Citigroup's Gold "Expert" Demands A Cash Ban

Tyler Durden's picture




 

Late last year, Grexit "expert" Willem Buiter decided that he was a greater expert on the topic of monetary metals than on geopolitics by stating that "Gold Is A 6,000 Year Old Bubble." Now, he has decided that after gold, it is best to just do away with any physical currency altogether and the time to ban cash has arrived.

Submitted by Pater Tenebrarum via Acting-Man blog,

Citigroup’s Chief Economist Joins the Cash Ban Bandwagon

We have discussed the views of Citigroup’s chief economist Willem Buiter previously in these pages (see “A Dose of Buiternomics” for details), on occasion of his coming out as a supporter of assorted monetary cranks, such as Silvio Gesell, to name one. Not to put too fine a point to it, Buiter is a monetary crank too.

Buiter is always shilling for more central bank intervention, and it seems no plan can ever be too silly or too extreme for him. In fact, he seems to have made the propagation of utterly crazy ideas his trademark.

Buiter has now joined one of his famous colleagues, Kenneth Rogoff, another intellectual enamored with central planning, in clamoring for a cash ban (for our discussion of Rogoff, see “Meet Kenneth Rogoff, Unreconstructed Statist”). Both Buiter and Rogoff want to make it impossible for citizens to escape the latest depredations of central bankers, such as the imposition of negative interest rates. This is to be done by forcing them to keep their money in accounts at fractionally reserved banks.

 

web1_WSOP-FINAL-TABLE_111114DB_020_6

If Buiter gets his way, there won’t be a WSOP final table with piles of cash anymore.

Photo credit: David Becker / Las Vegas Review-Journal

As Bloomberg reports:

“The world’s central banks have a problem. When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.

 

In a new piece, Citi’s Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. Fundamentally, the ELB problem comes down to cash. According to Buiter, the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction? Cash therefore gives people an easy and effective way of avoiding negative nominal rates. Buiter’s note suggests three ways to address this problem:

  1. Abolish currency.
  2. Tax currency.
  3. Remove the fixed exchange rate between currency and central bank reserves/deposits.

Yes, Buiter’s solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether. (Note that he’s far from being the first to float this idea. Ken Rogoff has given his endorsement to the idea as well, as have others.)

 

Before looking at the practicalities of abolishing currency, we should first look at whether it could ever be necessary. Due to the costs of holding large amounts of cash, Buiter puts the actual nominal rate at which the move to cash makes sense as closer to -100bp. So, in order for a cash abolition to become necessary, central banks would need to be in a position where they wished to set nominal rates much lower than that.

 

Buiter does not have to go far to find an example of where a central bank may have wanted to set interest rates much lower to -100bp. He uses (a fairly aggressive) Taylor Rule to show that Federal Reserve rates should have been as low as -6 percent during the financial crisis.”

(emphasis added)

As mentioned above, no meddling by a central bank is ever too extreme or too crazy for Mr. Buiter. Here is his ridiculous “Taylor rule” chart (the conclusions of which by the way would be vehemently disputed by none other than Mr. Taylor himself).

 

Ridiculous Buiter chart

Buiter’s ridiculous chart asserting that a “negative interest rate of 6% would have been needed” in 2008-2010, via Citigroup, Bloomberg.

 

This nice gentlemen who wants to either “abolish cash” or “tax currency” for the good of us all, is a typical example of the modern-day viciously statist intellectual (h/t, Hans-Hermann Hoppe), who constantly pines for the authorities to implement social engineering on a grand scale. As long as they implement his plan, everything will be great.

 

Not Bothered by Concerns

Bloomberg tells us that “Buiter is aware that his idea may a bit controversial”. What a relief. He even lists the disadvantages of abolishing cash, only to dismiss them out of hand. With the exception of one crucial point, he is mainly erecting straw men.

 

“Buiter is aware that his idea may be somewhat controversial, so he goes to the effort of listing the disadvantages of abolishing cash.

  1. Abolishing currency will constitute a noticeable change in many people’s lives and change often tends to be resisted.
  2. Currency use remains high among the poor and some older people. (Buiter suggests that keeping low-denomination cash in circulation — nothing larger than $5 — might solve this.)
  3. Central banks and governments would lose seigniorage revenue.
  4. Abolishing currency would inevitably be associated with a loss of privacy and create risks of excessive intrusion by the government.
  5. Switching exclusively to electronic payments may create new security and operational risks.

