You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. The New York Tax Theater Troupe...Taxing buildings and smiling about it... with little understanding of where wealth comes from in the post-2008 world. It's gonna be a wild decade as the pendulum shifts.
Last week, New York City’s mayor, Zohran Mamdani, stood outside Citadel founder Ken Griffin’s $238 million penthouse on Central Park South… with a camera crew. “When I ran for mayor, I said I was going to tax the rich,” Mamdani said. Then he stepped forward and tapped on the camera glass like a man rattling a door’s peephole, ready to break the thing down with an axe.
“Well, today we’re taxing the rich,” he says. From there, Mamdani said he was “excited” to announce a pied-à-terre tax on luxury properties over $5 million that are owned by people who don’t live in the city full-time. “Excited” is quite a term when it comes to announcing taxation... The video got over half a million views. It instantly became a point of argument between left and right-leaning commentators. The policy is estimated to generate roughly $500 million per year, directed at childcare, street cleaning, and neighborhood safety. (They haven’t really cleaned those streets since I lived there in 2008. Get in there… with a toothbrush.) But I watched this spectacle and backlash thinking… this is $500 million. The financial system creates trillions. Mamdani’s not taxing the rich. He’s taxing a building. And what policy leaders like him (and political pundits barking on television for sport) don’t understand is that the rich don’t really live in buildings. They live inside the plumbing of the global financial system… and nobody in politics is ever looking at those pipes. The penthouse is just where their Peloton sits alone for over six months and a day... The Wrong TargetWhen people think about wealth in America, they think it’s tied to income. It’s not. They think that it has to do with the penthouses and the beachfront properties. It doesn’t. People like Mayor Mamdani and Sen. Elizabeth Warren believe that if you just find the right tax, or locate the right local rate, or close the right loophole… then you’ll eventually be on the way to redistributing your way to fairness. You can’t. It’s honestly impossible. Although the famous last words of their careers will be… “Well we’ve gotta try...” All this wealth isn’t being generated where they’re looking. Ken Griffin didn’t become worth $51 billion because he bought a penthouse on Central Park South. His net worth hit $51 billion because his company, Citadel, sits at the front of the capital supply chain with structurally advantaged risk. Citadel doesn’t make “stuff.” The critics are smart enough to understand that… but they’re not able to go one step further to understand what Citadel really does… Citadel doesn’t innovate in the way that people thought of innovation in the 20th century. They don’t build physical infrastructure, and they don’t make cars... They move capital… they’re taking advantage of the increased financialization of the American economy and all of the incentives created by public policy for decades. That’s it. That’s the whole game. They’re a market maker, a primary dealer counterparty, a hedge fund that operates on leverage ratios and collateral chains that most people will never see, let alone understand. They’re basically just a financial toll booth with a PhD. They sit close to where new capital and credit enter the system, and they capture the spread on everything that flows through the pipes. Some people who do this for a living beat their chest like they’ve built something. But their wealth really originates from proximity. Citadel didn’t invent water. They just bought the hose and charged admission. I’m sure that Griffin would be humble enough to admit that he makes money because he’s closest to the fire hydrant. If he doesn’t, then… maybe we should wonder what is really behind what he describes as his “intense” stare…
American Made WealthNew money doesn’t fall from the sky evenly across all of America... It enters through specific doors… they include:
It’s a giant maze with a confusing-ass map. Each door leads to a different financial institution that gets first access. That institution uses its access to buy assets before prices adjust. By the time the money reaches consumers… in the form of lower rates, cheaper credit, or somewhat higher wages… the other assets have already repriced. This is the Cantillon Effect… named after an Irish-French economist who died in 1734 and saw something policymakers have been pretending isn’t true ever since… When new money enters an economy, it doesn’t spread evenly. It enters through various channels, like the ones I listed above... The people closest to those channels benefit the most. Everyone else pays the inflated leftovers. The Scale ProblemMamdani’s pied-à-terre tax would reportedly raise $500 million per year. But that’s a static estimate… I’m sure it will be a lot less. And it will probably be challenged in courts… because lawyers gotta get paid. But let’s put that number in context. When the Federal Reserve bought mortgage-backed securities from 2020 to 2022, home prices rose by roughly 40% in under three years. The median home in America gained roughly $120,000 in value during that stretch. There are about 85 million owner-occupied homes in the United States. That’s on the order of $10 trillion in housing wealth gains… driven in large part by a single policy regime that wasn’t directly voted on by the public… That’s $500 million versus $10 trillion. That’s the gap between the New York City theater troupe and the real machine. The system doesn’t need anyone’s permission to make the rich richer. It just needs new capital to flow. Politicians Will Never Fix ThisI don’t say this to be nihilistic. The problem isn’t that politicians are corrupt or stupid. Some are. Most aren’t. The real issue is that the wealth-generation element operates in a layer of the system that elected officials either don’t understand or can’t touch. A mayor can tax a building… A governor can raise a rate. A Senator can propose. But nothing changes the fact that the Federal Reserve’s balance sheet operations, the Treasury’s issuance, and the shadow banking system’s leverage create wealth at a scale no tax policy can offset. Every time the system injects liquidity… the people closest to the injection point capture the gains first. By the time it reaches wages… if it ever does… the prices of everything that matters have already moved. That includes housing, healthcare, education, childcare, insurance, and energy.
That is what explains THIS CHART that people share constantly but never really take the time to understand the core driver. It’s not just supply and demand. The graph needs to be three-dimensional, as increasing monetary bases and leverage help fuel these numbers. It has been happening over and over again… and it’s not debated. These aren’t random categories. These are the things people can’t avoid buying… which makes them the extraction points where asset owners capture the gains created at the top of the system. A pied-à-terre tax won’t change this. A wealth tax can’t change this. I believe a higher marginal income rate creates incentives for even more of this… The only thing that changes this is changing the plumbing itself. Nobody running for office is even talking about the plumbing… because the people who fund campaigns are the ones who benefit from how the pipes are built... If you actually wanted to fix the wealth gap… not perform fixing it, but actually fix it… You’d have to do things that no politician will ever propose. You’d need to change who gets first access to new liquidity. You’d have to eliminate the leverage mechanics that allow $1 of base money to become $10 in market impact before it ever touches an American consumer... You’d need to restructure the collateral chains that allow institutions to multiply purchasing power while consumers borrow at the end of the line… You’d have to redesign the global financial system itself. And that’s never going to happen… because the system is working exactly as designed. It’s not broken. It’s not a bug. It’s a feature that nobody wants to explain because explaining it would require admitting that the very inequality they want to tackle isn’t a policy failure. It’s a policy outcome. This isn’t a left or right issue. It’s an up-or-down one… And until someone has the courage to address the hydrant itself (and the backlash that would ensue)… where it is, who opens it, who stands closest, and why… everything else is political theater. And a waste of airtime. -30- About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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