Zero Hedge
Chase-ing Bitcoin: Is JPM Preparing To Unveil Its Own Electronic Currency?
Submitted by Tyler Durden
But maybe not so much. It's really more an alternative payment system than an alternative currency:
Clusterstock
You Should Probably Ignore That 'JP Morgan Bitcoin' Patent — It's Over A Decade OldRob Wile
57 comments:
More innovations in the never-ending plutocratic effort to dismantle state power, enhance private power, avoid taxes, hide profits, and do an end run around democratic community - all aided and abetted by libertarian toolbags.
Just wondering. Are there no plutocratic state toolbags?
Sure. But the chief socioeconomic problems we are facing now are the runaway power of concentrated private capital, the decrepitude of democratic government, the erosion of community, the prevalence of Social Darwinist aggression and the march toward laissez faire capitalist hell.
This is what I am talking about.
These shadow banks use derivatives to usurp the U$D sovereignty from the government and the people.
Now they are printing their own bitcoins ?
Rig the libor rate to push rates down so the credit unions and municipalities have to pay up
while fudge packing the margin portions of line of credits and other loans of their customers since the libor was going down.
Has to be win/win for them, eh?
and the march toward laissez faire capitalist hell. Dan K
There's nothing laissez faire about a government-enabled credit cartel unless you mean the government saying to the banks, "Here's a license to steal. Help yourself."
The banks could not survive to any large extent in a true laissez faire environment because most of the reserves backing the credit they extended would end up in accounts at the risk-free Postal Savings Service where they would stay since that service would be forbidden by law from lending them back, behind the account holders back.
The banks should have strictly voluntary depositors and creditors and not have, as they do, a default monopoly on the risk-free storage of and transactions with the Government's money.
"More innovations in the never-ending plutocratic effort to dismantle state power, enhance private power, avoid taxes, hide profits, and do an end run around democratic community - all aided and abetted by libertarian toolbags."
Dan - Speaking as a libertarian leaning constitutional conservative with a strong affinity for MMT, I would urge you to keep an open mind about libertarians. I was just watching C-Span Washington Journal and a caller from Georgia identified himself as an Austrian economics libertarian who has also recently become acquainted with MMT. He referred to Randal Wray and functional finance in a very articulate way. I thought I was a fluke but apparently I am not. The caller was urging Sen. Ron Johnson from Wisconsin to investigate MMT policy recommendations to help fashion fiscal policy. I wish there was a way contact that caller from Georgia.
Ed, my political and economic concerns and values go beyond MMT. The fact that some libertarian might see something positive in MMT isn't enough to make me feel friendly toward libertarianism. But MMT is a big tent, so I'm sure there are other people who feel differently.
Dan - What's your take on Rand Paul's plan to revive Detroit?
I don't think we need more economic freedom. We need more government leadership.
Dan - Economic freedom is what creates prosperity. I'm not trying to bait you with an extreme example, but how much economic freedom is there in North Korea?
Well that is an extremely extreme example, Ed. So what is the point? If I had called for a better national transportation system, would you feel compelled to point out that the Nazis also had trains that ran on time?
Free enterprise has not been the only basis for prosperity in the modern world over the past several centuries. Organization, planning, coordination, public investment, industrial policies and strategic missions and purpose have also played a role. My view is that we have drifted too far in the direction of free enterprise, and have neglected the fundamental role of government and the national organization of economic ends. I'm not talking about aping North Korea or other centrally planned totalitarian states. I'm talking about remembering our own history, here in the United States, as well as the history of all of the other advanced mixed economies in the world.
Further movement in the anti-government, free enterprise direction will lead to the further concentrated accumulation of private capital, further erosion of democracy, further segregation of the population into castes and hierarchies organized on socioeconomic lines, further balkanization of the regions of the US, and a further decline in national solidarity and a sense of common national purpose. Of course, maybe that's what the Paul's want.
Well, getting back to Rand Paul's plan for Detroit, leaving $1.3 billion in the pockets of households and businesses by cutting personal income tax and corporate tax to 5% and SS payroll tax to 2% paid by employer and 2% by employee seems to me like a a good dose of economic freedom.
@The Rombach Report said,
Always with the tax cuts? But what about those who pay no taxes directly? What guarantees those cuts will trickle down to them? Competition?
A just solution is just to hand out money and let it trickle up if it must.
Away with Rand Paul and his tax cuts; that dog don't hunt since "trickle down" has been disproven.
Instead, declaring Detroit to be an Economic Disaster Zone and sending in FEMA to rebuild it is a much better choice. FEMA did wonders for the Mississippi Gulf Coast, I can testify, or at least FEMA money did.
