Costs and Benefits of Tax Evasion

Tax evasion carries a maximum penalty of two years in prison. That's according to the law in Norway. In addition, there's confiscation of properties. Those caught will see their properties taken away and sold to cover lost taxes and damages.

From this, it follows that tax evasion needs to be sufficiently discrete to go undetected, or so grand and well executed that it is worth the cost.

In cases where up to two years in prison and confiscation of remaining properties is preferable to paying the tax calculated by the taxman, tax evasion is the rational option.

Case in point was the capital gains tax I was asked to pay on the house I sold in Norway in January 2017. The calculated tax was simply too high, so I took measures to avoid confiscation of remaining properties, and mentally prepared myself for what would undoubtedly be an unpleasant encounter with the taxman. Since taxes on gains in 2017 were only due in 2018, I had a full year to take care of all the arrangements required for a well executed tax evasion.

As it turns out, the taxman has been relatively quiet. There has been a few letters, but no-one has come to get me, and nothing has been confiscated.

The reason nothing has been confiscated is that there are no properties registered in my name. My adult children in Norway own everything that was left unsold. My wife here in Portugal owns everything I brought with me. There is also a stack of gold hidden away in a safe location. None of this can be confiscated.

The down side of this arrangement is that I have to spend the rest of my life making investments through the proxies that are my children and wife. There is also a continuous threat of imprisonment. However, I would much rather spend some time in a Norwegian prison than the rest of my life knowing I was too scared to stand up for myself and my family.

While investing through proxies is a little inconvenient, this arrangement has the advantage that there is no inheritance to be concerned with. The division of my estate has already taken place. This eliminates the risk of family members feuding over my estate after my death.

Giving control of my estate to the younger generation at an early age has the further advantage that it gives my children ample time to get used to it. They can also seek advice from me. This adds to their maturity and social status, which further promotes their chances of success in life.

A further benefit lies in the confidence and sense of autonomy that I have experienced ever since I refused to submit to the taxman. My wife and I have never had it so good. We live sovereign lives as king and queen of our realm, and it feels absolutely fantastic.

By Heralder - [1], CC BY-SA 3.0, Link

Gravity as an Imbalance in the Electric Force

The aether appears to be having a come back in theoretical physics. In this recent paper, Musa D. Abdullah shows that a field model of the aether will greatly simplify things related to space, light and forces that act at a distance.

His reasoning is remarkably similar to my own, and his conclusions are pretty much the same. The main difference is that Musa D. Abdullah sees the aether as a field while I model it as a mix of very low energy photons and neutrinos.

Of particular note is his conclusion regarding gravity. He too sees it as a manifestation of an imbalance in the electric force, with electric repulsion being slightly less strong than attraction. He arrives at this conclusion through the application of formulas, while I arrive at this same conclusion through logical argument.

Once again, we see that the theory proposed in my book can be backed up with mathematical formulas.

Two bodies (dark brown) attracted to each other due to an imbalance in the electrical force (arrows)

Sentiment

Having established that value is a subjective quantity depending on perception and circumstance, we can come up with ways to quantify these sentiments in order to make informed guesses about the future value of things.

Perception is all about feelings and history. By studying historic charts, we can judge the present perception of the markets, relative to the past. The Gold Dow ratio is for instance at a historic high, indicating that stocks are trading at elevated valuations relative to gold.

Google trends can also help us analyse perception. There is for instance very little interest in "buy bitcoin", despite the late run up in its price. It appears therefore that its price has become elevated without a corresponding positive development in overall perception. A downward price correction appears to be imminent.

Circumstance on the other hand, has to do with utility and scarcity. Foods and metals have utility in that they feed us and provide machinery for production of goods. When there are scarcities in commodities, prices go up, unless there is a strong perception that circumstances will change.

To get a good idea about likely price changes, we need to be well informed about perception, utility and scarcity. Only then can we hope to act rationally in the market. Given that most of us are less informed than professional traders, we should not get ourselves into the business of making short term predictions. However, long term predictions can be made with a great deal of confidence, especially for things that have well defined utility and scarcity. Gold, real estate and index funds are good investment vehicles for this reason.

Crypto-currencies on the other hand, are terrible in this respect. They have no utility in and of themselves, and are therefore valued purely based on perception. No-one needs crypto for anything. It cannot be used for anything other than transactions. It is not like gold, which is used in jewelry and electronics. There is no fundamental need for anyone to own crypto. No-one will refuse our hand in marriage due to a lack of crypto.

