Martin Armstrong Warns Of The Coming Crash Of All Crashes

Why are governments rushing to eliminate cash?

During previous recoveries following the recessionary declines, the central banks were able to build up their credibility and ammunition so to speak by raising interest rates during the recovery. This time, ever since we began moving toward Transactional Banking with the repeal of Glass Steagall in 1999, banks have looked at profits rather than their role within the economic landscape.

They shifted to structuring products and no longer was there any relationship with the client. This reduced capital formation for it has been followed by rising unemployment among the youth and/or their inability to find jobs within their fields of study. TheVELOCITY of money peaked with our Economic Confidence Model 1998.55 turning point from which we warned of the pending crash in Russia.

The damage inflicted with the collapse of Russia and the implosion of Long-Term Capital Management in the end of 1998, has demonstrated that theVELOCITY of money has continued to decline.

There has been no long-term recovery. This current mild recovery in the USA has been shallow at best and as the rest of the world declines still from the 2007.15 high with a target low in 2020, the Federal Reserve has been unable to raise interest rates sufficiently to demonstrate any recovery for the spreads at the banks between bid and ask for money is also at historical highs. Banks will give secured car loans at around 4% while their cost of funds is really 0%. This is the widest spread between bid and ask since the Panic of 1899.

We face a frightening collapse in the VELOCITY of money and all this talk of eliminating cash is in part due to the rising hoarding of cash by households both in the USA and Europe.

This is a major problem for the central banks have also lost control of the ability to stimulate anything.The loss of traditional stimulus ability by the central banks is now threatening the nationalization of banks be it directly, or indirectly.

We face a cliff that government refuses to acknowledge and their solution will be to grab more power – never reform.

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Leading German Keynesian Economist Calls For Cash Ban

It’s official: the world has gone central-planner crazy. 

Monetary policy, whether in the form of “conventional” methods such as the micromanagement of policy rates or so-called “unconventional” measures such as QE, has proven utterly ineffective when it comes to both “smoothing out” the business cycle and reigniting economic growth in the wake of severe downturns. If anything, recent history has shown the exact opposite to be true. 

That is, the Fed helped to engineer the housing bubble and has now succeeded in inflating a similar bubble in stocks and fixed income. Meanwhile, the Japanese experience with QE has plunged the country into what we have affectionately dubbed “The Kuroda Zone”, wherein the BoJ has cornered both the stock and bond markets while failing to promote wage growth or meaningfully raise inflation expectations. In China, the PBoC has taken to cutting policy rates at the first sign of weakness in the stock market, helping to sustain what will perhaps go down in history as the second coming of the tulip bulb mania, while the ECB has taken the insane step of adopting a trillion euro bond buying program while simultaneously demanding fiscal discipline, meaning the central bank’s bond monetization efforts are set against a backdrop of meager supply.

In sum, the collective actions of the world’s most influential central banks have done wonders when it comes to inflating asset bubbles but have done very little to revive robust economic growth. In fact, far from smoothing out the business cycle and resuscitating DM demand, post-crisis monetary policy has actually had the exact opposite effect: it has set the stage for an even more spectacular collapse while simultaneously creating a worldwide deflationary supply glut.

At this stage, a sane person might be tempted to call it a day on the monetary experiments, especially considering that at this point, the limits have been reached. That is, there are literally no more assets to buy and rates have hit the effective lower bound where rational actors will eschew bank deposits in favor of the mattress. But not so fast, say folks like Citi’s Willem Buiter and economist Ken Rogoff: the world could always ban cash because if you eliminate physical currency and force people to use a debit card linked to a government controlled bank account for all transactions, you can effectively centrally plan everything. Consumers not spending? No problem. Just tax their excess account balance. Economy overheating? Again, no problem. Raise the interest paid on account holdings to encourage people to stop spending. So with Citi, Harvard, and Denmark all onboard, we bring you the latest call for a cashless society, this time from German economist and member of the German Council Of Economic Experts Peter Bofinger.

Via Spiegel (Google translated):

Coins and bills are obsolete and only reduce the influence of central banks.This position represents the economy Peter Bofinger. The federal government should stand up for the abolition of cash, he calls in the mirror…

The economy Peter Bofinger campaigns for the abolition of cash. "With today's technical possibilities coins and notes are in fact an anachronism," Bofinger told SPIEGEL.

If these away, the markets for undeclared work and drugs could be dried out. In addition, it would have the central banks easier to enforce its monetary policy.The teaching in Würzburg economics professor called on the federal government to promote at the international level for the abolition of cash. "That would certainly be a good topic for the agenda of the G-7 summit in Elmau," he said. (Click here to read the full interview in the new mirror .)

Even the former US Treasury Secretary Larry Summers and economist pleaded for an end to the already cash . Likewise, the US economist Kenneth Rogoff . He also argued that the interest rates of central banks have less clout when banks or consumer credit rather than hoard cash.

Critics warn, however , such debates would only distract from the real problems of the current monetary policy.

Yes, the “real problems” with current monetary policy. Like the fact that by design it can't possibly work(but it can and will push stocks to unprecedented highs). Paging Mr. Weidmann, your countrymen are going Keynesian crazy.

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