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Could the Fed Implement a "Carry" Tax on Physical Cash?
The Fed meets this week on Wednesday and Thursday.
Many in the investment world believe the Fed will finally raise interest rates during this meeting.
If it does, this will be the first rate hike since 2006. And it will represent the first time in six years that rates are not effectively at zero.
Will the Fed raise rates or won’t it? Honestly, I don’t know and neither does anyone else.
Back in 2012, the Fed claimed it would start to raise rates when unemployment fell to 6.5%. We hit that target in April 2014.
Here we are a full 17 months later with the unemployment rate at 5.1% and the Fed has yet to raise rates even once.
Indeed, projecting a rate hike at some point in the future, only to hit that point and offer some other excuse to not raise rates has become something of a pattern for the Fed.
Everyone was convinced the Fed would raise rates in April 2015.
It didn’t.
Then everyone became certain a rate hike would come in June 2015.
It didn’t.
It’s now September and less than half of private economists believe a rate hike is coming this week.
Bottomline: no one has a clue when the Fed will raise rates. This includes Fed officials who continue to make various arguments for not raising rates this week.
However, one thing is relatively certain, whenever the Fed does raise rates, the tightening will be short-lived.
With over $555 trillion derivatives trading globally based on interest rates, the Fed cannot normalize rates without triggering a crisis that would make 2008 look like a picnic.
This is not just idle talk either.
Consider that as early as 1998, soon to be chairperson of the Commodity Futures Trading Commission (CFTC), Brooksley Born, approached Alan Greenspan, Bob Rubin, and Larry Summers (the three heads of economic policy) about derivatives.
Born said she thought derivatives should be reined in and regulated because they were getting too out of control. The response from Greenspan and company was that if she pushed for regulation that the market would “implode.”
So Greenspan knew about the derivatives problem in 1998. Bernanke, knows about it as well. This is why he admitted that rates would not normalize anytime during his “lifetime” during a closed-door luncheon with several hedge funds last year.
Janet Yellen is also aware of the derivatives issue. This is why she has continued to refuse to raise rates for months after hitting the Fed’s unemployment “target.”
The fact of the matter is that the Fed has backed itself into a corner. It should have raised rates in 2012 or 2013 so that it would have some dry powder now. Instead, it continued to ease and now it has nothing left in its arsenal.
Well, almost nothing…
More and more outlets have begun to call for imposing a “carry” tax on cash.
The idea here is that since it costs relatively little to store physical cash (the cost of buying a safe), the Fed should be permitted to “tax” physical cash to force cash holders to spend it (put it back into the banking system) or invest it.
The way this would work is that the cash would have some kind of magnetic strip that would record the date that it was withdrawn. Whenever the bill was finally deposited in a bank again, the receiving bank would use this data to deduct a certain percentage of the bill’s value as a “tax” for holding it.
For instance, if the rate was 5% per month and you took out a $100 bill for two months and then deposited it, the receiving bank would only register the bill as being worth $90.25 ($100* 0.95=$95 or the first month, and then $95 *0.95= $90.25 for the second month).
It sounds like absolute insanity, but I can assure you that Central Banks take these sorts of proposals very seriously. QE sounded completely insane back in 1999 and we’ve already seen three rounds of it amounting to over $3 trillion.
No one would have believed the Fed could get away with printing $3 trillion for QE in 1999, but it has happened already. And given that it has failed to boost consumer spending/ economic growth, I wouldn’t at all surprised to see the Fed float one of the other ideas in the coming months.
This is just the start of a much larger strategy of declaring War on Cash.
Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.
We detail this paper and outline three investment strategies you can implement
right now to protect your capital from the Fed's sinister plan in our Special Report
Survive the Fed's War on Cash.
We are making 100 copies available for FREE the general public.
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Best Regards
Phoenix Capital Research
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I don't think they will try this. Remember when gift cards used to have expiration dates? The public outcry was so loud that rule (or law?) was changed. Now, most gift cards have to retain their value until redeemed.
They already do have a tax on cash, just try speeding through anywhere in the US and tell them you won't allow any searches of your vehicle when you hand over your license and registration. No need to have expiry dates and be all sneaky with cash anymore, they just sack and pillage at will now.
That aside, there is no doubt any rate hikes will confuse the heck out of people and volatility will start to rise dramatically again.
Me thinks the amount of credit pumped into the system is far greater than claimed.
Credit is just a derivative on fiat
It sure looks that way to me.
When we save in the medium of exchange (dollars) any problem like inflation impacts our savings. Gold is a better saving vehicle. To combat this obvious alternative to saving in dollars the PTB (the Fed and USG) make sure gold is seen as unstable.
Ultimately gold will win out. They seem to be having trouble driving gold lower. If it gets too low the little people of the world buy so much gold becomes hard to find. If gold rises in price the mo mo chasers buy it up and it competes with the dollar in that way.
Ultimately gold will win. There is no magnetic strip on gold.
Indeed... they can manipulate it short term but long term they cannot. History is the proof of that.
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Well said.
