Stealing from savers - a hell of a trial balloon II

In an update to the previous post, Jonathan Krugman says that kind of plan is already here in the form of ZIRP - Zero Interest Rate Program. 

The ZIRP has had an unintended - and positive - consequence.  Debtors - poor and middle class - who spent willy-nilly during the days where credit was easy are now pushed to pay off the high-interest rate balances on their debt - some at rates of 30% or more.  With a lower interest rate, balances are paid off much faster than they normally would.  While you might see puny interest in your savings accounts, once a debt is paid off, the interest you would have paid to the banks goes right into your pockets. 

Example: If you paid off a $10,000 balance at 24% APR, you would be receiving an effective $200 extra per month.  That's $200 less the bank would be receiving from you each month, which is much, much better than the 0.1% APR the bank would have paid on that $10,000 ($10 a year).  You make a nice profit of $2,390, tax-free.  And, if the creditor discharged your $10,000 debt, it would have become taxable income.

Also, not having any debt at all also denies banks and creditors the ability to make interest and profits off responsible customers.  It may not make you a profitable customer in some banks' eyes, but in others, the ability to manage debt well is sound financial footing, no matter how much income or savings you have.  Paying off the debt is equal to an interest free - 0% - loan.

On the other hand, there could be 180 degree opposite of Cyprus.  In the right situation, that $9.6 trillion the banks are sitting on could be forced to be returned to savers - in exchange for not receiving a lengthy Federal prison sentence for the collapse of the markets in 2008.  That and a few forced Big Bank breakups would work immediate and long-lasting wonders.

Stealing from savers - a hell of a trial balloon

SamaBlog puts the whole Cyprus "savers to sacrifice savings" neatly: (emphasis mine)

I just wanted to go on the record that what has happened in Cyprus, with the seizure of bank accounts, is a trial balloon. If the world give it a collective shrug, that a first world central bank seized money from its citizens with no due process, then it will happen again, and it could happen here even. But as of right now, it is no longer safe to hold significant assets in a bank account, and I would recommend removing significant amounts of cash from the bank asap.

 What Cyprus was planning to do, via European Union diktat, was to take 6.9% out of all accounts up to 100,000 euros, and 9.5% above that, as conditions of the EU bailing out Cyprus.  That effort was met with a huge outcry, and to prevent panic and bank runs, Cypriot banks closed.  The Cypriot parliament voted that effort down, but banks are still closed, and may yet have bank runs.  Cypriots and expats from Russia and the UK were furious, not just at the ministers, but at Angela Merkel, the German chancellor who engineered the conditions of the bailout.

Back in the 1940s, Americans were compelled to buy war bonds, which back then paid a handsome interest rate of 5% (but the dollar back then bought much more than today; a dollar back then would be about $14 today).  Today, people are pressured to fund their retirement accounts, which total about $10-$20 trillion.  Given the right manufactured crisis, the government will see that $10-$20 trillion as an irresistable lure that its citizens will be glad to hand over - not knowing that their money may never be paid back.

Say the government needs to bail out banks, and decide they will levy a 20% surtax on all 401(k) accounts, regardless of value.  That means for every $100,000 you've scrimped and saved tax-free, the government is seizing $20,000, never to give it back.  If you earn $50,000 a year and contribute 20%, $2,000 of the $10,000 that you put into your account will be captured by the government.   If the situation is dire enough, the government will have the right to seize every bit of that $10-$20 trillion, and pay back at a fraction of that to the savers at a much lower rate.

Resentment in perfection

There are schools that couldn't care less about kids who graduate, so long as they leave the building with the diploma they're all but handed.  There are also those that do care and make every effort to have their kids graduate at a rate above 80%.  Those who graduate every single student in the senior class is rare, yet incredible accomplishment.

So why take away the prom?   I can see cancelling a prom for bad behavior, but to motivate students to have that distinction, against all odds, and taking away a major event just so the administrators can feel better?

These schools - really the administrators - who likely have tons and tons of federal and state education funds riding on the graduation rate, i.e. having a metrics fetish so archingly huge that a 99% graduation rate means losing funds - funds they can't afford to lose.  It's an attention getter for the students to work harder, of course, but it sounds more like Captain Queeg running the high school.

On the other hand, these students are motivated enough to do their best, so this could all be a huge bluff by this principal to get them to work harder.  I'd love to see the students call this principal's bluff as follows: "Fine, we'll hold our own, unsanctioned prom, full of liquor and drugs, obscene dancing, and chaos.  No chaperones, no control, no anything.  Would you like to be in the news for a 100% graduation rate, or half of the NYPD in the Bronx hauling kids to jail?  Your choice."

Update: Never mind...the prom will go on.