Of course my ideal solution is to hand out new fiat NATION-WIDE while abolishing the counterfeiting cartel of the banks.
FEMA is more up Dan K's alley but it sure beats Rand Paul's solution which is more fascist than libertarian.
Moreover, competition can cut the costs of the poor but it need not raise their incomes since business increasingly has little need for workers.
Ed,
How do you feel about the MMT claim that "taxes drive the currency" or "their is a guy at the door with a 9mm" ???
With your libertarianism, can you see that we could use our common state currency without this "coercion"????
We could look at it as a voluntary convention, with a small tax paid just to demonstrate some solidarity? Of course if the tax wasnt paid there would have to be an enforcement action of some sort but it would not include shooting you with a 9mm....
Krugman thinks "fiat is only possible by people with guns" or whatever and perhaps so do a lot of the MMT people but I dont think this is necessarily so myself...
rsp,
Or Ed do you think libertarians are just soooo anti-social that even requiring a reasonable small tax to exhibit some national solidarity is simply asking way too much????
rsp,
Matt. you are conflating necessary and sufficient. MMT holds that taxation is a sufficient condition to drive the currency, not a necessary one. Warren has said that without taxation, however, there is a risk of hyperinflation.
"How do you feel about the MMT claim that "taxes drive the currency" or "their is a guy at the door with a 9mm" ???"
Matt - How I feel about tax driven currency is irrelevant. However, what I think is that the claim that fiat currency derives its value from the government's ability to tax it out of existence may only tell half of the story. I was a Supply Sider during the 1980s before I became a libertarian, and before that in the checkered past of my youth I was a Marxist. So you see I am really kind of eclectic and I have cherry picked what I consider the best lessons I could learn from those different schools of thought.
That said, its easy to understand how a fiat currency like the US$ derives at least part of its value from taxation which can limit the SUPPLY of the currency. However, Supply Siders argue that high burdensome taxes can reduce DEMAND for the currency. By extension, this means that a low less burdensome tax structure increases incentives to work, save and invest because the after tax return on capital is higher when taxes are low. In other words, lower taxes may increase DEMAND for the currency.
That said, both forces may be at work simultaneously in a dynamic interplay between tax driven fiat currency which limits currency SUPPLY vs. Supply Side effects of low tax regimes which may increase DEMAND for the currency. Not sure which is the stronger force though, but it kind of reminds me of the question in quantum physics about whether light is a particle or a wave.
For example, during the 1980s taxes were cut which was partially why deficits were so high throughout that period. Meanwhile the US$ appreciated sharply during that time which I believe was attributable to the strong demand for the currency due to the incentives unleashed by the tax cuts. This is a conundrum for me and I haven't heard any MMT advocates convincingly refute the possible Supply Side effects of low taxes.
Warren Mosler makes the point that weak economic growth can be best remedied by tax cuts and/or government spending depending on your politics. I think there is a place for government spending, but my preference is for government spending on infrastructure assets (capital) that produce a high return on investment. I'm not too happy with government subsidies and corporate welfare to the military industrial complex, medical industrial complex, educational industrial complex, etc.....
I am quite sure intuitively that money left in the hands of millions of workers and business will be better spent (wisdom of crowds) than the same amount of money spent by central planning government bureaucrats.
Warren Mosler makes the point that weak economic growth can be best remedied by tax cuts and/or government spending depending on your politics.
Depends economically on multipliers?
"Depends economically on multipliers?"
Good point! Show me your data.
Have to look at the context to assess the multiplier effect. If conditions point to tax cuts going chiefly to investment or consumption rather than saving, then the multiplier will be higher than if chiefly saved. That will likely depend on how the tax cut is targeted.
Spending is generally targeted to public investment and personal consumption, unless part of it is a transfer toward the top, where it is more likely to be saved.
Ed Rombach,
"Supply Siders argue that high burdensome taxes can reduce DEMAND for the currency"
MMT argues that high burdensome taxes can reduce DEMAND.
(i.e. effective demand)
Ed,
"during the 1980s taxes were cut which was partially why deficits were so high throughout that period. Meanwhile the US$ appreciated sharply during that time"
I think that has to do with the very high interest rates.
"I think that has to do with the very high interest rates."
y - US % rates were very high in the 1980s but the yields were falling very dramatically at the same time.
Ed,
See this chart:
http://www.marketoracle.co.uk/images/2008/real_us_interest_rates_us_dollar_march08_image001.gif
The correlation between real interest rates and the dollar index in the 80s is very strong.
