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Guest Post: The Banker Tax

Tyler Durden's picture




 

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.”

Henry Ford

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.

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Sun, 01/29/2012 - 23:10 | 2108492 illyia
illyia's picture

Yup.

Sun, 01/29/2012 - 23:16 | 2108497 ACP
ACP's picture

Nah, 150% is more appropriate for people who take from society, as opposed to produce something for society.

And 700 lashes for Bernanke, who is a lying scumbag piece of garbage.

Sun, 01/29/2012 - 23:53 | 2108569 Oh regional Indian
Oh regional Indian's picture

A well written article, but as always, hacking away at branches or even leaves of the larger issue.

This as an example...

 

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.

Really? Campaign finance reform? It's even going to happen? These no-solutions are useless to even discuss. No time now but to dig for the roots.

ori

/watershed-day-may-this-pour-through-a-million-pairs-of-eyes/

Mon, 01/30/2012 - 00:08 | 2108596 Vic Vinegar
Vic Vinegar's picture

You are exactly right OrI.  It was a well-written piece that had a terrible sentence which you called out.

Campaign finance reform?  Really?  Violent revolution?  Really?

Which will come first?  I say neither...LOL!

To be fair Tim trades bonds in Texas, so he's probably like a lot of us, vacillating between expecting the system to crash and hoping that it can be reformed from within.

Mon, 01/30/2012 - 01:05 | 2108644 Oh regional Indian
Oh regional Indian's picture

I think we can put this down to Sunday, Slow Day post from the H.

Cognitive dissonance ensues when Fight/Flight are both blocked off eh Vic? I think we are watching a world go into terminal cognitive disonance.

ori

Mon, 01/30/2012 - 04:49 | 2108876 tired1
tired1's picture
A quick lesson on banking...

http://imgur.com/gallery/8jp3y

Sun, 01/29/2012 - 23:50 | 2108563 bullnutz
bullnutz's picture

The wicked witch of JP Morgue is gone!  Blythe Masters leaving for Deutsche Bank.  http://silverdoctors.blogspot.com/2012/01/breaking-news-blythe-masters-leaving.html

 

 

Sun, 01/29/2012 - 23:53 | 2108565 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Time to put on the slippers

Mon, 01/30/2012 - 00:23 | 2108615 Tyler Durden
Tyler Durden's picture

100% incorrect. Read below.

Mon, 01/30/2012 - 04:39 | 2108865 BlackVoid
BlackVoid's picture

That is not exactly "gone". She just moved to another arm of the squid.

Sun, 01/29/2012 - 23:11 | 2108493 Seize Mars
Seize Mars's picture

Amen, brother

Sun, 01/29/2012 - 23:12 | 2108496 Likstane
Likstane's picture

Wouldn't the bankers go out of busines if people stopped borrowing money? Why does anyone expect to make interest on a loan?  Park your money in AG and AU and pay off your loans.  Banks die.

Sun, 01/29/2012 - 23:34 | 2108525 adr
adr's picture

Banks used to need people to park money with them and take loans to be paid back with interest to stay in business. With the advent of the superbanks, they no longer need people. BAC, Citi, and the others get more money in 0% interest loans from the Fed than they ever got from common citizens. You and your money doesn't matter anymore, only fresh printed fiat. They don't even need to loan to you anymore becuase it's better to take the fresh loaned Fed notes and buy government debt that pays 3%. The bank can always pay back the loan by selling the bond and keep the profit for itself. Just imagine the wonderful game if you culd play with your friends. Eventually the size of the loan dosn't matter, only maximising your profit. he more you borrow the more you make. The more you borrow the more the government protecting your back can spend to do so. To the parties involved there is no way to lose. As long as everyone is playing the game, it all seems fine. Until a player eventually wants out.

Mon, 01/30/2012 - 03:50 | 2108849 Likstane
Likstane's picture

No loans=Citi, BAC die.  See below

 

Mon, 01/30/2012 - 00:10 | 2108601 The Monkey
The Monkey's picture

Nope. The banks can simply borrow short (from the Fed) and lend long (to the treasury). They profit from the spread. The way the Fed has things set-up, the banks can forever live without private sector lending.

