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Reader-submitted Article :
Cyprus Events and Contagion Risk For Other Countries





Published on March 18, 2013
Published on March 18, 2013
John Getson

Being sold, in mainstream media, as a "tax on banks'...banks supposedly  engaged in spurious activities including money laundering, the recent move to impose a levy on bank deposits could be seen as a trial ballon, contrary to statements out of EU headquatrters in Brussels.

Current demands for more "rationalized" economic action on all levels, by economists, world leaders and Central banks, will be extremely difficult to achieve, given that interest rates are already at, or near, all time low.

This balloon could be intended to gauge the political commitmnent for the continuation of current economic intervention policies, but by a little-known, rarely-used method alternative to expansion of the money supply by central monetary authorities... Demurrage.

I say little-known and rarely used because the US Treasury has already been authorized to use it's own national-level "demurrage-fee' type system. It was institutionalized by US Congress, by way of the Bankhead–Pettengill Bill.

Demurrage, for those unfamiliar with financial terms, is a 'negative interest" or cost associated with the owning or holding a currency over a given period of time. It is a method thought by some to achieve increased economic activity by speeding up the velocity of money circulation.

Usually used in reference to holding value-based currency alternative commodities, particularly gold... it  is also an alternative way to increase the present value of long-term investments... without using that politically dreaded word "inflation" to account for the increase.

Inflation because it is more variable, creates uncertainty, and is not usually uniform in its effect over time across the actual holder of currency compared to fixed, regular fees under demurrage.

But, in reality, they just may be considered to be two side to the same 'reduced purchasing power' coin created by current global fiscal policies; increased costs due to inflation damages the consumption side of the economy while demurrage undermines accumulation side by removing the incentive to create and hold wealth.

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