Not Your Sweetie

How Cutting Dividend Tax Will Deepen Recession
From a post by Bartcopper Hochizen:

he price of
certain dividend paying stocks
will definitely rise. While this will be good for those who
own these dividend paying
stocks, it will be bad for those who hold bonds. After all,
if the yield on bonds is not
increased by a corresponding amount, bonds will be less
desirable than dividend
paying stocks which provide a partial tax shelter.
Similarly, cds and bank notes will be
less desirable. The result will be an increase in the yield
of bonds and cd’s to represent
the increased pressure on these markets caused by the
attractiveness of dividend
paying stocks.

Guess what happens when the interest rates on bonds and cds
go up, boys and girls?
That’s right, real interest rates go up, because banks are
not going to lend money at a
rate less than they pay. So, the tax cut on dividends will
push the economy towards
recession. In a weak economy, adding pressure towards
weakness is insane.
Corporations are already leery of expanding, of hiring more
workers and of building
new plants. If the price of credit is higher (due to higher
bond rates the corporations
could float, or due to higher bank interest rates) they will
be even less likely to
expand.