Monday, July 31, 2017
Is Ban on Cash Coming to America?
A firestorm of speculative commentary has been ignited by reports that JPMorgan Chase has ceased to accept cash for payments on credit cards, mortgages, auto loans, lines of credit and so on. Not to defend any bank actions, but it is not difficult to imagine the confused look of a teller when you show up with a bundle of cash and instructions on how to apply the cash toward a loan payment.
Of course it would beg the question, where did you get the cash? Did you steal it? Is it unreported income? Did you print it yourself? Or are you just trying to make a point? Point being: A ban on cash has begun.
It has long been argued that cash is a relic. It’s dangerous to carry large amounts; counterfeiting is still a threat; cash enables a myriad of illegal transactions especially when it comes to drugs and gang violence; and, to the extent one can earn cash and bypass tax laws — that hurts everyone. Besides, the digital alternative is so much more convenient and efficient. Scan your wallet over the Starbuck’s payment device or transfer money to your college kid with two clicks of a mouse.
These are the arguments in favor of eliminating cash. As you see, they are compelling. Nonetheless, the dollar bills in your pocket are supposed to be legal tender for all debts public and private. Instead, a shift in sentiment is relegating the role of cash to a tool used by criminals to somehow defraud the system.
How ironic, as it was cash that once replaced gold and silver coins under the auspices that cash was as good as gold, and in fact backed by gold and silver. This is how far we have come in the evolution of money. Ben Bernanke once responded to the question, “is gold money?” with the simple answer of “No.”
The reality is this: There is already so little cash in circulation as compared to the digital transactions taking place at every level of the economy and in the financial system that eliminating cash won’t matter one bit or byte. This will be illustrated further into this report. Nonetheless, it appears we are now near a time when cash won’t be money either. But why?
Indeed some point to practical reasons for its elimination as previously mentioned. Others claim an insidious plot by the banks to control all your money (for many reasons) and cash just gets in the way. Government is interested in making sure all taxes are collected and when it comes to actions that may threaten national security, monitoring the digital footprint of suspicious transactions is a priority. While still others point to an end-times scenario where you cannot buy or sell without using a numbered account. So go ahead, pick your reason and know the end of cash is coming. Now it’s your turn to get educated and see if there’s an opportunity that may change how you invest or protect your assets.
The Global War on Cash Reaches DEFCON 2
The war against cash has gone global. At midnight on November 8, 2016, the government of India announced a ban on 500 and 1,000 rupee notes. Each represents the equivalent of about $6 and $12 respectively. The ban was imposed in an effort to stomp out the cash economy where cash transactions go unreported and untaxed.
Subsequently, there was a run on gold. Reports came in that Indian citizens were willing to pay in excess of $2,000 (USD) for an ounce of gold which was more than a 50 percent premium over the current price.
On November 24, 2016, an International Business Times report stated that U.S. Citibank’s Australian branches were going cashless along with about 900 of Sweden’s 1,600 branches. ATMs are also disappearing from the banking landscape.
And, as reported by ZeroHedge . . .
“France has banned any transaction over €1,000 Euros from using physical cash. Spain has banned transactions over €2,500. Uruguay has banned transactions over $5,000.
Outside of these countries Canada, Norway, Denmark, Australia, New Zealand, Ireland, Mexico and other nations are currently either proposing or rolling out programs that will ban cash from certain transactions if not completely.”
In the U.S., the war against cash is perhaps more covert. Yes, domestic banks are restricting the use of cash to make loan payments, prohibiting the storage of cash in certain safety deposit boxes and the withdrawal of cash from bank accounts is becoming more difficult. Just try to give a cashier $100 for a $25 purchase and see how many stores don’t have change.
A first step toward banning cash in America is the proposed elimination of the $100 bill. As I write, a number of economists are calling for exactly this. Former Secretary of Treasury Larry Summers is a prominent voice in the argument to eliminate the $100 bill. Harvard Professor Ken Rogoff is another strong advocate.
The next step took place just days ago as the world’s elites gathered in Davos, Switzerland for the Davos Economic Forum. Here, the cry from elites went out for the elimination of cash in the United States.
Joseph Stiglitz, the Nobel Prize winning Professor from Columbia University, reportedly made this statement during the forum. “I believe very strongly that countries like the United States could and should move to a digital currency.”
In a CNBC interview from Davos, PayPal CEO, Daniel Schulman, also called for the elimination of cash citing the fact that processing cash to include checks, was costly and wasteful. He said, digital transactions are “cheaper because they are not subject to fees that often come with cashing checks or transferring money in person.”
Are There Other Signs That Cash Is Becoming Endangered?
Now shocking evidence that this process may have already begun has just been uncovered. On September 29, 2016, the Monetary Base, as reported by usdebtclock.org was counting backwards.
The Monetary Base is defined as . . .
“The total amount of currency that is either circulated in the hands of the public or in the commercial bank deposits held in the Central Bank’s reserves.”
