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Bradley Jansen
“The Carry Tax Proposal”
Austrian Scholars Conference
Mises Institute March 14, 2009
What Is A Currency Carry Tax?
 A carry tax is a penalty for anyone who prefers
to hold money instead of depositing it in a
bank. The longer money is held, the greater
the tax burden.
 In order to impose such a tax, a form of data
collection device must be attached to
Implementation Of Carry Tax
 Tax on holdings of reserves at banks and other
financial institutions
 Tax directly on currency notes including those
held by individuals
Origin of the Carry Tax Idea

 John Maynard Keynes (1883-1946), included idea in

General Theory

 Silvio Gesell (1862-1930), German-Argentine

businessman/monetary author

 George Nordman, Swiss merchant

Irving Fisher
 Stamp Scrips

 The Bankhead-Pettengill Bill Feb 17, 1933

Rebirth of Carry Tax Idea

 Marvin Goodfriend, Richmond Federal Reserve

 http://www.richmondfed
 Expounded in a later paper
US Rep. Ron Paul
Reaction Against Goodfriend
 "Currency 'Carry Tax' Prohibition Act of 1999,"
HR 3399 (1999) & H.R. 2777 (2003)
 Dear Colleague letter, Feb 3, 2000
 Hearing on the Production and Protection of the
Nation's Money, March 28, 2000 http://
George Selgin
Reaction Against Goodfriend
"This is going beyond taxing banks for holding
reserves. It's taxing the public for holding currency too
long. That's even more wild an idea. There are
sweeping implications of these suggestions beyond
whatever role they might play in thwarting a
deflationary crisis... I think it's a very dangerous
solution to what may be a purely hypothetical
Lew Rockwell
Reaction Against Goodfriend
“Really, this plan amounts to a kind of internal currency control--a tactic
typical of totalitarian governments. In the case of FDR, his confiscation of
gold nullified all gold contract and nationalized the money stock. As
Thomas P. Gore told FDR at the time, ‘Why, that’s just plain stealing, isn’t
it, Mr. President?’ It would be stealing, too, if the Federal Reserve taxed
and penalized Americans merely for holding on to dollars for too long at a
time. In the broader context, this trial balloon is all part of a long running
war on bank privacy and cash, as explained by Richard Rahn in
The End of Money and the Struggle for Financial Privacy. It is precisely the
war on bank privacy that causes so many Americans and people around
the world to want to hold and deal in cash, and long for the day when
money goes completely cyber.”
Carry Tax Idea Percolating
 Bruce Champ (April 2008)
 Willem H. Buiter (June 2005); Willem Buiter and
Nikolaos Panigirtzoglou (Oct 2003)
 Evan F. Koenig and Jim Dolmas (July/Aug 2003)
 Stuart Sayer (2002)
 Tony Yates (October 2002)
 Ralph C. Bryant (Nov 99)
Bruce Champ
Economic Commentary
Stamp Scrip: Money People Paid to Use
April 1, 2008
Willem H. Buiter
Overcoming the Zero Bound on Nominal Interest
Rates: Gesell's Currency Carry Tax vs Eisler's
Parallel Virtual Currency
June 2005
Evan F. Koenig and Jim

Issue 4, Southwest Economy, Federal Reserve

Bank of Dallas, July/August 2003

Monetary Policy in a Zero-Interest-Rate

Stuart Sayer

Monetary, Financial and Macroeconomic

Adjustment Policies: An Overview

Journal of Economic Surveys, Volume 18 Issue 3

Tony Yates
Monetary Policy and the Zero Bound to Interest
Rates: A Review
October 2002
Ralph C. Bryant
Economic Policy When the Short-Term Nominal
Interest Rate is Stuck at the Lower Bound of Zero
Ralph C. Bryant, Senior Fellow, Economic Studies,
Global Economy and Development, The
Brookings Institution
Abstract Nov 99
Current Environment
 Lack of fiscal discipline
 Federal Reserve Board Chairman enamored by Great
Depression ideas
 President deferential to FDR
 Dismissiveness of free market critiques
Bank Reserves

 TARP and other federal bailout money largely

going to financial holding companies--not
necessarily to banks to be used for lending
 PROBLEM: banks increasing reserves and not
lending all of the bailout money
 POSSIBLE SOLUTION: introduction of currency
carry tax
Federal Reserve Notes
 Potential for “hoarding” and not spending fast
 Impose "carry tax" on cash
 Imbed a magnetic strip as a tracking device
 Visibly record note when withdrawn from
banking system
 Deduct tax when note deposited
Big Brother
Surveillance Questions

 Government could monitor private relationships

through currency transactions
 Complement to Bank Secrecy Act anti-money
laundering policies on checking, etc.
 Marketed as anti-counterfeiting measure
Why Current Concern

 Advertised as solution in order to stimulate

stagnant economic growth in an environment of
stable or falling prices and nominal short-term
interest rates at or near zero
 Technology now available to implement
Glass Half Empty?
 Lower reserves at banks
 Increase governmental control of
economy and private sector
 New surveillance of money
Glass Half Full?
 Reduce desirability of FRNs
 Increase skepticism of Keynesian ideas
 Increase desirability of government
money alternatives such as gold
202-742-5949 ext. 101