US will before long face an indirect negative interest rate
it is called a "carry tax" for unspent cash
it will backfire and promote speculation into the only rising assets: gold & silver
since earnings and spending will not sustain
financialsense.com
it was in Puplava's Monday report on the market
he referred to Stephen King's analysis
the initial extreme results of the Great USDollar Decline will be rendering the EU economy into bad stagnation, from extreme rises in the euro currency
Japanese will not go quietly into the economic night, as they will continue to kill their yen currency in order to keep their economy alive
Chinese will not have to kill their yuan currency, since it is lock pegged at 8.3:1, and their economy is thriving
all hell will break loose on the price inflation front within the USA when the Asian currencies are revalued upward, which is as inevitable as next winter's arrival
Stephen King at HSBC recently wrote a lengthy tome on possible Fed policy options to fight deflation. His piece, which is must reading, is called "Thinking the unthinkable." It is King's belief that the Fed and the US government are now in the process of implementing a Five Stage Strategy designed to prevent deflation from occurring and to cure it if it surfaces. According to King this policy will send yields on 10-year Treasury yields down to 2.5 percent from their present rate of 3.41 percent with the value of the US dollar spiraling against the Euro.
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The Carry Tax Cometh?
Not to worry. The Fed is also considering unconventional means if money velocity shrinks. Fed senior vice president Marvin Goodfriend of the Richmond Federal Reserve branch first proposed a study of implementing a "carry tax." This tax would be imposed on cash if consumers don't spend the money as fast as the government wants it to. Essentially this tax would be designed to eliminate the problem of zero-bound interest rates. The tax would lower the value of the currency the longer it is held without making a transaction. In effect, it becomes a negative interest rate, which punishes cash holders for preferring to hold on to their cash. It would be designed to eliminate the Japanese problem where consumers and investors have preferred to hold on to cash as their assets deflated in the stock and real estate markets.
In my opinion, besides the constitutional problems this would present, it would most assuredly backfire. As the government continues to depreciate the currency, implementing a carry tax would force investors and savers into "things" as they see the value of their assets depreciate such as paper assets and real estate and the value of things they need go up in costs. People would simply put their money into "things" and avoid paper. The most valuable asset under these conditions would be the only real money that has ever existed throughout history: silver and gold.
We may soon be revisiting history as the alchemist take us back to the days of John Law, something I never thought I would see. However, it looks even more likely in the days ahead more of which will be written about in the future.
what is coming will be simply mindboggling !!!
such are the makings of desperate men attempting to remedy the unfixable
/ jim |
