Submitted by Tim McCormick. Tim trades bonds in Texas
The Banker Tax
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Henry Ford
Is it ok with you if we starve poor people to bail out Citibank again? Will you stand by and do nothing while seniors struggle to afford heating oil just to keep Bank of America solvent? The fundamental structure of our monetary system creates a multifaceted regressive tax. Only when we come to view this complex confiscation of wealth as a tax, will we be able to summon the political force to defeat it.
Nobody likes to pay taxes, but some taxes are more treacherous than others. An open and simple tax can be opposed because it is vulnerable to "sound-bite politics". The worst taxes are hidden by the complexity of their indirectness. Hidden regressive taxes imposed without the representation of the payer are most unjust. We are now paying a banker tax or subsidy. It is hidden, it is regressive and we have little political control over it.
This banker tax is the hidden consequence of the many policies we employ to support an uneconomic level of credit. First, central banks try to manage our economies by fixing the price of credit and by printing money through quantitative easing. Second, this banker tax is made larger by the misguided policy of our governments subsidizing credit by bailing out private banks. Third is all of our tax policies creating an above market level of leverage. And fourth is all the various government agencies created to promote an extra-normal amount of credit.
Credit is just another resource for the production of goods or services. There is nothing magic about it. It is most efficiently allocated by the supply and demand pricing mechanism of a free market. We don't fix the price of equity capital, labor or raw materials because we know price fixing allocates resources inefficiently. Fixing a price to low creates shortages, and fixing a price to high creates a glut. Having a central bank impose an artificial price and quantity of credit is not in the public interest. It is only
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adr
adr's picture
Banks used to need people to park money with them and take loans to be paid back with interest to stay in business. With the advent of the superbanks, they no longer need people. BAC, Citi, and the others get more money in 0% interest loans from the Fed than they ever got from common citizens. You and your money doesn't matter anymore, only fresh printed fiat. They don't even need to loan to you anymore becuase it's better to take the fresh loaned Fed notes and buy government debt that pays 3%. The bank can always pay back the loan by selling the bond and keep the profit for itself. Just imagine the wonderful game if you culd play with your friends. Eventually the size of the loan dosn't matter, only maximising your profit. he more you borrow the more you make. The more you borrow the more the government protecting your back can spend to do so. To the parties involved there is no way to lose. As long as everyone is playing the game, it all seems fine. Until a player eventually wants out.
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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