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- WASHINGTON -
US currency
should include tracking devices that let the government tax
private possession
of dollar bills, a Federal Reserve official
says.
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- The
longer you hold currency without depositing it in
a bank account, the
less that cash will be worth, according to a proposal
from
<http://www.rich.frb.org/monetarypol/marvin.htm Marvin Goodfriend,
a
senior vice president at the <http://www.rich.frb.org/ Federal Reserve
Bank of Richmond.
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- In other words, greenbacks will get automatic expiration
dates.
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- "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last withdrawn from the banking system.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.
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- 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.
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- 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.
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- 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.
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- Congressional critics say they
would oppose any such
move.
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- "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
<http://www.house.gov/paul
Representative Ron Paul (R-Texas), a
free-market proponent who serves on
the House Banking
committee.
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- "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.
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- "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
<http://blaze.cba.uga.edu/economics/facpages/selginv.html
George
Selgin, a University of Georgia economics professor who specializes
in
monetary policy.
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