volume of the entire u.s stock market on all the different exchanges for an entire week, including all the different types of trades. That's right and here is an economics 101 question. I wonder if you know the answer: what happens when there is a huge overwhelming downward pressure in the market? What happens when there are far more people trying to sell something than the number of people buying? What happens to the price of that thing that all those people are trying to sell and not that many people are trying to buy? Well, that's right, you got it right. The market falls and if the sell volume is particularly high, the market will crash, but hey.

There is another option right. I mentioned that there are two ways in which elon can pay his 46 billion dollar tax bill. He doesn't have to go and sell his stock. He could just go and borrow the money.

That's the counter argument that people are gon na use, get an asset backed loan right because he's so rich. He has access to these special ways of financing. He can go and borrow against the rest of his shares and pay the bill using that now. Asset-Backed loans are very, very common, very popular among rich people, they're very cheap and that's how people like elon musk, are forced to pay for their heating while taking home a one dollar salary.

But let's not confuse things here. The sort of asset-backed loan that pays for your living expenses even very, very high living expenses, the sort of living expenses that maybe will buy you homes that cost millions of dollars are still a world away. An order of magnitude. Several orders of magnitude away from asset-backed loans for 50 billion dollars for one person, we are talking some serious levels of margin here and the risks involved are quite interesting.

Who exactly is going to be financing this 14.3 billion dollars worth of asset by financing and at what cost? Who is going to be sorry? 40.3, trillion who's going to be dishing out these 50 billion loans right and left to owners of high growth companies, where the share price against which this loan has been given could fall. Are we going to add a 14.3 trillion dollars worth of debt? The total u.s consumer debt, by the way at the moment, is 15 trillion. So are we just gon na go and double that overnight with absolutely no consequences to the market or whatsoever? Also, if you're just wondering it is half of the total u.s national debt, that people already think is insane and is never going to be repaid. That is an insane number.

So the truth will be some sort of a mix of these two different ways in which this tax bill can be paid and either way. We are looking at an unprecedented collapse in the stock market as the outcome, so who is going to suffer the billionaires, who you know now own just 80 of the 230 billion that they used to own? Or will it be the worker who is laid off because the economy has imploded? Will it be the single mom who can't get a job, because the jobs market has absolutely nothing for her? Will it be the truck driver who has been putting money away diligently into his pension for 40 years? Who finds out that his pension pot is now worth only half of its value? I have a feeling that eventually somebody has to wake up and smell the coffee, because the thing with billionaires is that they are, in general, pretty smart and pretty resourceful. That is usually how they get there. In the first place, the speed with which billionaires will acquire canadian and european passports, while denouncing their american citizenship of visible passes, will be very entertaining to watch, and i am suspecting that they will very quickly decide that they don't want to live in the us and Stop being residents this bill may well, do the exact opposite of what it's trying to do.

I suspect we're going to see big changes before that bill actually comes anywhere nearby, the signature, or at least i very much hope so, let's see what the next few days bring. If you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching. I really really appreciate it and, as always i'll see you guys later, you.