Saturday, October 24, 2015
QUANTITATIVE EASING IS A MASSIVE REGRESSIVE TAX ON SAVINGS OF THE HOUSEHOLD SECTOR
So, if we have a massive tax on consumption for the household sector, how come consumption remains robust in the United States?
Well, since everything produced in the country must be consumed or saved, we can either compensate the household sector in other ways - OR we can TAX the Savings which will force the Household sector to consume more of the measly earnings they are permitted to keep.
ENTER QUANTITATIVE EASING - the SAVINGS TAX
What is QE? In short it is the practice of keeping real interest rates extremely low or negative.
In part it is the Government subsidizing the Banking Sector by purchasing unmarketable securities from the banking sector. These securities on the open market would force rates ever higher to encourage investors to assume the risk of owning securities in danger of defaulting.
This hold rates artificially low.
In part it is the Government printing and buying its own bonds which subsidizes corporations, manufacturers, real estate developers and local Governments by keeping real interest rates negative - that is below the rate of inflation.
When one sector or group of sectors is subsidized another sector is penalized - or TAXED. Which sector is the loser? Depositors in Banks - or Savers - which is largely the Household sector.
So through Policy the Household sector - which is another name for the vast middle class is being subjected to massive Regressive Taxes both on the Consumption and on their Savings.
Ordinarily these massive regressive taxes would impel the Household Sector to A) leave the banking system. B) leave the Corporate System. and C) Enter into various entrepreneurial enteprises based on barter and cash transactions.
ENTER THE WAR ON CASH.