"..the USDX bottomed in July 1980 just one month after real rates bottomed. Global investors started buying the dollar again even when real rates were still negative because Volcker's inflation-fighting campaign was credible. By May 1981 real rates had rocketed back up to +7.1% and investors were scrambling to buy dollars and Treasuries. 1y T-Bill yields ran 16.9% but inflation had fallen to 9.8%.
While nominal rates soon came down, for almost all of Volcker's reign until August 1987 he kept nominal interest rates well above inflation. You can see this above with the blue line oscillating between 4% and 8% in much of the 1980s. With the real yields so high in sovereign US debt, international capital flocked to the dollar. The USDX went parabolic and topped at a staggering 164.7 in February 1985. It had soared 95.8% since July 1980!
While this parabolic ascent had to be followed by a crash in purely technical terms, the dollar didn't have to fall as far as it did. If real rates had stayed so high and favorable, it probably would have bounced between 130 to 140 on the USDX. But real rates plunged from 8.1% in June 1984 to 2.1% in October 1987 just after the infamous stock-market crash. Over this span, the USDX fell 30.9% to 94."
http://www.marketoracle.co.uk/Article3931.html
"MMT argues that high burdensome taxes can reduce DEMAND"
If so, then doesn't it follow that cutting high burdensome tax rates would increase DEMAND for the currency... even as it increases the SUPPLY?
y - Your argument that high real interest rates pushed the USDX sharply higher is compelling. However, and this may sound a bit tautological, I suspect that at least some of the reason for high real interest rates during the 1980s was attributable to the high borrowing demand for money. For example C&I loans were on a steady upswing throughout the decade even during the 1980 and 1982 recessions.
It's demand for goods and services, y is talking about. Higher taxes should INCREASE demand for currency by making it scarcer but DECREASE demand for goods and services. And debt is measured in nominal, not real terms, so higher taxes would make debt repayment more difficult.
But tax cuts do nothing for the poor unless they get "trickled on" from the rich which has been disproven.
"It's demand for goods and services, y is talking about."
Not clear from his post. y - care to weigh in?
"Higher taxes should INCREASE demand for currency by making it scarcer but DECREASE demand for goods and services."
Yes, no maybe??? Not really sure. One thing I do know is that when I wake up in the morning the first thing on my mind isn't "Wow, I've got to get up and go to work so I'll be able to pay my taxes." The first thing I think about making a buck so I can pay my bills. I suspect that MMT & Supply Side effects on the demand vs. supply of the currency co-exist simultaneously with perhaps one or the other force becoming dominant for a while and then the other depending on political and economic circumstances.
"And debt is measured in nominal, not real terms, so higher taxes would make debt repayment more difficult."
Not sure what your point is here.
"But tax cuts do nothing for the poor unless they get "trickled on" from the rich which has been disproven."
I guess I didn't get that memo during the 1980s boom.
Ed,
I just googled the topic of tax effects on the exchange rate and found this paper at the top of the page:
http://ideas.repec.org/p/dlw/wpaper/03-11.html
"This study examines the effects of taxes on the real exchange rate through their marginal impacts on economic activity. We develop a model that shows that an increase in the capital interest tax rate leads to real domestic currency depreciation while an increase in wage or consumption tax rates lead to a real domestic currency appreciation. These theoretical findings are supported by an empirical study using panel data estimations of ten OECD countries over 17 years."
Ed,
yes when I said DEMAND I meant general demand in the economy for goods and services (demand backed by money - effective demand). High taxes can reduce demand.
When you say low taxes can "increase demand for the currency", I suppose you mean people can be incentivised by low taxes to offer more for sale (produce more) in exchange for money. But all this extra activity could also lead to higher inflation, and possibly a weaker currency as a result of this. So it's not clear cut in that sense. According to MMT, lowering taxes can increase economic activity. Some others would argue that the effect also depends on people's expectations about future policy. So if they expect the tax cut to be temporary, they might save it instead of spending more, for example.
RR,
Perhaps you fail to realize that Federal taxation DESTROYS fiat so of course it would make paying off debt harder and reduce people's ability to bid up the price of goods and services.
And this isn't the 1980s. Today, workers have far less negotiating power due to automation and outsourcing so "trickle down" doesn't work anymore, if it ever did.
"Perhaps you fail to realize that Federal taxation DESTROYS fiat so of course it would make paying off debt harder and reduce people's ability to bid up the price of goods and services."
I see your point.
"According to MMT, lowering taxes can increase economic activity."