By Photo by Derek Ramsey (Ram-Man) - Self-photographed, CC BY-SA 2.5, Link

Perception and Circumstance

Value is subjective. The way to prove this is to consider a simple transaction. Let's say we need a pencil.

When we go into a store in need of a pencil, we are typically valuing a pencil higher than the store owner values the same pencil. The store owner would rather have our money than the pencil. If this is not the case, then no transaction will occur. Both the seller and the buyer must feel better off after a transaction. No-one agrees to a transaction in which the outcome is not at least marginally better than no deal. This proves that value must be subjective, otherwise no-one would be better off, and no transactions would happen.

It follows from this that every transaction operates with two prices. There is an offer price, set by the seller, and a bid price set by the buyer. In the case of a store, buyers rarely reveal their bid price. We do not normally haggle to get the price down. But in a market, bid and offer are often both on display.

Note that subjective does not mean random or incalculable. It merely means that something is dependent on the circumstances and perception of individuals.

There are plenty of objective criteria from which to calculate prices. A major factor is the cost of production, which in turn is dependent on circumstances. Oranges can be grown at low cost in Portugal. Codfish can be harvested at low cost in Norway. An exchange of codfish for oranges between Norwegian fishermen and Portuguese farmers is therefore logical, and reasonable prices can be calculated based the cost of production for the two commodities.

The wonderful ting about this is that Portuguese farmers get codfish by growing oranges, and Norwegian fishermen get oranges by catching codfish. It is a win-win situation.

Another objective measure is utility. In the case of the farmers and fishermen, both are very much aware of the utility of their products. Prices are not set randomly, but relative to the utility offered.

Scarcity is also a determining factor. A bumper crop of oranges translates into more oranges per codfish.

The only somewhat incalculable part of this is perception, which plays a relatively minor role when it comes to primary goods such as oranges and codfish.

However, when it comes to more abstract things perception takes an increasing role. In cases where there is no utility, yet nevertheless a demand, perception is everything. But this is not the normal situation, it is the exception.

Typical everyday transactions are based primarily on circumstance and secondly on perception. It is only when dealing in highly speculative assets that perception becomes dominant relative to circumstance, and even then, there are ways to calculate what a reasonable price should be.

By Original uploader was Dmgerman at en.wikipedia - Transfered from en.wikipedia: 2007-09-15 07:35 Dmgerman 600×400×8 (119825 bytes) two pencils grade hb Transfer was stated to be made by User:Ddxc., CC BY 3.0, Link

Fool's Gold

Bitcoin has gone from 3000 dollar to 7500 dollar over the last five months. However, this is no proof of anything, except that perception can trump reality for extended periods of time.

Unlike gold, which has real physical qualities such as near perfect conductivity and malleability, Bitcoin has no physical properties whatsoever. This means that while gold can be priced based on its physical qualities, Bitcoin is priced on the basis of perception alone.

It follows from this that Bitcoin cannot store any value. To store value, there must be some inherent utility that is stored. Perception is not part of this. Perception is in the minds of people, and therefor not something that can be stored in a thing. Whatever value Bitcoin keeps from one day to another is not stored in Bitcoin, but in the minds of people.

This is not the case for gold. Jewelers and engineers need gold to make things. It is not mere perception that make them buy gold. They need gold to make jewelry, smart phones and computers. There is a real need for the properties inherent in gold. There is no such need for Bitcoin because it has no inherent properties of value.

The only thing that Bitcoin has in common with gold is that it requires a lot of energy to be produced. Apart from this, there is no similarities whatsoever. To talk of the two things as if they are somehow similar is disingenuous, and it is sad to see so many people fall for it.

A piece of brass pretending to be a store of value

By Steve Jurvetson - https://secure.flickr.com/photos/jurvetson/8410385932/in/photostream/, CC BY 2.0, Link

Store of Value

The utility of a fish is that we can eat it. Alternatively, we can trade it with someone who wants to eat it. However, a fish is a terrible store of value. If it isn't eaten relatively soon, its value is lost.

The thing to note is that utility is a property of the fish, which is lost over time. Utility is not something outside of the fish, nor is its durability. While we all value fish differently, depending on all sorts of factors, utility and durability can be objectively quantified. We can all agree that fish is a poor store of value.