In return, we get transaction fees.

Sun, 01/29/2012 - 23:13 | 2108498 JPM Hater001
JPM Hater001's picture

My daughters got 2 oz of silver from my mother-in-law this year.  I was so proud of her.  I took the checks from my mom and dad and convereted them into silver to my daughters protest.

Today I explained that they bought into silver at 30 and now its 34.  "but we gave you $100..."

"Yes, and now its worth $112.  You still want your fiat?"

"No"

"Good, now shut up and watch War Horse."

Sun, 01/29/2012 - 23:40 | 2108536 ihedgemyhedges
ihedgemyhedges's picture

How old are your daughters?  We have gold and silver too.

Sincerely, Dominique Strauss Kahn, Bill Clinton and Newt Ginrgich..............

Mon, 01/30/2012 - 01:05 | 2108677 JPM Hater001
JPM Hater001's picture

My daughters are 9 and 11.  Yes, War Horse is nasty in the WWI battle...I will not shy them from the truth-bad people did bad things.  War is ugly.  Avoid War.

Vote Ron Paul

PS...My 9 year old sent Ron Paul a letter...he sent a nice letter back and a constitution...

I'm so proud of her.

Sun, 01/29/2012 - 23:19 | 2108502 Kaiser Sousa
Kaiser Sousa's picture

ok, now im getting very encouraged by seeing this mindset put in writing...

i've been tellin ya'll mother fuckers for the longest...stop playin the bitch ass bankers game...

resisitance is not futile if undertakin in the right forms...this is the first step...dumping their worthless shit  paper for "REAL MONEY"...

the next step is busting caps n their monkey ass to let'em know....IT AIN'T HAPPENIN NO MORE!!!!!!!!

 

 

Sun, 01/29/2012 - 23:34 | 2108526 Likstane
Likstane's picture

I'm with you Kizer, why even play the game?  Anybody with a loan(including a house) has no right to complain about inflation, rigged markets, politicians, or the rest of the bullshit.  Cut off the bankers feedbag and they have nothing to work with.  The inflation game is gone and the the only way to finance government is to pay higher taxes directly.  There is a level of taxation the general populace will quit paying and start hanging the government theives.  I say the the sooner the better.  As far as busting caps goes, I would rather see these banker/politician/lawyer scum work for the people they have been ripping off.  If they don't pay, then bust caps.

Sun, 01/29/2012 - 23:48 | 2108555 Kaiser Sousa
Kaiser Sousa's picture

fair enough...but man, they gotta pay.....

PLATA O PLUMO.....

Sun, 01/29/2012 - 23:54 | 2108571 zerotohero
zerotohero's picture

oooh gansta talk on ZH - what next.

Sun, 01/29/2012 - 23:18 | 2108503 prains
prains's picture

Campaign finance reform is our only hope of avoiding violent revolution. 

 

i thought you guys already did a campaign finance reform

Sun, 01/29/2012 - 23:41 | 2108538 rehypothecator
rehypothecator's picture

Campaign finance reform attempts to fix a symptom, not the problem. If corporate interests find it worth their while to spend hundreds of millions of dollars on campaigns, the solution isn't to (1) give the government even more power by (2) restricting some aspect of campaign financing, it is to remove the government interference in the markets that leads corporations to conclude it is worth so much money to try to influence. If government merely protected life, liberty, and property, then there would be no value in trying to get "their guy" elected, because "their guy" wouldn't be in a position to give special favors, enact captured regulations, or harm the competition, because those actions have nothing to do with protecting life, liberty, and property. In any case, every regulation has unintended consequences, and the outcome of the much-vaunted campaign finance reform is the formation of super-PACs, which are arguably worse than what came before them. There is no reason to think that *real* campaign finance reform won't create even worse monsters.

Sun, 01/29/2012 - 23:20 | 2108504 non_anon
non_anon's picture

ha ha, Sunday night, feeling no pain!

