Tag Archives: Carry Tax

The War on Cash is Real

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Stocks have rallied over the last 10 days in part by ECB President Mario Draghi’s statement that if push comes to shove, the ECB will push interest rates even further into negative territory (NIRP).

This represents just another round in the War on Cash, first implemented by the Central Banks in 2008.

It’s a little known fact that the cause for the gut-wrenching collapsing in late September-October 2008 was due to a significant portion of investors trying to move their money out of money market funds.

A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).

This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.

Remember, the bulk of money in the financial system is digital.

  • The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion.
  • When you include digital money sitting in short-term accounts and long-term accounts then you’re talking about roughly $10 trillion in “money” in the financial system.
  • In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size.
  • The US bond market (money that has been lent to corporations, municipal Governments, State Governments, and the Federal Government) is almost twice this at $38 trillion.
  • Total Credit Market Instruments (mortgages, collateralized debt obligations, junk bonds, commercial paper and other digitally-based “money” that is based on debt) is even larger $58.7 trillion.
  • Unregulated over the counter derivatives traded between the big banks and corporations is north of $220 trillion.

The Central Banks like it this way because they can regulate and control digital money much more easily than physical money. Moreover, as the 2008 money market fund collapse revealed, if a significant percentage of investors ever moved to shift their wealth into physical cash it could implode the financial system.

For this reason, the Central Banks are slowly pushing to implement reforms that will either tax physical cash or ban it all together.

The first round of this involved implementing NIRP (negative interest rate policy), which is a form of stealth tax as it charges depositors for sitting in cash.

However, things are getting more aggressive. France just banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000.

Aside from actually banning physical cash, some public services are no longer accepting cash as payments.

Last summer, London buses stopped accepting money. To pay your fare, you now have to wave either a prepaid Transport for London Oyster card or a contactless payment bank card at a receiver. For some, not having to dig out a handful of coins is a welcome relief.

Source: Bloomberg View

Make no mistake, the War on Cash is very real. And it’s unfolding before our very eyes.

Indeed, we’ve uncovered a secret document outlining how the Feds plan to take hold of savings during the next round of the crisis to stop individuals from getting their money out.

We detail this paper and outline three investment strategies you can implement right now to protect your capital from this sinister plan in our Special Report

Survive the Fed’s War on Cash.

We are making 1,000 copies available for FREE the general public.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/cash.html

Best Regards

Phoenix Capital Research

Are Border and Capital Controls Coming to the US?

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More and more analysts are beginning to take note of the “War on Cash.” However, they’re missing the fact that the actual template for what’s coming to the US first appeared in Europe back in 2012.

Back in March of 2012, when the EU Crisis first began to spin out of control, then Prime Minister of France Nicolas Sarkozy openly called for the renegotiation of the Schengen Treaty: the treaty that established the 26-nation EU as a “borderless” entity in which individuals could move from one country to another with little difficulty and which also made trade among EU members easier.

France was not alone either. A few months later, both France and Germany proposed imposing border controls in June of that same year.

A Vote of No Confidence in Europe

Germany and France’s joint proposal to allow Schengen-zone countries to temporarily reintroduce border controls as a means of last resort might sound harmless. But doing so would damage one of the strongest symbols of European unity and perhaps even contribute to the EU’s demise.

Germany and France are serious this time. During next week’s meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as “an ultima ratio” — that is, measure of last resort — “and for a limited period of time.” They reportedly go on to recommend 30-days for the period.

http://www.spiegel.de/international/europe/german-and-french-proposal-for-border-controls-endangers-european-unity-a-828815.html

Why border controls? Well in truth, it was all about the money… specifically, physical cash. As we’ve noted before… with the vast majority of the global financial system based on digital money… the minute a significant number of depositors try to move their money OUT of a bank and INTO physical cash, the whole system can collapse

Again, Europe was ahead of the US in terms of proposing these terms. The below article dated from 2012 outlines the plan to limit cash withdrawals, shut down ATMs, and impose border controls to stop people from fleeing with their capital.

       Exclusive: EU floats worst-case plans for Greek euro exit: sources

European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro…

As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120611&id=15208663

What are the key takeaways from this?

  • When the next crisis hits, the Powers That Be are only too happy to let the rule of law will go out the window.
  • The biggest problem they face is STOPPING people from moving their money into physical cash.
  • To stop #2, capital controls, border controls, and even a CARRY taxes will be imposed.

