All around the world we can see a fierce offensive against cash. There are two evident examples – the US and the EU. The proponents of cash transactions are equaled to criminals – if you have nothing to hide then why are you scared?
Supporters of the cashless progress don’t care about eliminating money loundering, corruption or financing terrorism but they would rather increase the state (and bank) control over the individual.
'There is no such wickedness, or cruelty, which otherwise would not have committed a mild and liberal government, when it runs out of money' Alexis de Tocqueville.
Just in 3 years limits of cash transactions in Europe were tightened from 10-15 thousand EUR to 1-3 thousand EUR.
There are many goals that the war on cash achieves:
a) The aforementioned control over the individual – this seems to be the main goal.
b) Without cash the pension funds in many countries will not be able to prevent their equity being confiscated through NIRP.
c) Coupled with NIRP, the elimination of cash is aimed at increasing the velocity of money circulation which should stimulate the economy. The faster money circulates, the higher inflation grows which in turn diminishes debt. It does it at the expense of savings of the middle class.
d) Safeguarding against runs on banks. In the situation where the amount of cash is being limited by a regulation, banks on the brink of collapse are guarded against a sudden wave of withdrawals of capital. We had examples in history when a run was initiated after a gossip was spread over social media making a prosperous bank bankrupt in no time.
The last instance happened just few months ago. In Bulgaria banks were stormed and drained from deposits after a claim on FB, taking out one bank off the market. Coincidentally it happened right after the South Stream pipeline was refused permission. Could it be the Russian intelligence? Who knows?
Coming back to the regulatory changes. In recent weeks Willem Buiter and Ken Rogoff openly campaigned for a removal of all cash in the US. They relied on Louisiana’s precedent where cash limitation was successfully introduced in 2011.
Buiter in his speeches shared his farsighted plans about what were his plans in the future. After making it harder to get your hands on cash the FED should introduce NIRP up to -6%. Thanks to that a society without any capital security should spend the American way out of crisis. I haven’t heard of a bigger idiocy for a long time but what is prevalent is that it would neither help the economy nor the society.
Calls for elimination of cash are still non-mainstream but few days ago the biggest bank in the US – Chase – banned its clients from paying back credit card debt, car credits and mortgages with cash. You can’t just walk into the bank and pay your credit with legitimate dollars. You have to first pay them into your account and then make a wire transfer.
Additionally, in the letter sent to clients Chase prohibited keeping cash in safe-deposits. It wasn’t clearly stated whether the depositor can still use a safe-deposit to store silver or gold bullion coins.
The problem is serious as whatever Chase does is sooner or later introduced by the other four big banks. As a result, 80% of the market is being revamped according to a new standard.
We already got used to totalitarian ways of the US but what Switzerland does – country where freedom is strongly engraved into its society’s pillars – is very saddening. Switzerland was the first one to introduce NIRP. Their government now charges you for the privilege of lending money to them making it an ‘investment’ with a guaranteed loss.
One of the pension funds questioned the rationality of investing in government bonds and keeping capital in a bank account. The fund is responsible to its stakeholders to deliver a return for the future pensioners. Having a choice of losing money when it’s being deposited in a bank or keep cash in a safe, the manager of the fund chose the latter. This simple operation could have saved 25 thousand CHF for every 10 million CHF each year. At the end of the day it is pointless to pick a guaranteed loss and accept any banking system risks when you can avoid both.
Unfortunately, the bank in a very diplomatic language refused a withdrawal of the funds. It refused the withdrawal of money – someone’s property was taken hostage!
The refusal was probably strong-armed by the Swiss National Bank and it matters very little that it is illegal. If this can happen in Switzerland – it can happen literally anywhere.
Taking into consideration the dramatic situation of the banking sector we shouldn’t be surprised that lobbyists do everything they can to kill cash. Without cash the comfort and security of the banking sector is elevated to the levels unknown before. Simultaneously, an average Mr Smith would lose ability to defend his capital on top of losing his privacy.
What we see now is coming close to a tragicomedy. Central bankers try to convince us that debt of a bankrupt who doesn’t pay any interest is worth more than cash. What is even worse with NIRP, this bankrupted state charges us money for giving it a credit. If the Cyprus bail-in wasn’t enough to warn the population then a guaranteed loss of money with NIRP will make it a painful but an easy to remember lesson for everyone. The lesson about what consequences the war on cash brings. Those who so blatantly agree to get rid of cash in the name of the fight against terrorism should think twice before their privacy is taken from them.