Another quantifiable factor that relates to value is scarcity. If something is useful, durable and scarce, we can be relatively sure that it is valuable not only to us, but to a lot of people. Furthermore, if scarcity can be expected to continue into the future, the value attributed to such a thing will remain steady.

In short, a good store of value has the following four qualities:

1. It has utility in and of itself
2. It is durable
3. It is scarce
4. Its scarcity is stable

These are objectively quantifiable qualities. While psychology and circumstances constantly change, no-one can disagree with the objective truth that fish is a bad store of value.

Similarly, gold can be objectively determined to be a reliable store of value. It has all sorts of useful properties. It is non-corrosive and therefore infinitely durable. It is scarce, and we can reasonably expect this situation to persist.

It is not mere psychology that makes gold a better store of value than fish.

By Diliff, CC BY 2.5, Link

20 Grams

No-one knows exactly how much above ground gold there is in the world. However, a common estimate is that it must be about 160,000 metric tonnes. That's 160,000,000 kilograms or 160,000,000,000 grams.

This may sound like a lot, but when we consider that there is about 8,000,000,000 people in the world, we see that there is only 20 grams of gold per person.

This explains why gold is used as little as it is. There simply isn't enough of it to use for all the things it could be used for. The wiring of a typical house requires a few kilogram of copper. A single copper bottomed pan has at about 100 grams of copper in it, so it does not matter that gold is a superior conductor, if we replaced all this copper with gold, we would quickly run out of it.

It is not for lack of useful qualities that we refrain from using gold in bulk. It is entirely due to its scarcity.

On the other hand, just about every person on the planet owns at least some gold. Computers and cell phones contain gold. Most people own a gold ring or some other gold jewelry. A typical person owns a few grams all together.

This means that gold possession is remarkably uniform and spread out. The distance between the typical 3 to 5 grams and the average of about 20 grams is narrow, certainly when considering how unevenly other assets are distributed.

Of the 160,000 metric tonnes in total, much less than half is hoarded by central banks and wealthy individuals. Almost all of it is spread out among regular people, with poor people sometimes owning just as much as rich people.

Gold is for this reason a social equalizer. The more gold is valued as a financial asset, the smaller becomes the inequality between rich and poor. On the other hand, when gold is marginalized and demonized, inequality becomes rampant.

By PHGCOM - self-made, photographed at the Metropolitan Museum of Art, CC BY-SA 3.0, Link

Gold Ownership

Anyone reading this post owns some gold. They may not know that they own gold, but they do, because gold is an essential part of electronics. There is nothing that quite compares to gold when it comes to electric conductivity, so it is used wherever conductivity has to be near perfect.

If it wasn't for the fact that gold is expensive, gold would be used for all wiring. Copper is only used because it functions as a tolerable alternative.

If gold was cheap, it would be used for all sorts of purposes. It is not only a better electric conductor than copper, it is a better heat conductor as well. Copper pans would therefore be replaced with gold pans.

Gold is malleable and non-corrosive, so copper roofing would be replaced with gold roofing. If gold was cheap, it would be everywhere.

But gold is expensive. It is therefore only used where it is essential, or where it can serve as a mark of social status. Gold jewelry is sought after, not only because it is beautiful and non-corrosive, but because it conveys social status.

With gold being near infinitely divisible, it is possible to own any quantity of gold. Poor people can own a small quantity, rich people can own more. But in both cases, it serves the same purpose when used in jewelry. It boosts the social standing of its owner. Rich people do not go to dinner parties without adorning their wives with a bit of gold. And the same goes for poor people.

The result of all of this is that gold is owned by almost every person on the planet. It also sets a floor for how low the price of gold can go. Should gold go down in price by a lot, demand would explode, pushing the price back up.

By Senado Federal - Fotos produzidas pelo Senado, CC BY 2.0, Link

Climate-Preparedness

If our climate is rapidly changing, as many believe it is, then we are going to see some serious disruptions in our food supply. There will be flooding and drought, frost and heat waves, all making it harder to grow food, and harder to find good places to live.

Anyone taking these predictions seriously, should take preparatory steps. However, despite all the talk about how serious this is going to be, very little is said on the topic of climate-preparedness. What exactly is the correct strategy when faced with a possible disruptions in the food supply?

Some people suggest that we should grow our own food. But that will only work if we happen to live in an area where the climate allows for this. There's no point in starting a new farm if the climate changes in such a way that nothing can grow where the farm is located.

