Negative Interest Rates: The Tax On Capital - Jeff Nielson

So-called “negative interest rates” are illegal. This is an inescapable conclusion of law, arrived at simply by applying some of the most fundamental principles of our entire legal system. But let’s put aside this issue of legality, it is a topic which will be dealt with comprehensively, in a sequel to this piece.

There is no such thing as a “negative interest rate”. By definition, an “interest rate” is a positive number. It is the price which we pay in exchange for the use of capital. Thus the phrase “negative interest rate” is a non sequitur. It is a euphemism used to conceal the inherent criminality of this newest, Western financial fraud. However, let’s put this proposition of logic aside as well.

The purpose of this commentary is two-fold.

1. Exposing the lies and propaganda which supposedly justify this systemic financial crime.
2. Explaining what a so-called “negative interest rate” is, in reality: a tax on capital.

Before exposing the fraud which is inherent with so-called negative interest rates, it is necessary to back-track, and examine the evolution of monetary criminality which has brought us to this point. Before we got to the fraud and insanity of so-called negative interest rates, we had the “0% interest rate” .

There is no such thing as a “0% interest” loan. Again, the legal technicalities here will be explained in greater detail in the sequel to this piece. For the moment, it will suffice to say that any so-called “0% loan” (and 0% interest rate) is a sham transaction, null-and-void as an elementary premise of law.

Skeptical readers can easily find this out for themselves. Engage in some “0% loans” in your own financial affairs, and see what happens when you report those transactions to the tax authority of your jurisdiction. You will receive a letter informing you that any/all of your so-called “0% loans” are sham transactions, and the tax authority has deemed all such transactions to be null-and-void.

A negative interest rate is not the natural, logical progression from a 0% interest rate, because neither of these concepts exists in the real world. The moment we reached “0% interest” we completely left behind any semblance of legitimacy (and legality) in our monetary system. Why? Why the frauds? Why all of the lies about these frauds?

Let’s start by examining what the bankers and politicians tell us that these fraudulent/criminal interest rates are supposed to do. They are supposed to “stimulate our economies”.

Really? What is a “0% interest rate”, in reality? It is free money – a gift. That’s what the tax officials will call any supposed “0% loans” which we try to execute in our own personal finances. Does free money stimulate our economies? Yes, but with two, gigantic caveats.

First of all, what does it mean when any central bank starts to spew “free money” (i.e. free currency) into that economy? It means that the currency is worthless. As an elementary proposition of logic, any “good” which is produced at zero cost, and in (near) infinite quantities, like our fiat currencies, must be worthless. This was the subject matter of a previous commentary . Producing free money destroys our entire monetary system.

Secondly, using free money as a form of economic stimulus has the obvious effect of causing asset bubbles to explode all over that economy. The reckless peril of causing such asset bubbles to spring into existence grossly outweighs any “stimulative” benefit to the economy.

But don’t accept the word of this writer for this simple proposition. Look at our history. If a fraudulent 0% interest rate was a good way to stimulate our economies, why haven’t we always engaged in such a monetary policy? Put into negative terms, why has such monetary fraud and criminality never been perpetrated in our economies until now?

It is because it has been universally accepted, throughout our economic history, that the financial perils of the reckless policy of free money grossly outweigh any economic benefits. A “0% interest rate” doesn’t work as a policy of stimulus because it has never worked. We now have empirical proof of this elementary principle, spelled J-A-P-A-N.

Has 30 years of free money fixed Japan’s economy? No. Thirty years of free money has destroyed one of the world’s strongest economies. Look at what near-zero, 0%, and now negative rates have reaped in our own economies: massive real estate bubbles , all over the Western world; massive bond bubbles, all over the Western world.

Look at the United States. It has the largest bond bubble in its history, and the largest stock market bubble in its history, simultaneously. This isn’t even supposed to be theoretically possible . Monetary criminality and financial fraud has reached an exponential extreme. And now the criminal regimes of the West have embarked upon something much, much worse: their so-called negative rates: borrowers stealing from lenders and savers. This is a good idea?

Observe the reasoning of the central bankers and the puppet politicians who take their orders. If a 0% interest rate “stimulates” our economies, then moving to negative rates will provide even more “stimulus”. It is the logic of a six-year-old.

