Federal Reserve Wants
Tracking Devices To Tax
US Currency!
By Declan McCullagh
WASHINGTON - US currency should include tracking devices that let the government tax private possession of dollar bills, a Federal Reserve official says.
The longer you hold currency without depositing it in a bank account, the less that cash will be worth, according to a proposal from < Marvin Goodfriend, a senior vice president at the < Federal Reserve Bank of Richmond.
In other words, greenbacks will get automatic expiration dates.
"The magnetic strip could visibly record when a bill was last withdrawn from the banking system. A carry tax could be deducted from each bill upon deposit according to how long the bill was in circulation," Goodfriend wrote in a recent presentation to a Federal Reserve System conference in Woodstock, Vermont.
The 34-page paper argues a carry tax will discourage "hoarding" currency, deter black market and criminal activities, and boost economic stability during deflationary periods when interest rates hover near zero.
It says new technology finally makes such a scheme feasible. "Systems would have to be put in place at banks and automatic teller machines to read bills, assess the carry tax, and stamp the bills 'current,'" the report recommends.
Goodfriend said in an interview that banks might place a kind of visible "date issued" stamp on each note they distributed. "The thing could actually stamp the date when the bill comes out of the ATM," he said.
Congressional critics say they would oppose any such move.
"The whole idea is preposterous. The notion that we're going to tax somebody because they decide to be frugal and hold a couple of dollars is economic planning at its worst," said < Representative Ron Paul (R-Texas), a free-market proponent who serves on the House Banking committee.
"This idea that you can correct some of the evil they've already created with another tax is just ridiculous," Paul said. Other economists say a carry tax is not a wise plan.
"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," says < George Selgin, a University of Georgia economics professor who specializes in monetary policy.