Others suggest we should stock up on food. But what if the place we are living becomes too dry or constantly flooded? How are we going to carry all that food with us as we flee our homes? Stocking up on food is of little value if we are located in a place that suddenly turns uninhabitable.

Our first concern should therefore be to identify local threats. We should avoid living on flood plains or places where drought have occurred in the past. Places that can get too hot or too cold should also be avoided. If we live in such places, don't invest too much in housing. If things get so bad that we have to move, we should not have all our savings tied up in real estate.

From history, we know that people in debt have been much harder hit by famine and other natural disasters than people with savings. A first precaution for anyone worried about climate change should therefore be to get out of debt.

History also tells us that people with savings in gold or silver have had the great advantage of mobility. They moved, sometimes over great distances, until they found places to settle. Their savings were then invested in tools and provisions to start over.

Rather than stocking up on food, we should stack gold and silver. It gives us the same kind of protection, with the added advantage of mobility. The advantage of metals over state sanctioned currencies is that currencies can go to zero, especially if the country in question is hit by a disaster. Gold and silver, on the other hand, will always have value.

From this we see that climate-preparedness is indistinguishable from sensible saving and hedging. It is about making good investment decisions and staying out of debt. We need to keep an eye on what's going on and make sure we're invested in the right things.

American Silver Eagle - Public Domain, Link

Key to Liberty and Prosperity

Liberty is far easier to achieve than many people think. It requires nothing more of us than for us to reach out and take it.

First thing to realize is that liberty is physical. It is not in books, it is not on the web, and it is not in some database somewhere. Liberty is nothing more than the freedom to do whatever we please within the means at our disposal.

From this, it is clear that we should keep things close. If someone can easily take away what we possess, we are less free than if it is hard to do. The farther away something is, the harder it is for us to control. The closer it is, the easier it is to control.

This is why I recommend staying away from debt, and keeping savings in physical things that cannot be taken away from us by the mere flick of a switch. Real estate, shares in companies, and gold or silver are all good alternatives to cash in the bank or crypto on the web.

Another thing to realize is that the only ones that can limit our liberty are other people, and they have to be physically close to us to do this. We are not limited in our liberty by people doing evil things far away from us. There is no need for us to concern ourselves with such people unless we have some possessions in these far away places, which would be contrary to the rule that things should be kept close.

However, if people are turning evil in our neighborhood, we need to take action. We don't want to be the last ones to sell our house when things start going down the drain. This does not mean that we have to move out of the neighborhood right away. It merely means that we pull things closer to ourselves when things start to look messy. Instead of owning a house, we rent a place. Savings are kept in metals or shares, depending on what makes most sense. That way, we can get out in a hurry without leaving anything behind.

Finally, we should always try to influence people in a positive way, not through party politics or agitation, but through example and personal interaction. Venting displeasure with things going on in far away places is a complete waste of time. Rather, we should focus on family, friends and neighbors. Make sure they respect us and trust us by being polite and respectful of them.

By keeping things real, keeping them close, and teaching by example, we can live full and free lives even if things around us are falling apart.

Close, real and an example to follow

By Valtov at fi:wikipedia - Originally from fi:wikipedia, Public Domain, Link

A Farewell to Party Politics

As a citizen of the 5th Empire, I do not waste my time on party politics. While my sympathies lie with the libertarian movement, I do not think it fruitful or even proper to get directly involved.

Most people do not want to be free. They do not want a libertarian world, and it is a great waste of energy to try to convince them otherwise. It is much better to focus on my own affairs and leave party politics for others.

I keep an eye on political developments, not as a fan of one party over another, but for practical purposes. I do not want to get stuck in a hostile environment. I do not want to be ruled. It is therefore important to know what my enemies are up to.

With a dispassionate position regarding politics, I can more fully appreciate its entertainment value. I can also take rational decisions, unhindered by political sympathies. As a result, I feel liberated.

I deal with illiberal laws in a pragmatic manner. I have no qualms in breaking laws that exist solely to subdue me.

Free from the sort of wishful thinking that comes with party politics, I do not get discouraged or frustrated when the winds of change blow in a certain direction. Nor do I get my hopes up when the winds appear to be favorable.

My loyalty is to my family and friends. That's it. I have no intention of serving a nation or a political leader, and I'm certainly not going to risk my life to protect them. However, when it comes to my nearest and dearest, I will gladly risk jail and even death to ensure their well being and safety into the future.

