Negative Interest Rates: The Tax On Capital

Sprott Money's picture


So-called “negative interest rates” are illegal. This is an inescapable conclusion of law, arrived at simply by applying some of the most fundamental principles of our entire legal system. But let’s put aside this issue of legality, it is a topic which will be dealt with comprehensively, in a sequel to this piece.

There is no such thing as a “negative interest rate”. By definition, an “interest rate” is a positive number. It is the price which we pay in exchange for the use of capital. Thus the phrase “negative interest rate” is a non sequitur. It is a euphemism used to conceal the inherent criminality of this newest, Western financial fraud. However, let’s put this proposition of logic aside as well.

The purpose of this commentary is two-fold.

  1.  Exposing the lies and propaganda which supposedly justify this systemic financial crime.
  2.  Explaining what a so-called “negative interest rate” is, in reality: a tax on capital.


Before exposing the fraud which is inherent with so-called negative interest rates, it is necessary to back-track, and examine the evolution of monetary criminality which has brought us to this point. Before we got to the fraud and insanity of so-called negative interest rates, we had the “0% interest rate”.

There is no such thing as a “0% interest” loan. Again, the legal technicalities here will be explained in greater detail in the sequel to this piece. For the moment, it will suffice to say that any so-called “0% loan” (and 0% interest rate) is a sham transaction, null-and-void as an elementary premise of law.

Skeptical readers can easily find this out for themselves. Engage in some “0% loans” in your own financial affairs, and see what happens when you report those transactions to the tax authority of your jurisdiction. You will receive a letter informing you that any/all of your so-called “0% loans” are sham transactions, and the tax authority has deemed all such transactions to be null-and-void.

A negative interest rate is not the natural, logical progression from a 0% interest rate, because neither of these concepts exists in the real world. The moment we reached “0% interest” we completely left behind any semblance of legitimacy (and legality) in our monetary system. Why? Why the frauds? Why all of the lies about these frauds?

Let’s start by examining what the bankers and politicians tell us that these fraudulent/criminal interest rates are supposed to do. They are supposed to “stimulate our economies”.

Really? What is a “0% interest rate”, in reality? It is free money – a gift. That’s what the tax officials will call any supposed “0% loans” which we try to execute in our own personal finances. Does free money stimulate our economies? Yes, but with two, gigantic caveats.

First of all, what does it mean when any central bank starts to spew “free money” (i.e. free currency) into that economy? It means that the currency is worthless. As an elementary proposition of logic, any “good” which is produced at zero cost, and in (near) infinite quantities, like our fiat currencies, must be worthless. This was the subject matter of a previous commentary. Producing free money destroys our entire monetary system.

Secondly, using free money as a form of economic stimulus has the obvious effect of causing asset bubbles to explode all over that economy. The reckless peril of causing such asset bubbles to spring into existence grossly outweighs any “stimulative” benefit to the economy.

But don’t accept the word of this writer for this simple proposition. Look at our history. If a fraudulent 0% interest rate was a good way to stimulate our economies, why haven’t we always engaged in such a monetary policy? Put into negative terms, why has such monetary fraud and criminality never been perpetrated in our economies until now?

It is because it has been universally accepted, throughout our economic history, that the financial perils of the reckless policy of free money grossly outweigh any economic benefits. A “0% interest rate” doesn’t work as a policy of stimulus because it has never worked. We now have empirical proof of this elementary principle, spelled J-A-P-A-N.

Has 30 years of free money fixed Japan’s economy? No. Thirty years of free money has destroyed one of the world’s strongest economies. Look at what near-zero, 0%, and now negative rates have reaped in our own economies: massive real estate bubbles, all over the Western world; massive bond bubbles, all over the Western world.

Look at the United States. It has the largest bond bubble in its history, and the largest stock market bubble in its history, simultaneously. This isn’t even supposed to be theoretically possible. Monetary criminality and financial fraud has reached an exponential extreme. And now the criminal regimes of the West have embarked upon something much, much worse: their so-called negative rates: borrowers stealing from lenders and savers. This is a good idea?

Observe the reasoning of the central bankers and the puppet politicians who take their orders. If a 0% interest rate “stimulates” our economies, then moving to negative rates will provide even more “stimulus”. It is the logic of a six-year-old.

Two factors are completely ignored in this infantile reasoning. First, a 0% interest rate does not stimulate an economy, it destroys an economy, as just explained. The positive “interest” paid to savers which is supposed to (partially) protect us from the rapacious “inflation” of the bankers is removed. Our savings are stolen – at the full rate of inflation.