Sun, 01/29/2012 - 23:20 | 2108505 UP4Liberty
UP4Liberty's picture

Here's a great article from about one year ago..."Stiff The Fed".

http://www.silverminers.com/commentary/wallace/index.php?&content_id=1290

Sun, 01/29/2012 - 23:20 | 2108506 Dermasolarapate...
Dermasolarapaterraphatrima's picture
Using inflation to erode the US public debt

Joshua Aizenman   Nancy P. Marion
18 December 2009

 

http://www.voxeu.org/index.php?q=node/4413

Sun, 01/29/2012 - 23:21 | 2108509 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

DXY up.  EUR/USD up.  JPY/USD up.  WTF? 

Fiat power?

Sun, 01/29/2012 - 23:43 | 2108542 slewie the pi-rat
slewie the pi-rat's picture

post-davos re-entry retro failure

Sun, 01/29/2012 - 23:51 | 2108564 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

That must be like when the Davos crowd tries to get laid without paying for sex.

Mon, 01/30/2012 - 00:12 | 2108605 AgShaman
AgShaman's picture

The parasite Bankers in Davos are too crusty and old to get laid without paying for it.

These shiksas would've gained entrance to the festivus for being rather "freakish"....but they haven't gotten past being poor...and a slavery byproduct of the bankstas.

http://www.youtube.com/watch?feature=player_embedded&v=3P8wNutKNxg

When they meet a rich hedge fund manager or investment banker that buys them a "boob job"....then everything'll be alright.

Mon, 01/30/2012 - 00:29 | 2108630 slewie the pi-rat
slewie the pi-rat's picture

well, any port in a storm!

Mon, 01/30/2012 - 01:29 | 2108710 SilverIsKing
SilverIsKing's picture

So say the seamen!

Sun, 01/29/2012 - 23:25 | 2108514 adr
adr's picture

Central controls of any kind create inequality scewed to concentrating wealth and power in a few controlling hands. Central control of price through a uniform commodity exchange has proven to inflate the cost of raw materials far beyond what common demand should dictate. The stock market is the greatest force of central control and should be dismantled. Think about what would happen if we pushed for nat gas powered cars. Before the cars ever came to market, the price of natural gas would skyrocket as speculators would bid up contracts to get in on the coming "supply crunch". They would bet supply contraints would force the price higher, even if there is abundant supply. The seculators would kill the market for the car before it even launced, and send millions of people into poverty as home heating bills would go higher than most average mortgage bills. That did happen a few years ago. Then as the bets don't pan out, the mass exodus from the contracts causes a price collapse kiling real business. Again happening now. Instead of letting competition set a price, we let a central beurocracy do it for us. Maybe I could produce gas for less and wish to make a smaller profit in order to gain more customers. That used to happen. Now the compeition is destroyed to prevent harm to the big bloated players.

Mon, 01/30/2012 - 00:03 | 2108583 xela2200
xela2200's picture

The problem with your hypothesis is in the believe that government can "push" a technology or "invest" in it. The speculators are not to blame. Rather, it is the arrogance of a few in power who feel they know better. The market should determine what route to take. As oil becomes more expensive, entrepreneur risk their capital and that of their investors to produce whatever technology fits better. It is done gradually and speculators don't pile on that commodity since doing so would stop the business and negate the effort.

Imagine if 100 years ago government would have decided that electric cars should be used instead of the internal engine that finally won not only over electric but even over the steam engine. We are still trying to develop a battery for the electric car.

On your second thesis, government interference does have an effect on people. That always seems to be the problem. Your scenario of increased gas price is mild in comparison to, for instance, the famine cause by Mao which killed about 6 million. Again, I wouldn't blame speculators for an increase in the price of gas. I do feel the commodity markets are rigged with hypothication and few other bs tactics. How can it be that an owner and a lessee of gold can both hold tittle? By leasing multiple times you have an increase in the "supply" of gold? It is that kind of games that are skewing the markets. I can't hardly wait to see what happens when PAGE opens spot price set by single ownership.

Sun, 01/29/2012 - 23:28 | 2108516 Rubbish
Rubbish's picture

Gold/Silver are great. Land with water, trees and game is better.