Dawn - By Jessie Eastland - Own work, CC BY-SA 4.0, Link

Trade Deficits

Where there is trade, there is exchange. The seller gives something up in exchange for something else. From this simple truth, we can see that there can never be a deficit. No-one is giving up something for nothing. Yet, we hear people talk about trade deficits all the time. China is supposedly running a surplus relative to the US. How can that be?

In the case of China and the US, we see that products are brought to the US from China, while dollars and dollar denominated assets are sent to China. The trade deficit is in other words about the type of things being sold. The deficit is not about an imbalance in trade, but an imbalance in production. China exports primarily goods while the US exports primarily services and dollar assets.

One of the reasons why this is the case is that the US holds the reserve currency. The dollar is an asset required for trade, and the only way to get fresh dollars is by sending goods to the US in exchange for dollars. The much talked about trade deficit is in other words a feature of the monetary system. As long as the US holds the reserve currency, it must run trade deficits. There is no other way for the system to be kept alive.

Slamming tariffs on imported goods will do nothing to change this. It will only make it more difficult for foreigners to get hold of dollars. This will in turn make it desirable for foreigners to find alternatives to the dollar when trading with each other. They will seek trading agreements that omit the dollar. China and Russia use currency swaps and gold in trade with each other, and many other countries are seeking similar solutions.

As more and more trade omit the dollar, the need to sell products to the US in exchange for dollars becomes less urgent. Should the world go away from the dollar all together, the dollar will cease to be the reserve currency. No-one will any longer need to sell goods for the sole purpose of getting dollars to trade with others. People will demand something else in return. They will demand goods and services. The US will have to restore their production base.

A balanced global production capacity will only come into effect once the US dollar stops being the reserve currency. Until then, the US will continue to sell dollars in exchange for goods from abroad.

Federal reserve note

By National Museum of American History - Image by Godot13, Public Domain, Link

Tariffs

A tariff is a tax on international transactions. It makes transactions more expensive for those involved. The seller must pay a tax to the government. This cost is in turn passed on partially or entirely to the buyer.

If there is a tariff on steel. Domestic producers of products using steel will see their costs rise. Producers of cars and appliances will suffer. If there is a tariff on yarns, domestic producers of yarn products suffer. The immediate result of tariffs is in this way a hit to the domestic economy.

Domestic producers of steel and yarns, supposedly protected by tariffs, will not gain nearly as much as many think because those using their products are forced to cut back production. Instead of a surge in demand for domestic steel and yarns, there will be layoffs in industries using these input factors.

Tariffs on finished consumer goods will have a similar adverse effect. If imported shoes get hit by tariffs, shoes will become more expensive for consumers. This in turn, leads to less money to use on other things. People will not only cut back spending on shoes. They will cut back spending on all sorts of products and services. A tariff on shoes may very well result in a hit for restaurants.

There is no way a tax can be used to increase prosperity. Simple logic dictates this, and history shows this to be true.

The Tariff Man

An Apparent Free Lunch

There is no such thing as a free lunch. If someone is getting something without effort or risk, someone else must have paid for it. However, it is not always easy to spot the mechanism in which resources are diverted from one group of people to another.

Case in point is the financial crisis in which more than 1.5 trillion dollars were brought into existence by the FED. While it is easy to see that the FED got 1.5 trillion to spend, there is no obvious dupe left with the bill. The money was not taken from anyone, it was created out of nothing.

The short answer to this paradox is that the general public were left with the bill. Purchasing power was extracted from their savings. For every dollar that was brought into existence, existing dollars lost some of their value.

However, a more nuanced picture can be made by considering the effect that 1.5 trillion dollars of fresh liquidity had on interest rates. They fell to zero and stayed there for ten years. Any saving scheme dependent on interest rates was thereby hit. Pension founds, which rely heavily on fixed income papers, have suffered greatly due to artificially low interest rates.

A further distortion came in the stock market where stocks were bid up to record levels, making it impossible to buy stocks at a reasonable price. The true value of stocks is the productivity of the underlying companies. It is this productivity that ultimately feeds the investor. If stocks are priced way higher than their productivity suggest, they are no longer productive assets but speculative bets. We get an unsustainable bubble.

The same happened in real-estate. House prices became inflated to the point that a typical wage earner no longer could afford a house.

The result is that we have bubbles in bonds, stocks and real-estate. As long as these bubbles stay inflated, things will appear to be somewhat normal. Young people cannot afford houses, and have little incentive to save, but older people are all right. Pension founds have not made much in the way of interest, but inflated bond prices are masking this for now.