Two factors are completely ignored in this infantile reasoning. First, a 0% interest rate does not stimulate an economy, it destroys an economy, as just explained. The positive “interest” paid to savers which is supposed to (partially) protect us from the rapacious “inflation” of the bankers is removed. Our savings are stolen – at the full rate of inflation.

In the absence of the gold standard, there is no way to protect savings from confiscation [i.e. theft] through inflation.

- Alan Greenspan , 1966

The banking Crime Syndicate and the puppet politicians have already taken away our gold standard. The only partial protection which remained against banker “inflation” (banker theft) was the interest paid on our savings. Now that protection has been taken away from us as well, by the same bankers and puppet politicians.

This is particularly important for people who live in the real world, and are cognizant of the real rate of inflation – not the absurdly fraudulent inflation “statistics” spewed by our corrupt governments. With real inflation running at 10+% per year, having no protection from this rapacious confiscation of our wealth is an extremely serious form of economic theft and economic destruction.

Negative interest rates go well beyond even this level of injustice and criminality. Negative interest rates tax capital. How do you “stimulate” an economy by taxing capital? Anyone with even an ounce of economic savvy would immediately realize that you don’t stimulate an economy with a tax – any tax.

However, taxing capital is arguably the most-destructive form of taxation which could ever be devised. It is even more destructive than the intellectually bankrupt concept of “income taxation” . The full, destructive force of a tax on capital can once again be summarized with one word: D-E-N-M-A-R-K.

Denmark was the first regime in the Corrupt West to go fully “negative” with its criminalized interest rates. It has the most-negative rates in the world. And the destructive impact of this policy of taxing capital could not be more obvious. We see this simply by looking at the reaction of Denmark’s corporate community to this overt, monetary criminality – bankers stealing their operating capital via the tax of negative interest rates.

In response to having their operating capital stolen by the Big Banks, Danish corporations began to pre-pay their (official) taxes, in ever-increasing amounts. No, this is not a misprint. Denmark’s corporations began pre-paying their taxes at such an extraordinary rate that Denmark’s government was forced to pass a law limiting the pre-payment of corporate taxes. Insanity piled atop more insanity.

Negative interest rates punish-and-destroy economies in two ways – directly and indirectly. Directly, it obviously does not “stimulate” an economy to allow bankers to steal the operating capital of businesses. Indirectly, the more taxes that Denmark’s corporations pre-pay (or hide in other manners) in order to avoid the theft of their operating capital, the less operating capital which remains to build Denmark’s economy.

Taxing capital does not stimulate an economy. Obviously, allowing the Big Banks to steal the operating capital of businesses could never stimulate an economy any more than allowing the Big Banks to steal the savings of ordinary people could stimulate an economy. Simultaneously, businesses and savers are then also subjected to the second form of banker theft: theft-via-inflation.

Let’s pretend that the banking Crime Syndicate and the puppet politicians beneath them actually did want to stimulate our economies. What would they do? First they would eliminate the overt criminality of our interest rates. No more “negative” rates. No more “0% interest”. Interest rates would be restored to being legitimate, positive numbers.

Savers would once again be paid by their bank, in exchange for bestowing the bank with the privilege of using their capital. Lenders would once again be paid by borrowers in exchange for the use of their capital. Monetary legitimacy and monetary sanity would be restored. No more “taxation” (i.e. theft) in the form of criminalized interest rates.

Secondly, the bankers and puppet politicians would put an end to the banking crime syndicate’s game of theft-by-inflation: taxing (and pocketing) all of our wealth via the monetary fraud of their excessive money-printing. Obviously all of our economies would receive a massive jolt of stimulus if the bankers were prevented from stealing all of the wealth of citizens and businesses at the rate of 10+% per year.

Legitimate interest rates foster sustainable economic growth and development. The obvious sanity and justice of positive interest rates is fully supported by economic fundamentals. The monetary voodoo imposed upon us by criminal central banks, and rubber-stamped by puppet politicians is the ultimate extreme in financial corruption. The inevitable result of this systemic criminality can only be the complete economic destruction of the Western world.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.