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Rep. Warren Davidson thinks repatriation tax holiday will increase lending

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Heard Representative Warren Davidson (R-OH) on the radio this morning. Davidson actually thinks that a repatriation tax holiday will increase lending:

“U.S. corporations… have 10% of corporate cash off-shore… because our tax code is broken. We need those dollars on deposit at U.S. banks available to be lent to smaller and medium size businesses…”

Link: https://goo.gl/D91x4r (go to 3:50 mark)

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Posted by (Questions: 11, Responses: 16)
Posted on 10/11/2017 12:37 PM
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The money multiplier is still widely believed. It’s really quite amazing.

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Cullen Roche Posted by (Questions: 10, Responses: 1800)
Answered on 10/12/2017 1:19 AM
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A firm moving funds from offshore does not increase domestic deposits, it moves funds from a FOREX merchants deposit account to the firms deposit accoount.

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Posted by (Questions: 22, Responses: 337)
Answered on 10/13/2017 3:17 PM
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the mistake that the representative is making is to imagine actual piles of Dollar bills being held in a safe in a foreign country (that does happen to quite a large extent with US currency, but the holders tend to be in a very different business to Apple, Facebook….etc).

A lot of the foreign profits made by US corporations with multinational operations will already have been exchanged into USD. Those USD would already be a number in an account held at a bank that has an account at the Fed, or held as Treasuries, or corporate bonds, or other USD denominated securities in an account at a US custodian institution.

The ‘money’ is already ‘onshore’, it’s just the name of the account holder is ‘offshore’. If the profits are brought ‘onshore’, the only real change will be that the account holder will change to a US entity from a foreign entity. There will be no ‘new money’ made available for lending. It is, in the main, already being lent to the US government and US companies.

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Posted by (Questions: 7, Responses: 92)
Answered on 10/14/2017 3:56 AM
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OFF TOPIC – a related argument could be made that once the profits are held in the US banking system, and in the name of a US entity, the company is more likely to spend them on their own new projects in the US.

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Posted by (Questions: 22, Responses: 337)
Answered on 10/14/2017 6:51 AM
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Robert

Even if the money was held in offshore piles of Dollar Bills , it would not effect the availability of lending to SMEs as the Fed maintains the interest rate , and issues reserves as required to do so. ie buys bonds with new reserves.

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Posted by (Questions: 22, Responses: 337)
Answered on 10/14/2017 7:08 AM