Fed taxes and the markets

 An increase in central bank taxes on collateral is a domestic deflationary force. 

This makes holding the currency a tax avoidance or a deflationary gain.  Regulated banking loses share and the corporate debt market saves the tax and lowers rates for risky corporation. And equities get a gamma boost from tax avoidance.  Looking at the corporate debt market, it remains about 90% of GDP, the risk spread has simply expanded. Companies gaining from tax avoidance in the shadow market.

So this is unobserved, untaxed velocity expanding in the shadow market at the cost of regulated banking. Like this:

US lending at point of sale: The next frontier of growth

Consumer point of sale loans are mostly run by intermediaris but put the banking risk onto the seller, who now becomes a shadow banker. And this:

Amazon Lending is a program in which Amazon offers short-term business loans to qualified sellers so that they can finance additional inventory to sell through theAmazon marketplace. Amazon loans are invitation-only and amounts range from $1,000 to $750,000. Amazon Lending does not check credit

Amazon is now a shadow banker.  They earn money by sharing the ability of merchants to aggregate buyers.  This is simply a repartition of a search engine such that interest charges replace ad fees.

Larry Summers fears the shadow bankers:

“I think as you look to the medium term, you look to a period where we’ve had a vaccine and put COVID behind us, people have run down the excess savings they’ve accumulated,” he said.

“I think we’re looking at an economy that is going to be problematic in terms of growth with normal budges and with even interest rates near zero,” he said.

“I think those interest rates near zero, are going to be an ongoing challenge to financial stability because they’re going to blow up asset prices to potential bubble levels, “ he said.