12 September 2015

Eliminating Cash and Digital Currencies

The calls to ban cash are again surfacing in the mainstream media. Earlier in the year various mainstream economist were expressing their support to ban cash transactions. But now it is none other than the Financial Times, who has recently published an article titled “The case for retiring another ‘barbarous relic.’” The barbarous relic they are referring to is cash.

According to an article in ZeroHedge, below is one of the supporting arguments from the article in the Financial Times to ban cash:

“The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy.”

(Source: ZeroHedge 2015 August 28th)

In an article earlier in the year, a writer for the Telegraph commented that “Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms.” (Source: The Telegraph 2015 May 13th)

So two writers from respected media outlets are promoting the cashless movement. The last thing the world needs right now is for the Central Banks to have even more control over every aspect of the financial system. 

However, it does seem that micromanagement of every single detail of our financial lives seems to be inevitable. 

The Cashless Trend is Gaining Momentum

The trend is already in motion. Over the last several months consider the following developments:

Under the pretext of cutting funding for terrorists, the French government already has a law in the pipeline banning cash transactions of over €1,000 ($1,120). (Source: Bonner and Partners 2015 June 25th) 

Earlier in the year it was reported by multiple media outlets that the Danish Government has proposed that most stores could dump their cash registers by January 2016. The story reports that essential services such as hospitals, pharmacies and post offices would be the few to still accept cash.

Business groups say benefits of the plan would be reduced handling and transport costs, increased security and a reduction in attempts to steal cash. Supporters say its a similar story in Sweden and Norway where consumers only rely on cash for less than 6% of all payments made. (Source: CNN Money 2015 June 2nd)

Why Control Cash

When you look at the crisis that happened in Greece earlier this summer, the reasons to control cash are clear. Cash greatly undermines the fractional reserve banking system. If customers feel that a bank is no longer safe mass withdrawals could create a loss of confidence. This loss of confidence could spread quickly to other banks and be very destabilizing. 

Remember in Greece the people were not able to withdrawal more than 60 Euros per day. This is a warning sign that more extreme measures are coming the next time citizens try and withdrawal cash from a bank during times of crisis. Central Banks undoubtably are aware that the system is facing an inevitable crisis and one way to protect the banks may be to eliminate cash. 

Even though its still fiat currency, cash gives citizens a certain amount of anonymity. With cash you are free to conduct business in privacy where purchases can’t be easy tracked. Ending cash would be another step toward eliminating privacy in peoples lives. The powers that be may comprise another freedom using the war on terror as a smoke screen to justify their cause to eliminating cash.

In addition, going to a cashless society enables governments to more easily manipulate spending habits through negative interest rate. For example, if cash were outlawed and banks went to negative interest rates, it would discourage people from saving. With negative rates customers are paying the bank to have a savings account, instead of receiving interest.

Too Much Debt 

Of course the other major issue is one which we have discussed many times and that is too much debt. The global economy is likely at the end of a debt supper cycle. The math just does not work anymore. In many countries the debt will either be defaulted on or it will be inflated away through money printing. 

Everyone already knows that the current government debt structure is unsustainable. As a result a cashless society will enable Central Banks and Governments to track everything and make sure that the maximum amount of tax can be collected as possible.

The fact that respected mainstream economists and media outlets are jumping on the cashless bandwagon means that it could be close to be becoming a reality. As the global economy continues to weaken the measures taken will probably become even more desperate. 

ZeroHedge summed it all up pretty well saying “Naturally, it’s all about state power, control and the ability to make sure the slave population is easily and efficiently milked.”

(Source: ZeroHedge 2015 August 28th)

 Why Gold and Silver Could Soar

If cash were banned there would most likely be a rush into Gold and Silver. Digital currency does nothing to solve the underlying problems in the monetary system. As we have said earlier in this article it will simply give governments and Central Banks that much more control.

The people who have a meaningful percentage of their assets in Gold and Silver do so because they know that there are very few other assets that have a history of maintaining purchasing power, especially in times of crisis.

Digital currencies will not result in fundamental changes in the way Central Banks manage the global financial system. In a cashless economy, Gold and Silver will likely be even more sought after globally as a way to hedge against the unprecedented risks that exist in the financial makers today.

What About Crypto Currencies?

Crypto currencies like Bitcoin do have a place in the financial systems and may even become good alternatives for conducting business. The transaction fees are low and it is a way to hold money outside the banking system. It is also portable, meaning that as of now, you can travel across borders and have access to your Bitcoin account. 

However, as we have seen, Bitcoin and other crypto-currency accounts can be comprised by hackers. So, its not a full proof solution where you want to have large amounts of money stored. It is also largely an unknown and just like fiat currency it could become worthless very quickly.

The key take away is that over the next 5 to 10 years the global financial system will look completely different than it does now. Even if Gold does not play a role in the new system it will do more to help provide stability to savings than just about anything else. 

Physical Gold and Silver can’t be comprised by hackers and it can’t be printed to infinity by the Central Banks. So regardless of what the future looks like having a core position in the physical precious metals is a way to own something tangible that history has aways shown to be valuable.

Author: celticgold.eu

Older The Global Economy and Gold Newer CelticGold Market Report 14th September 2015