John F. Kennedy who may have been the original Supply Side president, called for cutting the top marginal tax rate from over 90% to 65% to "Get the economy moving again". Congress later approved cutting the top marginal tax rate to 70%. Kennedy also said, "A rising tide lifts all boats", so depending on the size and scope of the tax cuts, some boats may get more lift than others. This is an area where I think MMT overlaps with the Supply Side model which ought to be a basis for at least limited political alliance on fiscal issues like this.
right. The question of how much to tax and who to tax is both economic and political. Before Kennedy the top marginal tax rate was 90%, but now people like Mitt Romney apparently only pay 15%. What's your view on that?
Ed,
If I remember correctly you are in favor of a flat tax and abolishing capital gains tax?
"Before Kennedy the top marginal tax rate was 90%, but now people like Mitt Romney apparently only pay 15%. What's your view on that?
"If I remember correctly you are in favor of a flat tax and abolishing capital gains tax?"
Good question, I'm glad you asked. My modified flat tax proposal is as follows....
I would reform and simplify the tax code with an across the board tax cut to a flat 10% rate on all sources of income. Earned income, interest income, dividend income, capital gains, corporate income and social security tax would all go to a flat 10%, with 5% of SS payroll tax paid by employees and 5% paid by employers. Also, eliminate the income ceiling applicable to the SS tax. Estate tax should also be 10% on estates in excess of $5 million.
Most current deductions would be eliminated and replaced by a generous standard deduction such that a U.S. family of four earning $50K would only have to pay the 10% tax on the first dollar of earned income over and above the $50K threshold. This means that even though this tax structure appears as a flat 10% rate, it is nevertheless quite progressive especially when taking into account the elimination of the income ceiling on the social security tax for high income earners. Under current law the SS tax is the most regressive tax borne disproportionately by the middle class and working poor. This feature should appeal to liberal progressives.
Under this plan, if you do the math you will see that regardless of how much income one earns and the source of one’s income the total effective tax rate never exceeds 18.75%.
This approach overcomes the objection often raised by the political left about the Armey/Forbes flat tax which did not tax capital gains, interest income or dividends. Makes sense too, because it doesn’t seem fair that some rich guy who derives all his income from coupon payments on Treasury securities wouldn’t have to pay any tax.
At the same time, the 1% would probably embrace paying a combined effective tax rate of 18.75%, which is more than Romney, Warren Buffet or Bill Gates pay, without having to pay an army of tax accountants and lawyers or create a "charitable" foundation to exploit every available loophole the way they do.
In other words, the 10% solution for tax reduction and reform is likely to garner support from liberal progressives on the left as well as Supply Siders and Libertarians on the right who want to cut taxes. Moreover, it is so simple that a 12 year could calculate the return on a 3X5 index card. I believe that a tax reform of this nature would unleash a shock wave of economic growth that would put people back to work and break the current cycle of economic malaise and stagnation.
"According to MMT, lowering taxes can increase economic activity.'
....This is an area where I think MMT overlaps with the Supply Side model which ought to be a basis for at least limited political alliance on fiscal issues like this.
Supply side argues that cutting taxes at the top increases investment and is therefore stimulative to the degree of increasing the amount of taxes paid instead of decreasing. Since debunked.
MMT holds that cutting taxes at the middle and bottom increases demand and is effective counter-cyclically. Pretty much vindicated with the FICA suspension.
"Supply side argues that cutting taxes at the top increases investment..."
So far so good.
"....and is therefore stimulative to the degree of increasing the amount of taxes paid instead of decreasing."
Tom - I can't figure out what you're saying here. Can you restate?
"Since debunked."
How so? Did I just imagine the 1980s?
Ed, supply side economics predicts that cutting taxes at the top will stimulate investment, which will lead to growth so that the result will be increased revenue at the lower rate, i.e., GDP will be higher such that the rate of growth of GDP will exceed the decrease in the tax rate, offsetting the tax cut. The idea is that everyone will be better off, since due to increased growth national prosperity will increase. This is the basis of trickle down. Studies have since shown that cutting taxes doesn't necessarily lead to increased investment / growth, since toward the top the tendency is to save, which drives up asset prices without creating new real wealth through investment. Trickle down didn't work as advertised.
"Studies have since shown that cutting taxes doesn't necessarily lead to increased investment / growth, since toward the top the tendency is to save, which drives up asset prices without creating new real wealth through investment."
What studies?
"Trickle down didn't work as advertised."
Once again, did I just imagine the economic boom of the 1980s?
Labor had far more bargaining power in the 1980s. Since then, robots and outsourcing have greatly reduced that bargaining power.
Let's try "trickle-up" this time. How can it fail, since the supply-side has already been built? Now we need demand, not more pointless supply.