In the absence of the gold standard, there is no way to protect savings from confiscation
[i.e. theft] through inflation.

Alan Greenspan, 1966

The banking Crime Syndicate and the puppet politicians have already taken away our gold standard. The only partial protection which remained against banker “inflation” (banker theft) was the interest paid on our savings. Now that protection has been taken away from us as well, by the same bankers and puppet politicians.

This is particularly important for people who live in the real world, and are cognizant of the real rate of inflation – not the absurdly fraudulent inflation “statistics” spewed by our corrupt governments. With real inflation running at 10+% per year, having no protection from this rapacious confiscation of our wealth is an extremely serious form of economic theft and economic destruction.

Negative interest rates go well beyond even this level of injustice and criminality. Negative interest rates tax capital. How do you “stimulate” an economy by taxing capital? Anyone with even an ounce of economic savvy would immediately realize that you don’t stimulate an economy with a tax – any tax.

However, taxing capital is arguably the most-destructive form of taxation which could ever be devised. It is even more destructive than the intellectually bankrupt concept of “income taxation”. The full, destructive force of a tax on capital can once again be summarized with one word: D-E-N-M-A-R-K.

Denmark was the first regime in the Corrupt West to go fully “negative” with its criminalized interest rates. It has the most-negative rates in the world. And the destructive impact of this policy of taxing capital could not be more obvious. We see this simply by looking at the reaction of Denmark’s corporate community to this overt, monetary criminality – bankers stealing their operating capital via the tax of negative interest rates.

In response to having their operating capital stolen by the Big Banks, Danish corporations began to pre-pay their (official) taxes, in ever-increasing amounts. No, this is not a misprint. Denmark’s corporations began pre-paying their taxes at such an extraordinary rate that Denmark’s government was forced to pass a law limiting the pre-payment of corporate taxes. Insanity piled atop more insanity.

Negative interest rates punish-and-destroy economies in two ways – directly and indirectly. Directly, it obviously does not “stimulate” an economy to allow bankers to steal the operating capital of businesses. Indirectly, the more taxes that Denmark’s corporations pre-pay (or hide in other manners) in order to avoid the theft of their operating capital, the less operating capital which remains to build Denmark’s economy.

Taxing capital does not stimulate an economy. Obviously, allowing the Big Banks to steal the operating capital of businesses could never stimulate an economy any more than allowing the Big Banks to steal the savings of ordinary people could stimulate an economy. Simultaneously, businesses and savers are then also subjected to the second form of banker theft: theft-via-inflation.

Let’s pretend that the banking Crime Syndicate and the puppet politicians beneath them actually did want to stimulate our economies. What would they do? First they would eliminate the overt criminality of our interest rates. No more “negative” rates. No more “0% interest”. Interest rates would be restored to being legitimate, positive numbers.

Savers would once again be paid by their bank, in exchange for bestowing the bank with the privilege of using their capital. Lenders would once again be paid by borrowers in exchange for the use of their capital. Monetary legitimacy and monetary sanity would be restored. No more “taxation” (i.e. theft) in the form of criminalized interest rates.

Secondly, the bankers and puppet politicians would put an end to the banking crime syndicate’s game of theft-by-inflation: taxing (and pocketing) all of our wealth via the monetary fraud of their excessive money-printing. Obviously all of our economies would receive a massive jolt of stimulus if the bankers were prevented from stealing all of the wealth of citizens and businesses at the rate of 10+% per year.

Legitimate interest rates foster sustainable economic growth and development. The obvious sanity and justice of positive interest rates is fully supported by economic fundamentals. The monetary voodoo imposed upon us by criminal central banks, and rubber-stamped by puppet politicians is the ultimate extreme in financial corruption. The inevitable result of this systemic criminality can only be the complete economic destruction of the Western world.




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katagorikal's picture

ZIRP and NIRP are not in any economics textbooks,
because they are in the history books,
under wealth confiscation and Fascism.

