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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Steve Lee who started this subject6/13/2002 7:23:04 PM
From: Crimson Ghost  Read Replies (3) of 99280
 
What the financial powers that be are capable of.

The following is from the Richmond FRB site (Federal Reserve Bank).

If a central bank imposed a per period, per dollar carry tax on electronic bank reserves when the interbank rate was
pressed to zero by an abundance of reserves, competition among banks to avoid the carry tax would push the interbank
rate below zero by the cost of carry. If negative rates were expected to persist for a while, however, banks and the public
would hoard currency rather than lend at negative interest. To deal with this problem, a central bank could also
impose a carry tax on vault cash and currency in the hands of the public. Modern payments technology makes it
possible to impose a carry tax on currency by recording the date it leaves an automatic teller machine and the date it is
returned to a bank. For the most part, currency is spent and returned to the banking system by merchants a week or so
after it is withdrawn. Thus the imposition of a carry tax on currency would be collected like a sales tax. For instance, a
carry tax on currency of 5 percent per year would be sufficient to prevent hoarding as long as the interbank rate was
not pushed farther than 5 percent below zero.
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