Your entire argument is focusing on the micro, not the macro

You were the one suggesting that investment should be exempt from tax. That requires a definition on the micro level of what constitutes investment, otherwise how do you determine whether or not some expenditure is to be taxed or not? From a practical point of view, how do you differentiate consumption from investment?

If you want to see the result of a lack of real investment, look at SF

Oh, so now there's more than one kind of investment, and only one is "the real kind"? As far as I can see, it doesn't get much realler than in SF: You've got risk seeking capital funding actual new ventures. As in actually creating new wealth. Provided of course that those new ventures succeed. Those rich people you talk of who can't afford to live there have the firstest of first world problems.

It's funny that you should mention SF, because it is a great example of what happens when there is an overabundance of capital and everyone is seeking to invest. You get investors taking on more and more risk to get a return on their capital and ultimately you get a bursting bubble. You see capital by itself does not magically cause value to be created, even when it is used to fund new ventures. If I build a house or a widget, or if I've performed a service, I've only created value, if that house/widget/service was needed in the first place. A man who invests in hotels on the South Pole or a sand selling business in the Sahara is actually destroying wealth. Just like everyone who invested in pets.com before the dot com bubble.

Why don't you explain the mechanism by which this occurs in real terms?

I'm not entirely sure what you mean by real terms? I can say it simpler terms if you like. It's not complicated: Imagine a supermarket. As people buy stuff, the shelves are gradually emptied. The shelves that are emptied first are the ones holding stuff that is most important i.e. valuable to people. Luckily the empty shelf is a great signal to whomever makes the stuff that gets sold in the supermarket to produce more of that stuff. There is of course a pricing component of that mechanism also, but that's basically how that works. If the producer of stuff is unable to keep up with the demand, then that's an opportunity to invest in a new factory that makes the same stuff. Of course not everything sold in supermarket is essential, but I'm sure you would agree that that doesn't mean it is without value. But if we were to tax everything sold in the supermarket heavily (and we would need to if we abolished other forms of tax), we would disincentivize buying anything except the bare necessities. If I understand you correctly, this is more or less the point. This then means that it becomes much harder selling anything other than the bare necessities, and as a consequence lots of businesses must close. Sure, there may be a tiny market selling motorized lawnmowers, but since everything becomes so expensive, most people will get by with a manual lawnmower. But this again means that people will have to spend more time mowing their lawns, and will have less time to do something else that could be valuable. And so on.

Look, I'm not saying that more consumption is always better. Clearly there comes a point at which people buy shit they don't need, and there is also a very real sustainability issue. It's a good idea to tax things like fossil fuels and cigarettes. But most of everything that's valuable gets produced because someone is willing and able to consume it.