Category Archives: Federal Reserve Bank

US Already Inflicts ‘Deposit Taxes In Disguise’

Business, Debt, Democracy, Economy, Federal Reserve Bank, Inflation

“Savers Pay for Spenders,” our March 19 BAB post on Cyprus, asked:

WHY is state-sanctioned theft from Cypriot savers any different to your paycheck being docked for statutory payroll tax deductions?
WHY is state-sanctioned theft from Cypriot savers any different in principle to the statutory theft called the income tax; and, in particular, from the progressive income tax, where the rich (“savers”) are penalized for the sins of the rest?
As to taxes on assets: Property taxes, taxes on investments—why are these seizures of private property any different in principle to the lunge on Cypriot savings accounts the bankers and bureaucrats of Europe have made?
You’d think the US doesn’t tax assets. It does. And how are the taxes above different in principle from a bank deposit levy?

Today comes the news, (via Forbes), that Cyprus and its puppet masters have agreed that, “the Popular Bank of Cyprus (Laiki Bank) will wind down” [presumably this is journo babble for “close”].

Laiki Bank deposits above 100,000 euros—which aren’t protected by EU law—will be frozen and used to pay for the deal. The frozen accounts are expected to yield 4.2 billion euros ($5.5 billion), and account holders will see an estimated 30% to 40% haircut on assets. Far greater than the original 9.9% levy.

“Haircut” is yet more journo mumbo-jumbo. The correct word is “theft.” Large-scale robbery of private property.

Financier Peter Schiff completes the thought expressed in this post’s lede, above—and shared by every clear thinking libertarian. This is all a formality—a more in-your-face lunge for private property :

…isn’t inflation, which allows governments to pay off debt through the creation of new money that transfers purchasing power from savers to borrowers, just a deposit tax in disguise? (Read more about Japan’s plan to do just that). British citizens of all means have been living with such a three percent stealth tax for the past three years, and it is expected to stay that high for at least two more years. Yet a one-time tax of 6.75% in Cyprus is seen as the ultimate act of betrayal?
Many are lamenting that Cyprus’ membership in the EU prevents it from devaluing its own currency to get out of the jam. How would such a course be morally superior? Taking actual losses on deposits is no different than taking losses through devaluation and inflation. Both result in the loss of purchasing power. Asking for a depositor haircut at least deals with the problem honestly and immediately. Although it’s not quite as honest, devaluation can also be effective.

UPDATED: Savers Pay For Spenders

Debt, Economy, EU, Europe, Federal Reserve Bank, Private Property, Socialism

Cypriot officials had colluded with euro-zone Kleptocrats in order to raid individual savings accounts in their country to pay for their profligacy.

If the little guy did this—you or I—we’d be in the big house.

Other than that it is theft, seizing private property to pay for “public” debt punishes the economically righteous, who squirreled away for a rainy day (RETIREMENT). Observe how state policies, in addition to generally being immoral, invariably help invert conventional morality.

The right of private property notwithstanding, why should savers pay for spenders?

However, ask yourself this:

WHY is state-sanctioned theft from Cypriot savers any different to your paycheck being docked for statutory payroll tax deductions?

WHY is state-sanctioned theft from Cypriot savers any different in principle to the statutory theft called the income tax; and, in particular, from the progressive income tax, where the rich (“savers”) are penalized for the sins of the rest?

As to taxes on assets: Property taxes, taxes on investments—why are these seizures of private property any different in principle to the lunge on Cypriot savings accounts the bankers and bureaucrats of Europe have made?

You’d think the US doesn’t tax assets. It does. And how are the taxes above different in principle from a bank deposit levy?

UPDATE (3/20): From Vox Day:

One of the many unintended consequences of the Cyprus situation is that many people are finally beginning to understand that money they deposit into a bank is no longer their money. It’s one thing to have some vague notion of what a fractional reserve system is, it’s another to realize that with every deposit, you are making what amounts to an interest-free loan to some of the shadiest and shakiest entities on the planet.

