Dave Beckworth's main claim is the Fed expanding its S/L facilities to other central banks, short cutting the Swift network. Thus the more liquid banking creates more demand for US dominated reserve assets. And that leads to a seigniorage, tax increase. Boils down to congestion pricing.
But the dollar index is now down to pre-covid levels. The international rush to safety has collapsed and the seigniorge tax remains high. The rush to safety is apparent in deleveraging consumers who want to buildup deposits in response to the second consecutive crash. But they too will find other tax free investments over time. But the seigniorage tax remains.
We are still deflationary, the cause is still the siegniorge tax. That tax remains for 15 years, the time needed for the Swamp to rollover its past debt, now costing over 2% per year. The siegniorage tax should peak at about 1.5% of the economy.
The question is, how long will we tolerate a 1.5% banking tax. Dodging taxes is a major law of economics. This is what worries Powell and Yellen. The Swift banks have to sit out half their market for 15 years, and will not survive the sandbox taking all that Swift share.
On the political side, it is soon that Yglesias and Drum discover this regressive flat tax is not on the talking points. And this is a 15 year, non legislated, flat tax generated by an unelected group. At some point even the Alt-Right could get clue. Then we have internal party differences with the centers of both parties liking the idea of a tax they do not need to vote on. In between is the Swift bankers union.
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