Of course, just money creation would have created both supply and demand, each in their turn.
But what does ethics have to do with money creation many seem to wonder?
"Under this plan, if you do the math you will see that regardless of how much income one earns and the source of one’s income the total effective tax rate never exceeds 18.75%."
That's about what the poorest 20% of Americans currently pay (those with an average income of $13,500) when counting all taxes.
According to this:
http://ctj.org/ctjreports/2013/04/who_pays_taxes_in_america_in_2013.php#.UqtspeBy_FI
the top 20% pay about 31% - 33%, again when counting all taxes. If they are only paying an effective rate of 15% then they're basically cheating the system.
Instituting a flat rate of 18.75% would appear to be mainly a large reduction in tax for the wealthiest, which seems unfair.
Ed,
"I would reform and simplify the tax code with an across the board tax cut to a flat 10% rate on all sources of income. Earned income, interest income, dividend income, capital gains, corporate income and social security tax would all go to a flat 10%, with 5% of SS payroll tax paid by employees and 5% paid by employers."
Are you only talking about federal taxes? I'm trying to roughly work out how your plan might affect the distribution of the tax burden but it's pretty complicated.
@RR,
The poor should pay NO TAXES since they are the victims of the government-backed counterfeiting cartel, the banking system, which exists for the benefit of the rich and other so-called credit worthy.
You claim you are poor yourself? Then be warned:
A poor man who oppresses the lowly is like a driving rain which leaves no food. Proverbs 28:3
He who oppresses the poor to make more for himself or who gives to the rich, will only come to poverty. Proverbs 22:16
We should not even consider a flat tax until the government-backed counterfeiting cartel is abolished and perhaps not even then.
Besides, the poor, especially the working poor, do pay taxes since taxes are built-in to their cost of living.
But you want to add to their burden?!
Speaking of muddle, unprincipled men, both fascists and socialists, have made a mess of justice in the US. A pox on both their houses and according to Revelation it's coming!
y & anyone else - I have a relatively simple EXCEL spreadsheet that allows you to input hypothetical income amounts from different sources to test drive the system. Matt Franko has my email if you want to contact me, or if you prefer you can post your email here and I will reply with the spreadsheet attached.
That said, the super rich like Romney and Gates and Warren Buffet pay very low effective tax rates because the byzantine tax code allow them to exploit loopholes.
Beard, if you examine the details of my 10% flat tax you will see that the poor don't really pay any taxes except for a 5% social security payroll tax assuming of course that they have some form of income. A family of 4 earning $50K would not have to pay any income tax because of the standard deduction. That family would only start paying the 10% income tax on the first dollar of income over and above $50K. Meanwhile, the $113,700 income ceiling that applies to the social security tax would be eliminated which means that high income earners would pay the 5% SS payroll tax on all of their income. That doesn't mean that they would receive that much more back when it comes time to collect their benefits because distributions will be means tested. That's very PROGRESSIVE!
OK RR,
The expression "flat tax" has very negative connotations for me because our money system is rigged to favor the rich and other so-called credit worthy. So let them pay for it and indeed for their victims too.
"Studies have since shown that cutting taxes doesn't necessarily lead to increased investment / growth, since toward the top the tendency is to save, which drives up asset prices without creating new real wealth through investment.:
What studies?
Trickle-Down Economics: Four Reasons Why It Just Doesn't Work
by Mehrun Etebari
Congressional Research Service Report On Tax Cuts For Wealthy Suppressed By GOP (UPDATE) by Ryan Grim and Nick Wing
The New York Times reported on Thursday that Senate Republicans applied pressure to the nonpartisan Congressional Research Service (CRS) in September, successfully persuading it to withdraw a report finding that lowering marginal tax rates for the wealthiest Americans had no effect on economic growth or job creation.
"The pressure applied to the research service comes amid a broader Republican effort to raise questions about research and statistics that were once trusted as nonpartisan and apolitical," the Times reported. Democrats in Congress, however, have resurfaced the report and published it in full. It can be read below.
Ed,
does your plan take into account state and local taxes? I think these make a very big difference to the overall effect on the distribution of taxes. If for example you drastically lower federal taxes but keep state and local as they are, the result would be a large reduction in taxes for higher income brackets and a small reduction in taxes for lower income brackets.
by the way I'm not against the idea of big tax cuts but I am suspicious of trickle-down type theories.
"does your plan take into account state and local taxes?"
No. But since most itemized deductions would be eliminated state taxes it may be that state taxes would not be deductible. Need to think about that factor some more.
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