However, bubbles cannot stay inflated for ever. The underlying income is in the end all that matters, and it is far smaller than the bubbles suggest. When time comes to pay out pensions and savings, assets must be liquidated. Income in the form of interest and dividend is simply too little. But who will be the buyers? Young people are broke.

To paraphrase Ludwig von Mises: There is no way around the fact that a boom brought on by monetary expansion will end in a bust. The only question is whether it will come sooner in the form of deflated asset prices or later in the form of a collapse of the monetary system.

The apparent free lunch was not free at all. Young people are broke, and most pension founds are woefully underfunded.

Ludwig von Mises

By Ludwig von Mises Institute - Ludwig von Mises Institute. Originally from en.wikipedia; description page is/was here. Original uploader was DickClarkMises at en.wikipedia, CC BY-SA 3.0, Link

Eco-Anxiety

Yes, it's a thing. People are now so concerned about the environment that it has become pathological.

The term for this mental disease is eco-anxiety.

Since I know a few people who seem to suffer from this, I did a quick search on the internet to see if there was any worthwhile advice out there.

What I found was not particularly soothing. All the articles started out by saying that climate change is man made and serious, which is hardly a good starting point when dealing with an exaggerated fear. Then they went on to suggest direct action through political engagement, volunteer work and donations.

The advice given was similar to the advice once given to people suffering from hell-anxiety. Go to mass, congregate, and pay indulgences. Eco-hell is clearly the new fire and brimstone, and people are scared witless.

Eco-anxiety - By Anders Hellberg - Own work, CC BY-SA 4.0, Link

Liquidity and Interest Rates

In the world of finance, interest rates is the price paid to borrow cash and liquidity is the overall availability of cash.

From this, we can draw a simple relationship based on the law of supply and demand. When interest rates go down, liquidity goes up. When interest rates go up, liquidity goes down.

The only problem with this is that people are not only concerned about interest rates when it comes to their willingness to save or borrow. There are all sorts of other factors that play a role too. The overall debt level, employment opportunities, salaries, etc. They all play into this. Liquidity cannot for this reason be controlled by interest rates alone.

However, in an elastic system in which cash can be conjured into existence from nothing, liquidity can be provided by a central bank through a process known as quantitative easing. The central bank prints money to buy stuff. This takes assets off the hands of sellers in exchange for cash. In this process, it is no longer interest rates that determine liquidity, but liquidity that determines interest rates. Adding liquidity sends interest rates down. Removing liquidity sends interest rates up.

During the financial crisis, the FED injected more than 1.5 trillion dollars into the economy in order to keep interest rates down. To further control the system, it established a regime of lending and borrowing between banks. If a bank has an excess of liquidity, it can park that cash at the FED over night at a very low rate. If a bank has a need for cash, it can borrow at a slightly higher interest rate.

This system has worked fine for more than ten years now. However, the extra 1.5 trillion dollars of assets on the FED balance sheets need to be wound down in order for people to keep their faith in the dollar. After all, the dollar must not be printed without limit. When extra liquidity is provided, it must subsequently be withdrawn. Otherwise, there will be no difference between the FED and the central bank in Zimbabwe or other places where liquidity is created but never withdrawn.

However, a problem has emerged. With liquidity being drained from the system, the price to borrow emergency funds has crept upwards, and is currently above the upper limit established by the FED. This is not supposed to happen and requires immediate attention. The FED must take action to stop interest rates from continuing up and out of its prescribed range.

With the extra 1.5 trillion in liquidity still out there, the FED cannot very well stop draining it, so it has decided to lower the rate at which it lends out money to banks.

The FED is now simultaneously draining liquidity from the system and setting interest rates lower, but these actions are mutually exclusive. Draining liquidity sends interest rates up. Declaring them lower will not help unless an external actor is tempted to provide liquidity. However, that actor had to be a bank, and it is the banks that are screaming for more liquidity.

It remains to be seen what happens to the system as the FED continues to drain liquidity while simultaneously declaring lower interest rates, but I suspect the reality of shrinking liquidity will trump the declaration of lower rates. If so, the FED is stuck. It will be forced to stop draining liquidity from the system. It may even be forced to provide additional liquidity in order to avoid a repeat of the financial crisis we had ten years ago.

FED headquarters

By AgnosticPreachersKid - Own work, CC BY-SA 3.0, Link