Guest Post: The Banker Tax
Submitted by Tim McCormick. Tim trades bonds in Texas
The Banker Tax
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Is it ok with you if we starve poor people to bail out Citibank again? Will you stand by and do nothing while seniors struggle to afford heating oil just to keep Bank of America solvent? The fundamental structure of our monetary system creates a multifaceted regressive tax. Only when we come to view this complex confiscation of wealth as a tax, will we be able to summon the political force to defeat it.
Nobody likes to pay taxes, but some taxes are more treacherous than others. An open and simple tax can be opposed because it is vulnerable to "sound-bite politics". The worst taxes are hidden by the complexity of their indirectness. Hidden regressive taxes imposed without the representation of the payer are most unjust. We are now paying a banker tax or subsidy. It is hidden, it is regressive and we have little political control over it.
This banker tax is the hidden consequence of the many policies we employ to support an uneconomic level of credit. First, central banks try to manage our economies by fixing the price of credit and by printing money through quantitative easing. Second, this banker tax is made larger by the misguided policy of our governments subsidizing credit by bailing out private banks. Third is all of our tax policies creating an above market level of leverage. And fourth is all the various government agencies created to promote an extra-normal amount of credit.
Credit is just another resource for the production of goods or services. There is nothing magic about it. It is most efficiently allocated by the supply and demand pricing mechanism of a free market. We don't fix the price of equity capital, labor or raw materials because we know price fixing allocates resources inefficiently. Fixing a price to low creates shortages, and fixing a price to high creates a glut. Having a central bank impose an artificial price and quantity of credit is not in the public interest. It is only in the interest of undisciplined governments and their banking cohorts. The core of this hoax is our accepting the notion that the price and quantity of money must be managed by someone wiser than market forces.
This hidden banker tax is manifested in many ways. One of the worst ways we pay the tax is in a regressive form of inflation. Governments like the hidden tax of inflation because it softens the discipline of having to balance the books. Central bankers like inflation too. It creates the appearance of a false prosperity and allows them to prop up the collateral supporting the private banking system. When Bernanke says he wants to target a 2% inflation rate he is truly saying he wants to confiscate nearly 25% of your cash every decade. But as everyone experiences their own unique inflation, it is the poor who suffer most.
When a central banker says he is trying to help make credit available, run the other way. Every benefit has a cost. There is no free lunch. We have been tricked into believing monetary policy is operated in the interest of the people. The reflationary propping up of these assets only serves bankers and overleveraged investors. Reflationism does nothing for the average guy. Inflation strikes first at the cost of food and energy. The billions of people world wide who spend a large proportion of their income on food and energy are literally starved and frozen to death to support this global elite cabal.
When Bernanke argues that it is not in the Fed's mandate to consider global living standards it is a devious, oppressive lie. The Fed cannot righteously argue it has no global responsibility while abusing its power as issuer of the world reserve currency. When we export inflation, we export misery and death. When the world hates us, they are justified. While well meaning, caring liberal thought is captured and neutralized by ineffectual government programs, we live in denial of our systemic oppression.
The effectiveness of reflationism on leveraged assets is diminished by their status as excess capacity. Centrally planned monetary policy is at best a blunt instrument, and in truth it is entirely counterproductive. And when a central banker uses the bugaboo of avoiding deflation as a threat, we should discredit this sham as a denial of our right to affordable living.
Central banks will argue they are managing credit to achieve maximum employment. To argue that fixing the price of money serves a full employment mandate is lunacy. Employment follows an optimal allocation of resources. Credit is just another resource. The market allocates resources to their most productive use. An economy driven by these efficient productive enterprises is one that employs the most people.
Contrary to a belief that easy money promotes growth, zero interest rate policy, quantitative easing and government sponsored credit promotion schemes are insidious regressive taxes. Zero interest rate policy is a hidden tax on savers and retirees. Millions of people worldwide are trying to live on fixedincomes, they are paying a tremendous bank bailout tax when they receive an artificially low investment rate. These savers are also forced to take on abnormal risk. Is it a fair policy to force risk averse savers into inappropriate risk as an economic tool? Why should this economic group bear the burden of the credit promoters?
Because reflationary affects occur disproportionately, the nature of central bank reflation is also regressive. Central bankers worldwide are spinning their wheels as fast as they can to prop up their bank master's assets. As these over-leveraged excess capacity assets are less responsive to reflationary efforts than scarce and essential food and energy, the resulting inflation is an immoral regressive tax. We must help people understand this outrage. Central bankers are starving the poor to perpetuate a tyrannical system! We don't elect Fed Governors, why do we let them impose this tax?
A regressive tax is a tax that takes from the poor and gives to the rich. It is the kind of situation that justifiably leads to revolution. Our present monetary system is a devious regressive tax. Our complex monetary system has devolved from a system of fair rules and rewards into a system rife with the hidden taxes of crony capitalism. It will be very difficult to change because the political mechanism of representation best used to correct injustice has been usurped by corporate interests. The super-PAC is the instrument of tyranny.
Campaign finance reform is our only hope of avoiding violent revolution. The most devastating usurpation of all is the near century long stealth corruption of our monetary system.
Because our political system is corrupted by corporate lobbyists, it leaves the people with few choices. Those who do not wish for a violent revolution are left with the one alternative of taking control of their own money. Money can be anything two parties in a transaction choose it to be. Precious metals is one good choice. Converting ones savings from Federal Reserve Notes into precious metals is not some kooky survivalist ploy. It is empowering a person to vote against the immoral monetary system. Hoarding food is not a kooky survivalist ploy, it is hedging against an immoral banker tax. We all have the moral obligation not to pay the banker tax. Refuse to deposit your funds into a money center bank. Support efforts to end the Federal Reserve System.