Dallas Fed gives excuse to spend money on coins

Don't know if anyone else saw this from the Dallas Federal Reserve Bank but it
could give one a good reason to spend money for coins. Tax money saved.

"The strategy for eliminating the zero bound, therefore, is to make money pay a
negative nominal interest rate, by imposing some type of "carry tax" on
currency and deposits.

"It's easy to envision such a system with regard to deposits at the Federal
Reserve or transactions deposits at banks; for the most part, the technology to
implement such a system is already in place. A tax or fee on Reserve deposits
of 1 percent per month, for example, would mean that those deposits, in effect,
pay a nominal interest rate of roughly minus 12 percent.

"The technological difficulty lies mainly in imposing such a tax on currency.
In the 1930s, Irving Fisher of Yale University, one of the greatest American
economists, proposed such a system, in which currency had to be periodically
'stamped', for a fee, in order to retain its status as legal tender. The stamp
fee could be calibrated to generate any negative nominal interest rate that the
central bank desired."

Full paper he

http://www.dallasfed.org/htm/research/hot/bd0503.html

Guess the government is saying either spend it or we'll tax it and spend it for
you.



--

Brian Blackwell
SPMC 9522 ANA LM2644
My Obsolete Banknotes Page
http://home.att.net/~brianblackwell/obsolete.htm

From: (Brian)

"The strategy for eliminating the zero bound, therefore, is to make money pay
a
negative nominal interest rate, by imposing some type of "carry tax" on
currency and deposits.

This is just so horribly stupid, I don't even know where to start.

Yes, the definition of inflation is too many dollars chasing too few goods. So
by taxing the money supply, you will, in theory, limit it and thereby help keep
inflation in check.

However, ours is not a perfect world. As long as we carry a budget deficit and
national debt, it is actually in the government's interest to have as many
bucks out there as the economy can handle. And, depending upon whom you read,
maybe even better to be slightly saturated (as if any group of economists can
agreee on what constitutes a "slightly").

Additionally, one of the reasons why consumer credit levels are at all-time
highs is that consumer savings is at an all-time low. This would just add fuel
to that fire.

So this paper from the Dallas Fed is just yet another example of another
government (or near-government, thank you) bureaucracy doing the one-for-all
and all-for-me routine.


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mark