Buiter dismisses each of these concerns in turn, finishing with: In summary, we therefore conclude that the arguments against abolishing currency seem rather weak.

Whatever the strength of the arguments, the chances of an administration taking the decision to abolish cash seem vanishingly small.

We are surprised by the optimism expressed by Bloomberg that “the chances of an administration taking the decision to abolish cash seem vanishingly small”. We believe that governments all over the so-called “free world” are working feverishly to make a ban of cash currency a reality.

Naturally, we couldn’t care less about the “seignorage” revenue of the State. In our opinion central banks shouldn’t even exist, and “seignorage” is nothing but a euphemism for outright theft. It’s a nice touch that Buiter also doesn’t want to “throw seniors under the bus” and gives a brief thought to the poor as well. Why would any of them ever need anything more than a $5 note?

That someone like Buiter doesn’t find it difficult to dismiss the concern that “abolishing currency would inevitably be associated with a loss of privacy and create risks of excessive intrusion by the government” is no surprise, but it is indeed a legitimate concern. Under the cover of the “war on drugs” and lately the even bigger government-sponsored racket known as the “war on terror”, financial privacy has been all but eradicated already.

 

Buiter

Willem Buiter, shill for statism and central planning, here seen at the Council for Foreign Relations. Did we mention that we believe he’s an atrocious economist?

Photo credit: Bloomberg

 

Needless to say, we dispute the idea that central banks should ever impose negative interest rates. This policy is revolting economic nonsense that greatly harms the economy. As we have previously pointed out, given that the natural rate of interest can never be zero or negative, it is an inescapable conclusion that any imposition of negative market rates will end up destroying scarce capital and leave society poorer.

Lastly, Buiter fails to list one counterargument that we believe is extremely important. Since he works for a charter member of the world’s most powerful banking cartel, this is no big surprise either. We will make up for his oversight.

The 2008 crisis has not shown that anyone needs “negative interest rates” as Buiter erroneously claims. It has mainly shown how rickety and de facto insolvent the fractionally reserved banking system really is. If not for the introduction of an accounting trick (under immense political pressure, the FASB allowed the banks to dispense with mark-to-market accounting, which suddenly made them “whole” again), a huge taxpayer bailout and money printing by the central bank on an unprecedented scale (in the post WW2 era), several of the biggest banks would have gone the way of Lehman.

It was a good reminder that although fiduciary media – deposit money that is not backed by standard money – are part of the money supply in the broader sense, their main characteristic is that they exist only in the form of accounting entries. Hence, fractionally reserved banks are at all times insolvent, since they cannot possibly pay all demand deposits on demand. This obvious violation of what once used to be a bailment contract has been sanctioned by the courts in the 19th century under the influence of banking interests. If one considers how deposit money is multiplied under this system, it should be obvious that the scheme is fundamentally fraudulent. It goes against the grain of legal traditions that have been well-established in Western culture since antiquity.

If cash were to be banned, people could no longer opt out from this system. Bank runs would no longer be possible at all. While a bank run these days only gives one government scrip that is itself an irredeemable liability of a central bank, it is at least slightly more “real” than the accounting entry known as deposit money. Most importantly, cash can insure one against a bank going under, or the breakdown of the entire banking system, which is always a potential danger. Banks would obviously love a cash ban – quite possibly they are the only ones who would love it even more than governments.

 

1212cash

 

Conclusion

We keep being bombarded by moves to restrict the use of cash and demands to ban it altogether. These demands seem to mainly revolve around two arguments: one is that “only criminals need cash”, which is on a par with the absurd assertion that we should all be fine with Stasi-like ubiquitous government surveillance “if we have nothing to hide”. The other one is that a cash ban would make life easier for the central planners who are actively undermining the economy with their policy of debasement. We would argue that central banking and fiat money have done more than enough harm already and that the eradication of financial privacy has gone way too far. Money and banking should be freed from the clutches of government-directed monopolization and cartelization and should be returned to the free market.

 

Addendum:

One of our readers has sent us a few links concerning recent examples of the war on cash waged by governments the world over, which we reproduce below. Indeed, there is little cause for optimism on this score. Given this increase in attempts to restrict the use of cash, the danger that possession of gold will one day be declared illegal again can no longer be so easily dismissed either.