When we save in the medium of exchange (dollars) any problem like inflation impacts our savings. Gold is a better saving vehicle. To combat this obvious alternative to saving in dollars the PTB (the Fed and USG) make sure gold is seen as unstable.
Ultimately gold will win out. They seem to be having trouble driving gold lower. If it gets too low the little people of the world buy so much gold becomes hard to find. If gold rises in price the mo mo chasers buy it up and it competes with the dollar in that way.
Ultimately gold will win. There is no magnetic strip on gold.
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What is this? Groundhog Day?
When we save in the medium of exchange (dollars) any problem like inflation impacts our savings. Gold is a better saving vehicle. To combat this obvious alternative to saving in dollars the PTB (the Fed and USG) make sure gold is seen as unstable.
Ultimately gold will win out. They seem to be having trouble driving gold lower. If it gets too low the little people of the world buy so much gold becomes hard to find. If gold rises in price the mo mo chasers buy it up and it competes with the dollar in that way.
Ultimately gold will win. There is no magnetic strip on gold.
You can say that again!
How about, no?
I'll settle the difference in lead
A carry tax on cash solves nothing.
It just further impoverishes the 99%.
It accelerates the decline and lays the ground work for even more repressive measures.
"Sounds like a winner" - Jamie Dimon
I want to be there when some snotty-nosed twit banker tells my grandfather that his $100 bill is only worth $90. I want to hear the pig-squealing coming from the once-smug brat as a very pissed-off old man extracts the missing ten bucks from his face and throat while dangling him upside down outside his window.
Yeah, a tax on cash sounds like a good idea on paper, until the above scenario plays out times a couple hundred thousand... There just are not enough lampposts for all the useless bankers...
The idea here is that since it costs relatively little to store physical cash (the cost of buying a safe), the Fed should be permitted to “tax” physical cash to force cash holders to spend it (put it back into the banking system) or invest it."
I completely agree.
The day these SOB's EVER try to pull something like that is the day the system is pulled down and crushed.
I really hope they're not that stupid.
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Lamp posts are reusable. You can even make the banksters pull down a body to make room for their turn with the rope (also reusable). Or, a 10 cent .22lr to the neck. Quicker, and you can do it at the burial pit so less transport involved. Lacks the educational benefit to others that the lamp post proffers. One needs to be careful that we retain our humanity and do not become monsters while taking our vengeance. Maybe put the FEMA camps to good use and stick all those bad banker types in a slave labor camp for 30 yrs which is a death sentence for those 60/70 something bastards. Or, tattoo a Star of David and IDF logo on them and parachute them naked over Syria, Iraq, Afghanistan etc. So many more humane ways of disposing of bankers and other cronies. Not that I am against the lamp posts. Sometimes a point needs to be made.
The next lamppost the banker sees wont take him to Narmia....lol
"there are just not enough lamposts for all the useless bankers...." dhengineer
But we can make more!!
Full employment plan.
All of this in attempts to avoid cutting Social Security checks.
Call it for what it is, you worked all your life, paid into A system and that system is insolvent. End the program.
The system isn't insolvent. It's not going anywhere.
That's flippant for you to say because you aren't relying on a check from feds, for money they stole from you. It will collapse when it's time. Hope you keep your job.
Flippant? I’m being looted today, this very moment, right now.
I'm paying into a system that I will never see anything from, and I know it. BOHICA.
Gee ....60% per year inflation!!!
Great Idea!!
Another argument for holding and owning tangibles.
You know I can't believe I'm saying this, but you're right. Trackable cash puts denominated PM's (especially silver) iin a whole new light. A bag full of silver nickels, dimes, and quarters will go a long way when paper cash is little better than a cheap version of a mastercard, only with a highr interest rate.
Bankers suck.
They could but won't, physical cash is a relative nothingburger vs. total bank deposits, and the vast majority of it is held by the drug traders that are largely responsible for keeping certain banks (HSBC) afloat.
That would be a good time to start the general debt and tax payment strike.
666
https://www.youtube.com/watch?v=7mHe6FMs46o
What a crock of shit. It's outrageous enough to considered by these maniacs. What's wrong with the old fashioned tax on cash: inflation.
I'll spend it allright . . .
. . . what doesn't get spent on necessities,
is used for purchase of PMs.
No bullshit "holding tax" for me.
I doubt this idea will get backing from the banks.
Think about it - if the cash is losing value all the time it is sitting outside a bank vault, then as soon as a store - or anyone else - gets cash, they'll rush it to the bank to deposit it, rather than hold onto it to buy something with it. This means the banks will be handling more cash, and they hate this, because it's expensive.
Also - when offered it in exchange for goods and services, people will have no idea how long it's been outside a vault. No one in their right mind would take it, because they'd have no idea what it was actually "worth", unless everyone who takes cash gets magnetic cash readers to tell them.
And how long would it be before someone came up with a magnetic strip writer so you could hack the withdrawal date on the note?
Instant job program. A new software system will keep track of it. A smart phone will scan the bill and use the serial number to determine "free range" time.
also, no need for any special strip or even new bills.