Also under Fascism, you will find: crony capitalism; unpunished financial collusion and fraud; one rule for the rich, one for the poor; toleration of tax evasion by the wealthy; industrial groups becoming monopolies by mergers and acquisitions; concentration of ownership of media companies; money printing and monetizing govt debt; political control of central banking; outright nationalization of banks and strategically important companies; stealthy nationalization of the others by buying their bonds and their shares; leaking financially important news to insiders before official publication; govt contracts awarded to favored companies; subsidies and tariffs for protected industry sectors and national champion companies; military-industrial complex extracting high prices and beating the drum for war; use of mercenaries and proxies in unofficial armed conflicts; nationalizing property by buying all mortgages; excessive direct federal govt ownership of land; zoning, govt control of private land use and corruption of local planning processes; passing many restrictive laws so that everyone is a criminal; spying on people's movements, communications and financial transactions; capital controls; cash withdrawal controls; limits on cash payments; foreign exchange controls; restricting the ability of citizens to hold foreign bank accounts; restricting withdrawals, channelling investments or confiscating private pensions; denial of actions such as foreign travel, opening a bank account, or alerting on a financial transaction, without having to give any reason; extra-judicial power vested in bureaucrats and govt agencies; claims of supra-national powers around the globe in spying, subversion, assassination and droning; bullying allies and threatening enemies; intervention and control of the global financial system; monitoring and taxation of non-resident citizens; treating citizens as if they were owned as slaves by the State; arbitrary confiscation of private property; militarization of civil law enforcement; proliferation of armed govt agencies; killing of civilians by the govt almost never successfully prosecuted; rich enclaves and gated communities; private security firms staffed with ex-military personnel; disruption, outlawing or subversion and control of organized labor; thought crime and monitoring of all speech and writing; political correctness and the necessity of metaphor to avoid censorship; rigged elections; family dynasties in power bought by coercion, blackmail and bribery; re-election of incumbents; lobbying govt and buying special treatment; political bias in govt appointees to the judicial system; many cases settled out-of-court based on threats, extortion and plea bargaining; suspension of presumption of innocence, jury trial or habeas corpus; arbitrary detention for arbitrary periods without charge or trial; the use of opaque catch-all charges, such as terrorism or money-laundering, used to justify any coercion or restriction; gerrymandering and the corruption of electoral districts; self-serving political parties solely directed to accumulate money and power for the insiders; pork-barrel politics and the corruption of the legislature; random attachment of special interest clauses to unrelated bills and laws; excessive and unscrutinized expenses of those in political office; waste and fraud in govt spending; failure of governance and accounting for money in public accounts; control of the media; use of spectacle, such as sport, to distract from political subversion; excessive power of companies to advertize and brainwash the population, especially children; failure to enforce truth in advertising and product labelling; hallowed treatment of govt leaders in media reports and interviews; lack of investigative reporting and sacking or suppression of those who search for truth; over regulation as an excuse to punish independent thought and action; long-running official inquiries that delay and usually omit any final justice; hollowing out of the education system; suppression of independent thought and encouragement of herding social media; feeding media with biased and stereotypical characterizations of the people and leaders of any antagonistic foreign state; blaming the outsider, the other and the immigrant for issues caused by their own policies; using religious rhetoric without any actual piety, ethics or compassion ....        

wwxx's picture

In the US, for example as having a very small Soc. Security & Income tax 'required estimated prepaid' [closed business over 10 yrs. ago], there was no mention of earning interest on that prepaid balance...because there was no written rule or law requiring it, that I knew of.


But maybe there is such a rule or law that exists, I don't know. The only discount I could find as a small business was .01% discount could be had each month when posting state sales taxes collected in a timely & accurate manner--that hundredth of a percent wouldn't even cover the time involved to calculate & complete the necessary form. 


So I cannot understand 'hidden money in the government account'... what the financial incentive in a NIRP atmosphere is to companies in Denmark to prepay estimated income taxes...unless there is a rule or law that requires positive interest accumulates for a time until the tax is actually due. I suppose even in the NIRP atmosphere, there should be a substantial difference [the incentive] for those managing their accounts in a timely efficient manner and the disincentive for those that do not.



pitz's picture

FRN's aren't "capital".  They're debt. 

joego1's picture

Good article, someone should read that to the congress critters and putt the magic negro.

redd_green's picture

Its actually negative yields not negative rates. Negative rates will never exist, but they can keep futzing with the price until yields keep going more and more and more negative. 

Boris Badenov's picture

Who made the banks agents for The IRS???

JailBanksters's picture

I hate to be the bearer of bad news but, the IRS was created by the Federal Reserve.

The Federal Reserve is a Private Company, so the IRS is another private company.

Here's the great bit, there is Law stating it's existance, there is no income tax Law.

The IRS was created to recover the Money loaned to Government. In effect you are

paying off somebody elses loan, and legally you can not be held liable for somebody

elses line of credit.

Boris Badenov's picture

Perhaps you are correct, but you mention INCOME tax. This Negative Rate thing is not INCOME in any way of interpretation.