Jobs: More Cover-Up Than Recovery

Economy, Federal Reserve Bank, Labor

Although “The labor force participation rate, which measures workers and those looking for jobs … fell to a 32-year low of 63.5%, tied with where it stood in August 2012”—Mark Hanna at Euro Pacific gives out a “better than expected employment report”:

* The government reported a net 236,000 new jobs as the unemployment rate fell to 7.7%. Economists expected the 160,000 new jobs in February and the unemployment rate held steady at 7.9%.
* Service industries led the gains with 73,000 new jobs, while construction added 48,000 and health care provided 32,000. Retail also added 24,000.
* There was a downward revision in January’s data, from an initially reported 157,000 down to 119,000. December’s numbers, though, were revised up from 196,000 to 219,000.
* Average hourly earnings rose four cents to $23.82 an hour, while the average work week edged higher to 34.5 hours.

By Paul Craig Roberts’s assessment, this is “The Missing Recovery.” He pulls the curtain back on a declining “U.3 measure of unemployment rate”; declining “because it does not count discouraged job seekers who have given up looking for a job.”

AND:
• An “expansive monetary policy of bond purchases to maintain negative real interest rates continues 3.5 years into the recovery.” This comes “at the expense of interest income for retirees on their savings accounts, money market funds, and Treasury bonds.”

PBS admits too that, while unemployment dropped because people found work, “some 130,000 others stopped looking for work, so they were no longer counted.”

Robert Wenzel’s EPJ (Economic Policy Journal) has it right: This is a Ben Bernanke manipulated uptick.

We’re floating on a confetti of funny-money. How can we tell what’s real and what’s not real?

UPDATED: GOP ‘Sequesteria’ & The GDP Gambit (When Debt = Growth)

Debt, Democrats, Economy, Federal Reserve Bank, Government, Republicans

Are you able to tease apart Republican “sequesteria” from the Democratic position on the effects of a miniscule decrease in the increase in US government spending, for this year?

I can’t.

The Democrats are adamant that a cut in oink-sector spending will destroy the chances of an economic recovery and will lower GDP.

It didn’t have to happen this way, lament the Republicans. Negotiations could have produced a better honed cutting instrument.

Note that the Republicans have never made relevant points such as that, “Government spending increases unemployment because it crowds out so much private sector job creation” (Thomas J. DiLorenzo, Organized Crime: The Unvarnished Truth About Government, p. 202).

Or, as Larry Kudlow put it, “When the government spending share of GDP declines, so does the true tax burden on the economy. As a result, more resources are left in the free-market private sector, which will promote real growth.”

Ask yourself why GDP would shrink if the burden of government is reduced slightly. Why would Gross Domestic Product be affected by a threat of a reduction in the parasitical sector–the sector (government) that doesn’t produce wealth, but only consumes it?

Could this paradox be a result of the way in which GDP numbers are crunched?

Indeed.

Gross domestic product (GDP) gauges economic activity based on spending, or “consumption,” which is not what creates wealth. Production creates wealth. (Gross domestic income (GDI) is a lesser-known calculation used by the Federal Reserve to gauge economic activity based on income.)

Official GDP numbers also chart—and include—the growth of government debt. As Vox Day has explained, “GDP counts spending but doesn’t subtract debt, so it’s like saying that you’re rich because you maxed out your platinum Mastercard. Until the debt is paid back, you can’t properly count it as economic growth. And almost all of the GDP growth over the last 20 years has been nothing but debt growth.”

The GDP is a political construct, defined, tracked and manipulated by the D.C. political machine.

GDP statistically conflates the growth of debt with economic growth.

When our economic definitional building blocks are thus perverted, it becomes easy to peddle the GDP hoax. And that hoax is that a reduction in state spending and debt is also a reduction in economic growth, and that reducing debt must be avoided at all costs.

As Ayn Rand would have advised, “Check your premises.”

UPDATE (3/3): “THE SEQUESTER ISN’T REALLY THERE.” Via the fabulous EPJ: Ron Paul on the Sequester: