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 Post subject: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 6:58 am 
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IMF calls for a tax on household savings - google translate

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In a report, the IMF is concerned about the European sovereign debt and proposes a 10% tax on household savings to fix it!



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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 7:31 am 
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Thanks (I think ) BR this Bail by another name in is getting closer


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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 7:32 am 
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yes a good old bail in is the way this dog and pony show is heading I'm afraid.


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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 7:51 am 
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Having fleeced the sheep, they're now mowing the pasture!

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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 8:55 am 
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Interesting, it might also be intended to encourage households to start spending again.

It certainly would encourage me to redo the kitchen sooner rather than later! Rather than saving another few thousand, I might as well borrow and avoid any tax on my savings.


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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 9:12 am 
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It's not even a wealth tax, since wealth is NET assets.

Old charts from Eurostat.
http://epp.eurostat.ec.europa.eu/statis ... iabilities

Financial assets as % of GDP.
Image

Financial assets by instrument
Image

Don't have the raw data to hand, but assets/GDP seems to vary wildly (average maybe 150%) whilst currency and deposits seem to average about half of financial assets, DE and IE both 40%.

In the case of Ireland it's 10% of 40% of 195%, which is 8% GDP, with unknown side effects.

Not going to fix anything very much, is it?

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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 9:26 am 
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Eschatologist wrote:
In the case of Ireland it's 10% of 40% of 195%, which is 8% GDP, with unknown side effects.

Not going to fix anything very much, is it?
The IMF is saying that this will just get debt back to its level at the end of 2007, but I presume that's aggregating across the 15 countries rather than specifically getting Ireland back to the end of 2007 (which I expect would take a lot more than 8% of GDP at this point).

If the alternative is inflation eating away at savings over time with little or no interest on deposits, what's the better option?


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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 9:35 am 
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ex-Patrick wrote:
If the alternative is inflation eating away at savings over time with little or no interest on deposits, what's the better option?

You mean better of those two, or better than either?

Of those two I'd choose inflation, since it gives the owner of the asset the choice about risk/reward.

In any case, this is unworkable.

If it's flagged in advance there will be bank runs then capital controls, either of which would be a disaster.

If it's done overnight there will be capital controls then slow-motion bank runs.

If it's retrospective then it's totally immoral and probably illegal.

Why would anyone keep money in a bank at almost zero rates if, regardless of the solvency or liquidity of that bank, the State can just help itself whenever it likes?

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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 9:59 am 
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ex-Patrick wrote:
Interesting, it might also be intended to encourage households to start spending again.

It certainly would encourage me to redo the kitchen sooner rather than later! Rather than saving another few thousand, I might as well borrow and avoid any tax on my savings.


I believe it would have the complete opposite effect on most others.
Such a smash and grab invokes fear.

When you start stealing people's savings, they don't spend them, but hide them.
(example : people don't buy less gold and silver because burglars like to steal them, they just hide these assets in their houses)
They may actually save even more than before, as they hide greater quantities of money in anticipation of future shortages.

I believe the law of unintended consequences would throw a serious spanner into any desired effect of such a tax..


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 Post subject: Re: IMF calls for a tax on household savings
PostPosted: Fri Oct 11, 2013 10:01 am 
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Eschatologist wrote:
ex-Patrick wrote:
If the alternative is inflation eating away at savings over time with little or no interest on deposits, what's the better option?
Of those two I'd choose inflation, since it gives the owner of the asset the choice about risk/reward.
Is that better for the economy as a whole? Or better at an individual level?
Questions of workability and morality aside, it probably makes more sense at a macroeconomic level to grab 10% of savings than to stimulate an equivalent level of inflation. The inflation would have to be realized fairly quickly in order to be of any benefit, and that would be very destabilizing. At least a money grab would be over with quickly - it might skew some incentives temporarily, but inflation would skew everything and ongoing until it ran its course.
Eschatologist wrote:
If it's retrospective then it's totally immoral and probably illegal.
How is it totally immoral if retrospective? Is it less immoral if planned or done overnight?
Eschatologist wrote:
Why would anyone keep money in a bank at almost zero rates if, regardless of the solvency or liquidity of that bank, the State can just help itself whenever it likes?
Well, you have to keep it somewhere. This 'whenever it likes' issue is key, even the IMF recognizes that.


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