Moreover, and I want to stress this, Europe has also shown us the template for how this mess will play out. Indeed, the 2013 banking crisis in Cyprus showed us EXACTLY how it will be in terms of speed and timing.

The quick timeline for Cyprus is as follows:

  • June 25, 2012: Cyprus formally requests a bailout from the EU.
  • November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
  • February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.
  • March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
  • March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
  • March 18 2013: Bank holiday extended until March 21 2013.
  • March 19 2013: Cyprus parliament rejects bail-in bill.
  • March 20 2013: Bank holiday extended until March 26 2013.
  • March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
  • March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).

The most important thing I want you to focus on is the speed of these events.

Cypriot banks formally requested a bailout back in June 2012. The bailout talks took months to perform. And then the entire system came unhinged in one weekend.

One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out. ATMs were closed, capital controls were in place, full stop.

There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system.

How far will they go to maintain this trust?

The Bank of Cyprus, the bank that imploded in 2013 and STOLE clients’ funds was voted Best Bank for Private Banking in Cyprus by EUROMONEY magazine in 2012!!!

No joke…

Bank of Cyprus has been named as the Best Bank for Private Banking in Cyprus, by the internationally acclaimed magazine EUROMONEY

Bank of Cyprus Private Banking ranked first among Cypriot, Greek and other international financial institutions operating in Cyprus in the Private Banking sector…

This recognition by EUROMONEY is ever more important in today’s macroeconomic environment as it reaffirms the Bank’s ability to safely and successfully respond to its clients’ financial needs and emphasizes its clients’ loyalty and trust.

http://www.bankofcyprus.com.cy/en-GB/Cyprus/News-Archive/Best-Bank-for-Private-Banking/

From best bank to totally broke and freezing clients’ accounts in less than one year.

Europe has laid the template for what’s coming to the US.

This is just the beginning. We’ve uncovered a secret document outlining how the Fed plans to incinerate savings.

We detail this paper and outline three investment strategies you can implement

right now to protect your capital from the Fed’s sinister plan in our Special Report

Survive the Fed’s War on Cash.

We are making 1,000 copies available for FREE the general public.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/cash.html

Best Regards

Phoenix Capital Research

Prepare to be Taxed: Wealth Tax and Carry Taxes Are Coming

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Prepare to be taxed.

Behind the veneer of “all is well” being promoted by both world Governments and the Mainstream Media, the political elite have begun implementing legislation that will permit them to freeze accounts and use your savings to prop up insolvent banks.

This is not conspiracy theory or some kind of doom and gloom. It’s basic fact.

In the last 16 months, Canada, Cyprus, New Zealand, the US, the UK, and now Germany have all implemented legislation that would allow them to first FREEZE and then SEIZE bank assets during the next crisis. I expect more countries to join this movement. The IMF actually openly suggested it as the best means of dealing with future crises in the financial system.

Outside of this, we’ve also seen the beginning of moves to ban the use of physical cash in France, Spain, Uruguay, and elsewhere… as well as a growing chorus of experts calling for negative interest rates and possibly even a “carry tax” on cash itself.

Why is this?

The world will soon be facing a tsunami of defaults on bad debts.

This will include municipal or local government defaults, governments “defaulting” on promises they’ve made to the people (e.g. Social Security, Medicaid), a default on the social contract between society and politicians such as the one in Cyprus (a default on the notions of private property and Democracy), stealth defaults on debts in the form of inflation and finally, of course, outright sovereign defaults.

The sovereign defaults will come last; all other options will be tried first.

The reason for this is that sovereign bonds (think of US Treasuries, German Bunds or Japanese Government bonds) are the senior most collateral posted by banks for the hundreds of trillions of Dollars worth of derivatives bets they’ve made with each other.

The minute an actual sovereign default occurs in Europe, Asia or the US, then the large global banks will all be vaporized. End of story. As is now clear, the Central banks do not care about ordinary citizens. They only care about propping up the big banks.

This is why Cyprus decided to default on the social contract with its people and steal their funds rather than simply instigating a formal default. And it’s why in general we’re going to see Governments implementing more and more theft in the form of “taxes” (Cyprus called its theft a tax) in the future.

Make no mistake, the words “wealth tax” mean freezing of assets and then taking some of your savings. Anyone with more than $250,000 in a bank account should be prepared for this. It has happened in Cyprus. It will happen elsewhere too.