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Thu, 04/16/2015 - 13:10 | 5999298 PirateOfBaltimore
PirateOfBaltimore's picture

Fuck you, banksters.  Ban cash, I go barter.

Thu, 04/16/2015 - 13:12 | 5999305 knukles
knukles's picture

Fuck Statism, Butier (betcha that Citi's not too happy about that attitude as in screws the very fabric banking business) and a cashless society.
How's about eliminating financial engineering?

Thu, 04/16/2015 - 13:14 | 5999313 jaap
jaap's picture

The question is, did he pay the presents and dinners for Heleen Mees with the family bank account?

Thu, 04/16/2015 - 13:20 | 5999341 nope-1004
nope-1004's picture

Stupid assed banker.  Wouldn't want monetary freedom amongst the people now would we?  Going all digital so they can track, trace, tax, and confiscate.

Much of this is happening already.  Go to your bank and ask to withrawal $1500.  "We don't have that" is what I was told.  A BANK!!!

lmao

Thu, 04/16/2015 - 13:21 | 5999361 Harbanger
Harbanger's picture

I can't wait for Govs like Iceland and others to Nationalize their Central Banks.  Maybe then people will see what their problem really is.

Thu, 04/16/2015 - 13:29 | 5999383 Captain Debtcrash
Captain Debtcrash's picture

Huh only 5 days after I wrote a piece bashing Buiters proposal: http://www.debtcrash.report/entry/economist-buiter-proposes-a-cashless-society

Thu, 04/16/2015 - 13:30 | 5999411 outamyeffinway
outamyeffinway's picture

If they banish cash, how will Harry Reid get paid?

Thu, 04/16/2015 - 13:35 | 5999443 Manthong
Manthong's picture

That Tree of Liberty looks to be getting awfully thirsty.

Thu, 04/16/2015 - 13:40 | 5999463 Xibalba
Xibalba's picture

What's wrong with a One World, Digital, Currency?  You can have an RFID chip implanted at birth, all of your records stored on it, and never have to worry about forgetting your drivers license or wallet again!  Wholla!  

Thu, 04/16/2015 - 13:45 | 5999489 SilverIsKing
SilverIsKing's picture

Voila!  or Hollaaaa!

Thu, 04/16/2015 - 13:47 | 5999500 Silky Johnson
Silky Johnson's picture

I have a better demand, bankers and economists should be required to pass an exam before being hired. Applicants are hung from a gallows for an hour, if they survive, they are hired.

Thu, 04/16/2015 - 13:57 | 5999546 SWRichmond
SWRichmond's picture

No private citizen should be allowed to own assault cash.  It is far too powerful.  Only the state should be allowed to own cash.  This is for your own protection.  Only criminals need semiautomatic assault cash.

If private citizens must be allowed to own cash, it must be only small magazine capacity cash (5$ or less).

Thu, 04/16/2015 - 13:59 | 5999556 El Vaquero
El Vaquero's picture

Fuck this crooked fuck.

Thu, 04/16/2015 - 14:05 | 5999577 Bay of Pigs
Bay of Pigs's picture

+1 Evil personified.

Thu, 04/16/2015 - 14:27 | 5999660 OpTwoMistic
OpTwoMistic's picture

This man and his ilk serve a demon. I avoid banks totally.

Thu, 04/16/2015 - 14:37 | 5999722 SumTing Wong
SumTing Wong's picture

This is called a trial balloon. When all of the sheeple are too busy watching American Idol, they will start banning cash. And then they will say, "Well, none of you objected."

I work on the underground economy. We'll keep working it, even if it involved trading PMs or ammunition or Tide detergent or whatever.

Thu, 04/16/2015 - 14:51 | 5999790 green sheen
green sheen's picture

Since when do rich people care about money? They own everything!

https://www.youtube.com/watch?v=68V1-2OGeYw

Thu, 04/16/2015 - 16:11 | 6000103 Haus-Targaryen
Haus-Targaryen's picture

I can't get into cash huh?  

How about I pop myself into my little car and drive into Switzerland a few times a year to "stock up?" Or are you going to ban the Swiss from having cash too?  

He has more problems in his theory than sliced cheese.  Oh, then there is Poland, the Czech Republic, Denmark, Norway, the UK, etc., etc., etc.,  And even if you did get all these countries to give you a reach-around -- there is still the Rusky Currency.  

