FINANCIAL GENUISES' NEW PLAN TO SAVE ECONOMY
OR "GOVERNMENT PLAN FOR COMPLETE CONTROL OF YOUR LIFE"
The subject of negative interest has been increasingly talked about. At present four countries (Denmark, Sweden, Switzerland and Japan) have descended into this bizarre economic policy. While we hear politicians and financial commentators tell us that all is well in the economy, it has just been reported that world trade has declined 14% in 2015 and that the yield on 27% of government bonds worldwide are now in negative territory. I am not a Harvard or Yale-educated economist, who I am sure will have a convoluted message that this is a perfectly acceptable situation, but to me this is a red flag that all is not well.
This idea of negative interest rates will inevitably lead to series of consequences that can only lead to a very negative result, not only to your economic well being but to all aspects of your life. Does anyone believe any sane person will leave their money in the bank and allow it to decline in value by just sitting there? There is a problem with this in that in the US alone we have $11.1 trillion of digital dollars, but only $1.35 trillion dollars of actual paper currency. If large numbers of people foresee negative interest rates and attempt to withdraw their money, there quickly would be a shortage of currency. There is already resistance by some banks to giving out cash to their customers. In Sweden, which has become mostly a cashless society, even panhandlers have a cell phone with a device to swipe credit cards and churches have an ATM to receive contributions.
Do not doubt that our financial planners have a solution for this. Last week, Larry Summers former treasury secretary under the Clinton administration, remarked that it was time to withdraw the $100 bill from circulation. If the $100 bill was withdrawn that would leave only $271 billion of currency in existence. It has been proposed by Citibank, one of the largest of credit card processors, that it was time to do away with cash completely. He is not the only one - many of the "superiorly intelligent" economists say that if cash is done away with, they will be in a much better position to control the economy. What they are saying is they can no longer stimulate the economy by lowering interest rates and they just don't know what else to do. The real problem is an overload of debt by the federal, state and local governments, most all corporations, and individual citizens. This includes most all pension funds. Rather than allow the bad debts be written off and taking the medicine for their 40 years of economic irresponsibility, they would rather try this experiment in insanity.
But of course they are not really insane. They are unscrupulous and have decided since raising taxes is becoming increasingly difficult, a new approach is needed. So let's assume we go to a cashless society where the only way you can use your money without paying a tax on your savings is to spend it or invest it. Every transaction will of course have a 2% commission to the credit card processor...and of course the government will say that is too much. In their great wisdom they will say it can only be 1.92 % and you should be very grateful. Next they will decide to inflict a transfer tax to fund some great thing such as education or whatever they think will produce the least outcry. Let's say this will start at 1%, but it can easily be manipulated up when needed. So we will have a situation where every transaction will add at least 2.92 % and also the negative interest which will start out at 0.25%, but of course will be floating number that may go to 7%. In reaction to this policy you will be encouraged to either buy stock, bonds or a new Chevrolet. The Chevrolet purchase will increase economic activity, and the stock and bond purchase will raise the value of investments to bail out the government debt and pension funds. Wow! These guys are smart! At least until it all blows up and no one will have any money left. Just imagine you go to the yard sale in the future to buy that used lawn mower for $30.00 when you swipe that card, the credit card company can add 2%, the federal govt. 1% for the transfer tax, and the state can add the 6% sales tax. That means it will cost you an extra $2.10 and the seller 0.60 cents. Oh, and by the way the seller will also get a 1099 at the end of the year for his $30.00 sale. One other problem, what if the internet or phone service goes down either by accident or design, will all activity come to a halt? Welcome to the 21st century.
Then comes the next problem. Humans always find a way to get around things like this, for example trading labor or some other item for the lawn mower or silver coins for the lawn mower, or for those without money or coins, maybe their wives or daughter. I have no doubt that if these policies take effect, we will descend into a primitive barter system in an attempt to insulate ourselves from the failures and dishonesty of the experts. You can be sure they will have to make barter or any transactions not done through the system illegal.
If this idea is allowed to be implemented, it will most likely lead to decline in economic activity, the hoarding of goods and assets capable of being bartered, and corresponding penalties for those who do not comply. What it won't lead to is a better world for most of us.
Do not doubt that our financial planners have a solution for this. Last week, Larry Summers former treasury secretary under the Clinton administration, remarked that it was time to withdraw the $100 bill from circulation. If the $100 bill was withdrawn that would leave only $271 billion of currency in existence. It has been proposed by Citibank, one of the largest of credit card processors, that it was time to do away with cash completely. He is not the only one - many of the "superiorly intelligent" economists say that if cash is done away with, they will be in a much better position to control the economy. What they are saying is they can no longer stimulate the economy by lowering interest rates and they just don't know what else to do. The real problem is an overload of debt by the federal, state and local governments, most all corporations, and individual citizens. This includes most all pension funds. Rather than allow the bad debts be written off and taking the medicine for their 40 years of economic irresponsibility, they would rather try this experiment in insanity.
But of course they are not really insane. They are unscrupulous and have decided since raising taxes is becoming increasingly difficult, a new approach is needed. So let's assume we go to a cashless society where the only way you can use your money without paying a tax on your savings is to spend it or invest it. Every transaction will of course have a 2% commission to the credit card processor...and of course the government will say that is too much. In their great wisdom they will say it can only be 1.92 % and you should be very grateful. Next they will decide to inflict a transfer tax to fund some great thing such as education or whatever they think will produce the least outcry. Let's say this will start at 1%, but it can easily be manipulated up when needed. So we will have a situation where every transaction will add at least 2.92 % and also the negative interest which will start out at 0.25%, but of course will be floating number that may go to 7%. In reaction to this policy you will be encouraged to either buy stock, bonds or a new Chevrolet. The Chevrolet purchase will increase economic activity, and the stock and bond purchase will raise the value of investments to bail out the government debt and pension funds. Wow! These guys are smart! At least until it all blows up and no one will have any money left. Just imagine you go to the yard sale in the future to buy that used lawn mower for $30.00 when you swipe that card, the credit card company can add 2%, the federal govt. 1% for the transfer tax, and the state can add the 6% sales tax. That means it will cost you an extra $2.10 and the seller 0.60 cents. Oh, and by the way the seller will also get a 1099 at the end of the year for his $30.00 sale. One other problem, what if the internet or phone service goes down either by accident or design, will all activity come to a halt? Welcome to the 21st century.
Then comes the next problem. Humans always find a way to get around things like this, for example trading labor or some other item for the lawn mower or silver coins for the lawn mower, or for those without money or coins, maybe their wives or daughter. I have no doubt that if these policies take effect, we will descend into a primitive barter system in an attempt to insulate ourselves from the failures and dishonesty of the experts. You can be sure they will have to make barter or any transactions not done through the system illegal.
If this idea is allowed to be implemented, it will most likely lead to decline in economic activity, the hoarding of goods and assets capable of being bartered, and corresponding penalties for those who do not comply. What it won't lead to is a better world for most of us.
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