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What Do Greece and Louisiana Have in Common? The War on Cash
More and more institutions are trying to make it harder for you to move your money into cash.
Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.
Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. In France and Italy, you are not allowed to make cash transactions above €1,000.
This sounds laughable to most people, but it is a reality in Europe… and in the US, in some regions. Louisiana has made it illegal to purchase second hand goods using cash.
This is just the beginning. The War on Cash will be spreading in the coming weeks.
The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.
This is precisely what happened in 2008…
When the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds.
A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).
This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.
To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.
When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.
None of these issues have been resolved. The big banks remain as leveraged as ever and at risk of implosion should a significant percentage of capital get pulled into physical cash.
European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).
This is why whenever things get messy in Europe, the ECB and EU begin implementing capital controls.
Consider what recently happened in Greece. Depositors began to flee the banks in droves, so they declared a bank holiday. This holiday included safe deposit boxes… so all the bullion or physical cash Greeks had stashed there remained locked up… just like the “digital” money in their savings accounts.
Again, it was impossible to get cash out of the banks… even cash that technically wasn’t “in the system” anymore but sitting in safe deposit banks.
The US financial system isn’t any better. Indeed, the vast majority of it is in digital money. Actual currency is just a little over $1.36 trillion. Bank accounts are $10 trillion. Stocks are $20 trillion and Bonds are $38 trillion.
And at the top of the heap are the derivatives markets, which are over $220 TRILLION.
If you think the banks aren’t terrified of what this market could do to them, consider that JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades.
Mind you, this is the same bank that is now refusing to let clients store cash in safe deposit boxes.
This is just the tip of the iceberg. As anyone can tell you, it’s all but impossible to move large amounts of money into cash in the US. Even the large banks will routinely ask you for 24 hours notice if you need $10,000 or more in cash. These are banks will TRLLLIONS of dollars worth of assets on their books.
This is just the beginning.
Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings.
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It seems like you are trying to say that all of this new found wealth in the stock market is in fact- not real. That when people start cascading out to find no bond yields, no savings or CD rates, that they cannot convert their wealth into anything other than electronic credits and debits.
This is precisely how the Bernank was going to eliminate all of this excess liquidity- didn't he say that the Central Bank could do it in 20 minutes?
I give you Ron Kanjorski. He explains why TARP was needed and what it was for. The Fed noticed a large sum of $500 billion dollars was being taken out of money markets within a few hours. The Fed estimated that by the end of the day a total of $4-5 Trillion would have been pulled which would have destroyed not only the US economy but the global economy.
He ends the segment with the comment that someone threw us into the middle of the Atlantic Ocean, financially speaking, and we have to determine which is the closest shore and if we can even get there by printing money. WE DON'T KNOW!
https://m.youtube.com/watch?v=pD8viQ_DhS4
When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode"
Ok, ok...
Let's take this step by step.
In the first place, ANY fiat currency is ONLY validated by the issuer of it. It is an instrument of exchange that can be revalued, revoked, or replaced at any time by the authority (directly or by delegation) that emits it.
Historically, hyperinflation can be caused by the inordinate emmison of a fiat currency during a financial emergency to cover a sudden and panicked demand for it. So, either this could happen, OR, a totally new means of exchange could be introduced (along with new bone fides) to replace the extant one. Indeed, the new fiat would likely be introduced by a new, "higher" authority (such as Congress directly) if the cause of the panic is a loss of confidence in the value of the original fiat.
So, why would there ever be a sudden and panicked demand for cash?
As I see it, there are basically two reasons:
1. Economic crash is underway or is imminent.
2. Aside from an economic crash, or even a weak economy, key members of the polity suddenly become aware of the insolvent futility of continuing to place faith in the ability of an extraordinarily-indebted government, or it's dysfunctional assigns (eg Federal Reserve) to comprehensively resolve the insolvency.
So, one condtion involves circumstances overwhelming economies and the markets within them, while the other overwhelms a precious "belief" in an extant system's power to cope with, and to overcome, those circumstances.
Indeed, that loss of confidence is only heightened by the inability to deal with already-chronic fiscal red ink, which is routinely added to one of the key reasons for the shaken faith: national debt.
What makes our time different, is we are dealing with BOTH at the same time. THAT'S new.