Then again, sir, because of you I am stacking like a mother fucker. 

I will pay no "European Solidarity Contribution" or other such nonsense.  

Thu, 04/16/2015 - 18:29 | 6000612 Supernova Born
Supernova Born's picture

With the $100 bill worth a mere $14 in 1967 buying power?

All they have to do is leave the maximum denomination the $100 and inflation will take care of cash's utility.

 

 

Thu, 04/16/2015 - 17:19 | 6000367 Stuck on Zero
Stuck on Zero's picture

Please, someone, hack this guys bank codes and steal all his money.

Thu, 04/16/2015 - 15:02 | 5999847 Herd Redirectio...
Herd Redirection Committee's picture

Only criminals use cash, ergo criminals would have looked to take over the fiat creation/moneyprinting business, amiright?

It reminds me of currency debasement in the time of gold/silver standard.  Coins would get clipped, and the sovereign/central banks would call in all the old coins, and make 25% more coins by making them 25% copper!  Now, if you  or I did that, it would be highly illegal!

Thu, 04/16/2015 - 14:06 | 5999585 Colonel Klink
Colonel Klink's picture

I think the world needs to ban (read hang) Ivory tower assholes!  Especially those who run Central banks, attend Bilderberger conferences, and those who try to control others.

Thu, 04/16/2015 - 14:30 | 5999678 Thirst Mutilator
Thirst Mutilator's picture

Who runs BARTERTOWN?

Thu, 04/16/2015 - 19:04 | 6000758 turnoffthewater
turnoffthewater's picture

Taylor rule = a lot higher gold price

Thu, 04/16/2015 - 14:13 | 5999609 Ignatius
Ignatius's picture

How are they going to 'explain' the continuing existence of the profitable illicit drug trade after such a move as banning cash?

 

Thu, 04/16/2015 - 14:30 | 5999679 El Vaquero
El Vaquero's picture

I was wondering the same thing myself.  They would rely on the masses being sheepishly stoopid.  Unfortunately, more and more of us are waking up.  A lot don't understand why things suck, but they fully understand that things suck. 

Thu, 04/16/2015 - 14:32 | 5999689 cnmcdee
cnmcdee's picture

The Law - Frederick Bastiat

http://bastiat.org/en/the_law.html#SECTION_G015

 

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

Then abolish this law without delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals. If such a law — which may be an isolated case — is not abolished immediately, it will spread, multiply, and develop into a system.

The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protect and encourage his particular industry; that this procedure enriches the state because the protected industry is thus able to spend more and to pay higher wages to the poor workingmen.

Do not listen to this sophistry by vested interests. The acceptance of these arguments will build legal plunder into a whole system. In fact, this has already occurred. The present-day delusion is an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.

Thu, 04/16/2015 - 18:06 | 6000541 Hari_Seldon
Hari_Seldon's picture

Is this idiot not worried about ending up on the wrong end of a nailgun?

Thu, 04/16/2015 - 14:05 | 5999561 macholatte
macholatte's picture

 

Statist Modern day supporter of political slavery; A secular State-Worshiper; Member of the cult of the State; An irrational, immoral, collectivist parasite which leeches off the productive private sector at the point of a gun, while attempting to justify such behavior through invalid, unethical, altruistic arguments. Uses statist law (oppressive edicts backed by criminal violence) to intimidate and run the neo-slave racket. Typically found in government, politics, bureaucracy, police, military and law; aka Supporter of such; Governmentalist; Nationalist; A degenerate sub-human who makes your life a living hell; An accident just waiting to happen... / / Anarcho capitalist A person whose philosophy is based on the idea of individual sovereignty, and a prohibition against theft, coercion and fraud. It sees the only just basis for law as arising from private property norms and an unlimited right of contract between free and sovereign individuals. From this basis, anarcho-capitalism rejects the state as an unjustified monopolist and systematic aggressor against sovereign individuals, and embraces anti-statist laissez-faire capitalism. Anarcho-capitalists would aim to protect individual liberty and property by replacing government monopoly, which is involuntarily funded through theft by taxation, with private, competing businesses that use physical force only in defense of liberty and property against aggressors. Hence, they believe that all goods and services, including law, order, and security, should be supplied through the mechanism of a free market. Anarcho capitalists know that when you keep all of what you produce, you have an incentive to produce more, thus the whole of society benefits greatly from each individuals inherent greed.
Thu, 04/16/2015 - 14:13 | 5999610 ILLILLILLI
ILLILLILLI's picture

Replace the word 'greed' at the end there with 'enlightened self-interest' and you've got a winner.