This will be sold to the public as either an attempt to tax those with a lot of money because it’s only fair that they put in more to bailout the nation OR as a form of financial terrorism e.g. “either you take a 7% cut on your deposits and the bank stays afloat or the bank crashes and you lose everything.”

This will be spreading throughout the world, GUARANTEED.

Spain, Canada (which allegedly has the safest banks in the world), New Zealand and now even Germany have already begun discussing confiscation schemes for depositors in the event of a banking crisis. The US and UK have also developed similar schemes to freeze “systemically important” financial entities during the next crisis.

This is just the beginning. Indeed… we’ve uncovered a secret document outlining how the US Federal Reserve plans to incinerate savings.

We detail this paper and outline three investment strategies you can implement

right now to protect your capital from the Fed’s sinister plan in our Special Report

Survive the Fed’s War on Cash.

We are making 1,000 copies available for FREE the general public.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/cash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Banks Are Now Openly Rejecting Deposits… Is a Cash Ban Next?

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The Central Banks hate physical cash. So much so they there will likely try to ban it in the near future.

You see, almost all of the “wealth” in the financial system is digital in nature.

  • The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion.
  • When you include digital money sitting in short-term accounts and long-term accounts then you’re talking about roughly $10 trillion in “money” in the financial system.
  • In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size.
  • The US bond market (money that has been lent to corporations, municipal Governments, State Governments, and the Federal Government) is almost twice this at $38 trillion.
  • Total Credit Market Instruments (mortgages, collateralized debt obligations, junk bonds, commercial paper and other digitally-based “money” that is based on debt) is even larger $58.7 trillion.
  • Unregulated over the counter derivatives traded between the big banks and corporations is north of $220 trillion.

When looking over these data points, the first thing that jumps out at the viewer is that the vast bulk of “money” in the system is in the form of digital loans or credit (non-physical debt).

Put another way, actual physical money or cash (as in bills or coins you can hold in your hand) comprises less than 1% of the “money” in the financial system.

As far as the Central Banks are concerned, this is a good thing because if investors/depositors were ever to try and convert even a small portion of this “wealth” into actual physical bills, the system would implode (there simply is not enough actual cash).

Remember, the current financial system is based on debt. The benchmark for “risk free” money in this system is not actual cash but US Treasuries.

In this scenario, when the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds.

A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).

This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.

To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.

When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.

As a result of this, virtually every monetary action taken by the Fed since this time has been devoted to forcing investors away from cash and into risk assets. The most obvious move was to cut interest rates to 0.25%, rendering the return on cash to almost nothing.

However, in their own ways, the various QE programs and Operation Twist have all had similar aims: to force investors away from cash, particularly physical cash.

After all, if cash returns next to nothing, anyone who doesn’t want to lose their purchasing power is forced to seek higher yields in bonds or stocks.

The Fed’s economic models predicted that by doing this, the US economy would come roaring back. The only problem is that it hasn’t. In fact, by most metrics, the US economy has flat-lined for several years now, despite the Fed having held ZIRP for 5-6 years and engaged in three rounds of QE.

As a result of this… mainstream economists at CitiGroup, the German Council of Economic Experts, and bond managers at M&G have suggested doing away with cash entirely.

If you think this sounds like some kind of conspiracy theory, consider that France just banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000. And on and on.

This will be coming to the US in the near future. Already, the big banks (the ones with the closest ties to the Federal Reserve) have begun turning away deposits OR charging them.

 State Street Corp. , the Boston bank that manages assets for institutional investors, for the first time has begun charging some customers for large dollar deposits, people familiar with the matter said. J.P. Morgan Chase & Co., the nation’s largest bank by assets, has cut unwanted deposits by more than $150 billion this year, in part by charging fees…

And here’s another big “tell”…

 “At some point you wonder whether there will be a shortage of financial institutions willing to take on these balances,” said Kelli Moll, head of Akin Gump Strauss Hauer & Feld LLP’s hedge-fund practice in New York, saying that where to hold cash has become an increasing topic of conversation as hedge funds are shown the door by longtime banking counterparties.

So where is the physical cash meant to go?

Jerome Schneider, head of Pacific Investment Management Co.’s short-term and funding desk, which advises corporate and institutional clients, said that as a result of the bank actions, he and his customers have discussed as cash alternatives boosting investments in U.S. Treasury bonds, ultrashort-duration bond funds and money-market funds.

When it comes to cash, Mr. Schneider said, “Clients have been put on warning.”