Sun, 01/29/2012 - 23:45 | 2108548 slewie the pi-rat
slewie the pi-rat's picture

what time's the game start?

Mon, 01/30/2012 - 00:03 | 2108592 Rubbish
Rubbish's picture

At 62...Need to hang on 5 more years

Mon, 01/30/2012 - 00:32 | 2108637 slewie the pi-rat
slewie the pi-rat's picture

well, i hope you like mooseburgers and potatoes!

you have catfish;  we have catfood;  the homeless can have the cats

5 year plan, BiCheZ!

Sun, 01/29/2012 - 23:29 | 2108519 AC_Doctor
AC_Doctor's picture

I will gladly pay a noose tax to take care of the banker tax...

Sun, 01/29/2012 - 23:34 | 2108524 Gidas19
Gidas19's picture

Bullet tax

Sun, 01/29/2012 - 23:40 | 2108532 xela2200
xela2200's picture

"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."

Does a regressive tax takes from the poor and give to the rich? No, it affects more the poor when it is charged. A flat tax or a sales tax is regressive, but I don't see it as unfair. In fact, I would argue that flat tax is fair and a sales tax encourages savings and investment. At the end, these "regressive" taxes provide incentive to produce more and wealth building. Why would it justify revolution? We have a convoluted tax system that taxes us as soon as the income is earned on an incremental percentage basis. The US has had this tax systems for a hundred years. Wealth has been destroyed and for the first time in my life revolution seems possible. We even need computers to figure out these taxes in a "fair" basis.

Sun, 01/29/2012 - 23:42 | 2108539 Kassandra
Kassandra's picture

I prefer to call it stocking the pantry..not hoarding food. In the 70's my Mom (a child of the Depression) had a basement storage area that we nicknamed "The Apocalypse Pantry". Between that and the freezer, we figured she could feed the entire neighborhood for five years. Learned a lot from her.

Mon, 01/30/2012 - 00:05 | 2108580 Kali
Kali's picture

Precisely.  In my childhood (60's), all houses had at least a pantry.  It was SOP to have extra on hand.  Most people could go at least a couple of weeks with what was just in the pantry.  Many people still had "storage rooms" in the basement if they had a house, or, sometimes root cellars. Some people could go for years.  I am crusty enough to remember a lot of men had smokehouses too.   People cooked from scratch and didn't eat out as much.  It was a big deal to go out to eat, a special treat,  you got dressed up and everything.  We weren't poor, that's just the way it was. No "convenience food" either.  I remember when TV dinners first came out.  That was a "treat" too. 

Mon, 01/30/2012 - 00:12 | 2108604 Caviar Emptor
Caviar Emptor's picture

Yup. Back when it was 'waste not, want not'. Waste became cool in the 80s. Like greed. 

Sun, 01/29/2012 - 23:43 | 2108544 SilverDoctors
SilverDoctors's picture

Speaking of Banksters....Blythe Masters is out as head of commodities at JP Morgan as of Monday.

http://silverdoctors.blogspot.com/2012/01/breaking-news-blythe-masters-leaving.html

Sun, 01/29/2012 - 23:57 | 2108575 Kaiser Sousa
Kaiser Sousa's picture

we should give her a ride from her office on her last day...

in a mother fuckin Hearst....that bitch!!!!

Mon, 01/30/2012 - 00:23 | 2108616 Calmyourself
Calmyourself's picture

Wrap her in a newspaper.. Doesn't seem very Kaiser Sousa like..  Unless you light it on fire, ahh gotcha.

Mon, 01/30/2012 - 00:02 | 2108591 Kali
Kali's picture

rats fleeing the ship!

Mon, 01/30/2012 - 00:22 | 2108600 slewie the pi-rat
slewie the pi-rat's picture

she ran a breast cancer campaign last fall while the crimex was about to crumble round her

blythe this, blythe that, she's the gal to put in charge

so, that's that

new commodity head:  wasn't here, then; ...i hear she works for the redCross now, but not positive;...yes! i know about the nite she got gang-banged @ zeroHedge!  not sure where they put the records;  try dick cheney's bunker, maybe...

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