Thu, 04/16/2015 - 14:07 | 5999562 BaBaBouy
BaBaBouy's picture

Shyit... Where Is I Sis When You Need Em..?..

Thu, 04/16/2015 - 14:15 | 5999613 Ignatius
Ignatius's picture

Will the 'thong chick' attack this guy?

Thu, 04/16/2015 - 14:02 | 5999567 ILLILLILLI
ILLILLILLI's picture

They can have my cash when they pry it from my cold, dead fingers.

As if...

Thu, 04/16/2015 - 15:25 | 5999948 lehmen_sisters
lehmen_sisters's picture

You will also need to trade in your CCW for the new CCC , Carrying Concealed Cash permit.

Thu, 04/16/2015 - 22:22 | 6001522 Me.Grimlock
Me.Grimlock's picture

"Assault Cash" was the name of my band before we changed the name to "The Avocado Seizures".

Thu, 04/16/2015 - 14:05 | 5999552 BaBaBouy
BaBaBouy's picture

ALL HAIL The Keynster Bankers ...

Thu, 04/16/2015 - 13:48 | 5999509 I am more equal...
I am more equal than others's picture

 

 

 

Band stupidity. 

If that happens there would be a lot of politicians, bankers and corporate leaders digging ditches.

Ditches could be used for burial purposes too. 

Thu, 04/16/2015 - 14:02 | 5999563 El Vaquero
El Vaquero's picture

Exactly.  And if they were to actually go through with it, they would get a lot of mail warning them of as much before they finished the job too.  Not just the random death threat, they would be flooded with "we'll kill you and your banker backers, motherfuckers" type letters. 

Thu, 04/16/2015 - 14:27 | 5999663 Cannon Fodder
Cannon Fodder's picture

May I suggest you read your Bible, for a spoiler, skip to the end, the Book of Revelation.... something about the Mark of the Beast....

Thu, 04/16/2015 - 14:57 | 5999814 Bananamerican
Bananamerican's picture

I've never been big on "End Of Days"/Rapture/Armageddon talk but if they ban cash, ima start thinkin' about it....

Thu, 04/16/2015 - 15:35 | 5999996 El Vaquero
El Vaquero's picture

It will lead to the end of their days if they go through with something like that.  The criminal cocksuckers are getting desperate. 

Thu, 04/16/2015 - 13:48 | 5999508 fascismlover
fascismlover's picture

same as he does now, in transvestite hookers and blow

Thu, 04/16/2015 - 13:49 | 5999513 zhandax
zhandax's picture

Ban Birinyi rulers, instead.

Thu, 04/16/2015 - 14:22 | 5999623 bwh1214
bwh1214's picture

What a joke!

Thu, 04/16/2015 - 14:16 | 5999617 RaceToTheBottom
RaceToTheBottom's picture

I think banishing cash allows for more central banks shenanigans, not less.  

What presently gets delivered as bags of cash, held in congressman's freezers would be delivered directly to bank accounts of congressmen, disguised as whatever to whichever account they want it hidden in.

Thu, 04/16/2015 - 14:27 | 5999657 Captain Debtcrash
Captain Debtcrash's picture

Pater Tenebrarum took MY POST added a bunch of fluff waited a few days and posted it to his blog.

Thu, 04/16/2015 - 15:39 | 6000008 bwh1214
bwh1214's picture

Yep strait up stole that shit!!!

Thu, 04/16/2015 - 19:38 | 6000908 Thisson
Thisson's picture

You think you're the only one that thinks this?  That just because you posted first the idea is yours?  You can't copyright an idea.  You don't own it.

Thu, 04/16/2015 - 15:40 | 6000010 DavidC
DavidC's picture

outamyeffinway,
Easy, insider trading - it's not illegal for them.

DavidC

Thu, 04/16/2015 - 13:25 | 5999386 RU-GAY2
RU-GAY2's picture

They ban cash at their peril.  Because they're too stupid to understand the size and depth of the black markets which would immediately go to gold, silver, Bitcoin and other alternatives...

Do NOT follow this link or you will be banned from the site!