            Source: Wall Street Journal.

This is just the beginning. Indeed… we’ve uncovered a secret document outlining how the US Federal Reserve plans to incinerate savings.

We detail this paper and outline three investment strategies you can implement

right now to protect your capital from the Fed’s sinister plan in our Special Report

Survive the Fed’s War on Cash.

We are making 1,000 copies available for FREE the general public.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/cash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Our FREE daily e-letter: http://gainspainscapital.com/

 

Could the Fed Implement a “Carry” Tax on Physical Cash?

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The Fed meets this week on Wednesday and Thursday.

Many in the investment world believe the Fed will finally raise interest rates during this meeting.

If it does, this will be the first rate hike since 2006. And it will represent the first time in six years that rates are not effectively at zero.

Will the Fed raise rates or won’t it? Honestly, I don’t know and neither does anyone else.

The Fed Has a History of Moving Its “Targets”

Back in 2012, the Fed claimed it would start to raise rates when unemployment fell to 6.5%. We hit that target in April 2014.

Here we are a full 17 months later with the unemployment rate at 5.1% and the Fed has yet to raise rates even once.

Indeed, projecting a rate hike at some point in the future, only to hit that point and offer some other excuse to not raise rates has become something of a pattern for the Fed.

Everyone was convinced the Fed would raise rates in April 2015.

It didn’t.

Then everyone became certain a rate hike would come in June 2015.

It didn’t.

It’s now September and less than half of private economists believe a rate hike is coming this week.

Bottomline: no one has a clue when the Fed will raise rates.  This includes Fed officials who continue to make various arguments for not raising rates this week.

However, one thing is relatively certain, whenever the Fed does raise rates, the tightening will be short-lived.

Why the Fed Won’t Let Rates Normalize

With over $555 trillion derivatives trading globally based on interest rates, the Fed cannot normalize rates without triggering a crisis that would make 2008 look like a picnic.

This is not just idle talk either.

Consider that as early as 1998, soon to be chairperson of the Commodity Futures Trading Commission (CFTC), Brooksley Born, approached Alan Greenspan, Bob Rubin, and Larry Summers (the three heads of economic policy) about derivatives.

Born said she thought derivatives should be reined in and regulated because they were getting too out of control. The response from Greenspan and company was that if she pushed for regulation that the market would “implode.”

So Greenspan knew about the derivatives problem in 1998. Bernanke, knows about it as well. This is why he admitted that rates would not normalize anytime during his “lifetime” during a closed-door luncheon with several hedge funds last year.

Janet Yellen is also aware of the derivatives issue. This is why she has continued to refuse to raise rates for months after hitting the Fed’s unemployment “target.”

The fact of the matter is that the Fed has backed itself into a corner. It should have raised rates in 2012 or 2013 so that it would have some dry powder now. Instead, it continued to ease and now it has nothing left in its arsenal.Well, almost nothing…

Is a Carry Tax Coming For Physical Cash?

More and more outlets have begun to call for imposing a “carry” tax on cash.

The idea here is that since it costs relatively little to store physical cash (the cost of buying a safe), the Fed should be permitted to “tax” physical cash to force cash holders to spend it (put it back into the banking system) or invest it.

The way this would work is that the cash would have some kind of magnetic strip that would record the date that it was withdrawn. Whenever the bill was finally deposited in a bank again, the receiving bank would use this data to deduct a certain percentage of the bill’s value as a “tax” for holding it.

For instance, if the rate was 5% per month and you took out a $100 bill for two months and then deposited it, the receiving bank would only register the bill as being worth $90.25 ($100* 0.95=$95 or the first month, and then $95 *0.95= $90.25 for the second month).

It sounds like absolute insanity, but I can assure you that Central Banks take these sorts of proposals very seriously. QE sounded completely insane back in 1999 and we’ve already seen three rounds of it amounting to over $3 trillion.

No one would have believed the Fed could get away with printing $3 trillion for QE in 1999, but it has happened already. And given that it has failed to boost consumer spending/ economic growth, I wouldn’t at all surprised to see the Fed float one of the other ideas in the coming months.

This is just the start of a much larger strategy of declaring War on Cash.

Indeed, we’ve uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.

We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed’s sinister plan in our Special Report Survive the Fed’s War on Cash.

We are making 100 copies available for FREE the general public.

To lock in one of the few remaining…

Click Here Now!

Best Regards

Phoenix Capital Research