On September 29, 2016, the total of these reserves shown to exist were $3.802 trillion dollars. At the same time, the M2 Money Supply, consisting of . . .
M1 (includes physical currency) plus savings deposits, small denomination time deposits, Individual Retirement Accounts (IRA) and Keogh balances at depository institutions, and balances in retail money market mutual funds
. . . was $13.016 trillion dollars. Now let’s do a little time travel into the future of our money supply. According to the USdebtclock.org, by 2021 the supply of currency is now projected to fall by 8 percent to $3.518 trillion. (This number is still falling now and in the future) Given a projected 8 percent rise in GDP during the same period, a falling supply of cash is contrary to the trend.
Most astonishing however, is the projected 30 percent rise of M2 to $16.777 trillion. The rise of digital money appears to be correlated to the declining supply of currency. This trend will continue as technology dictates cultural shifts that drive digital transactions and eliminate the need for cash.
At the same time real cash disappears and the supply of digital cash grows our national debt increases at a rate of $2.2 billion per week, U.S. total debt (including unfunded liabilities) grows at a rate of more than $16 billion per day, while currency and credit derivatives currently exceed $500 trillion. Who says you need cash to run a growing economy?
In this context, cash is already gone. You can hardly blame cash for the tremendous bubbles that have been blown up in our financial system. In fact you could make the case that digital money has enabled the expansion of the biggest debt bubbles in history.
The minimal amount of cash circulating in our multi-trillion dollar system could be compared to a bag of quarters circulating in Disney World. The vast majority of payments are electronic. What remains are merely tattered remnants of a flourishing society. As these last remnants of cash finally disappear, so too will our protection against wealth destruction.
Alan Greenspan once wrote:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.”
Perhaps no truer words were ever written. Alan Greenspan wrote them in 1966, a time when cash was still backed by gold. Since then, and as a consequence of cash losing its gold backing in 1971, inflation has robbed the dollar of 87 percent of its purchasing power. If this is the consequence of a financial system no longer backed by gold, what now are the consequences of a financial system where there is no cash? Think about it.
Negative Interest Rates – Without cash, there would be no way to protect yourself against negative interest rates where your money diminishes over time because it costs you to keep it in the financial system. Today, it is estimated that near one third of all bonds held globally, pay negative returns. That is to say: it may cost $101 to purchase a bond that matures at $100 face value.
Bail-ins – New laws, written to protect banks against failure, now allow failed banks to confiscate depositor funds to facilitate a bail-in. As the depositor, you basically become the creditor when the balance sheet goes south. Holding cash in hand could insulate one from having to personally bailout your own bank.
The Power to Tax – Today politicians talk about the tax return filed on a post card. However, if there were no cash and all you earn and spend is digitally recorded, the potential exists for the IRS to simply take taxes from an account on an as-needed basis. Does this feel like a slippery slope?
Hackability – Internet banking and digital fund transfers have given birth to a new kind of robber – The Hacker! Certainly the elimination of cash does not ensure the elimination of theft. While technology tries to keep up with the bad guys, they always seem to be one step ahead.
Electronic System Failures – Occasionally, cell phones drop calls, satellite TV goes blank and cable internet stops working. When your wealth is converted to a collection of bits and bytes, how safe is it really? Will your money be accessible when systems are down?
Privacy – As the argument goes, if you have nothing to hide why do you need privacy? Spending habits will create a detailed digital footprint and privacy will be compromised. Does it matter that your whereabouts and your activities are known?
If you are one who has stashed cash in the mattress or behind a loose brick, imagine the pain if it is one day announced that we have a new currency or no currency. Or, what if one day, we learn the world has a new reserve currency. The dollar would plummet in value (it’s already in a decline) and you would be left holding a pile of currency relegated to the role of fireplace kindling. Imagine a mound of 20 dollar bills laying right next to the pile of wood that you could not buy with the cash you now use to start your fire.
Why would you want to store something whose value can disappear or be reduced in a blink of an eye? Why would you ascribe any value to something the government can print, at a whim, by the trillions? And, if you use cash to buy bonds, the returns you get basically scream that your dollar is going to be worth less when this bond matures than it is today.
The Last Defense Against Total Wealth Destruction
Now that we have settled on the inevitability, that the end of cash is approaching, what do we do about it? I say let them do away with cash! Take advantage of the fact that the end of the dollar bill is coming. How? It’s simple! Don’t bet on physical currency.
While the Dollar is High, Diversify Dollars into REAL ASSETS!
Identify assets that can never be worth zero. Warren Buffett owns railroads, Goldman Sachs tried to stockpile aluminum, JPMorgan is stockpiling silver, oil barons are buying up oil rigs, farmland sales are booming, Chinese citizens are stashing gold and billionaires are buying collectible art and tons of physical gold and silver.
If you think the end of the dollar is coming, Don’t Stash Cash! Don’t whine when the banker tells you he doesn’t accept bills anymore. Instead, go with it. Own something real like physical gold or silver, just like smart money is doing all over the world!
Credit to David Engstrom