Our current economic malaise-to-crisis has it's roots in shortsighted corporate outsourcing of western middle class economies. There can be NO DOUBT about this. Our immediate needs for income growth and good-paying middle class job creation has become an emergency situation, and the principle cause of the injury necessitating the emergent care is 40 years of damage outsourcing created.
And all of that took place within an economy ever expanding it's social spending well beyond it's ability to fund those needs without major increases in debt spending. THOSE programs had THEIR headwaters in government's New Deal response the the LAST major economic collapse, the Great Depression.
Now, the full effects of both problems are upon us.
Not only do we continue to overspend, without hard choices to end deficits that feed debt, but NO one has focused on overcoming the emergency that outsourcing has created. All we've done is continue the first, while expensively and radically sidestep the second.
Whether you can or cannot retrieve cash is only relevant to the extent it is.
We have never been here before; old ideas about wealth preservation won't work any more than warping efforts to stimulate a dying economic system have.
If you have any cash, or can access it, even with large initial tax consequences, it may not help to just grab and hold it. I suggest using it to obtain productive assets that retain value for that reason alone. Cash, PM's, and other assets don't do this well. Too many unconstrained variables make their precieved value precarious.
Productive equipment relies mostly on me to make it valuable; the other's rely mostly on something or someone else.
That's a bit of certainty in uncertain times...
m
You WROTE:
Our current economic malaise-to-crisis has it's roots in shortsighted corporate outsourcing of western middle class economies. There can be NO DOUBT about this. Our immediate needs for income growth and good-paying middle class job creation has become an emergency situation, and the principle cause of the injury necessitating the emergent care is 40 years of damage outsourcing created.
"Shortsighted"?! Don't think that strategy was anything but witting, deliberate, and highly successful.
Sorry - double post.
And how exactly do they get to violate the FEDERAL LAW that allows cash for "all debts?" Funny, I didn't think that was allowed.
Another thing Louisiana and Greece have (had circa 2013) in common is their GDP.
I'll bet Greece doesn't have Corexit flavored shrimp.
I have two banks I use (as necessary)
One is a very large bank and the other a small regional bank.
Neither of them prohibit the storing of cash in a safe deposit box.
In fact, they really don't prohibit anything from being stored there.
Not to say there isn't a 'war on cash'. But I'd say it is a natural evolution even if there wasn't an agenda to digitize cash. The technology creates the pathway and the desire of banks to reduce handling costs light the way. That said, yes I also believe there is an agenda.
But fear mongering to sell a product is repulsive to me. Always has been.
Is Phoenix Capital Research a real company? They should take "Research" out of their name.
Louisiana Folk subsidize Duck Dynasty to the tune of millions. I’m guessing a Republican stronghold.
When you open a safety deposit box account you get a statement that cash is not to be stored in your box. It's not new it's the way it's always been. Everyone does anyway but you are not supposed to. Smart people should not be putting any money in a bank in any form. Put enough in to operate and the rest under the mattress.
When a Gov. makes bullshit laws that cannot be enforced it's credibility suffers across the board.
Negative rates are really a tax when governments hold the bonds - we pay the difference.
Turn in your cash, the government will take good care of you.
Being a bit of an schedenfreude...when the Occupy Wall Street idiots were trying to pull the system down, I used to suggest to them to start a movement to pull their monthly and weekly cheques out of the banks in cash...all at the same time. Don't use credit or debit cards, just cash.
Poor bastards...They had no freaking idea what I was talking about.
Wow, it sounds real similar to a certain family in Europe who stored gold for people and gave them notes.
"There is plenty of paper we can pass around, my sons, what is the chance everyone will come for their gold at once? We can issue more gold notes than the fizz in the vault!"
"But dad, what if it does happen?"
"Well, there would be a huge crisis."
Those friggin Italians.
Yes, Louisiana Gov. Bobby Jindal, posing now as a conservative as he runs for president, signed a law a few years ago making the use of cash to buy second hand goods illegal. He was bowing to police lobby pressure to create an easy avenue for arresting and prosecuting copper thieves. However, no one in Louisiana pays attention to this law -- it is ignored across the board. Louisiana natives have a strong regard for our history, and we have far greater regard for Jean LaFitte the Pirate than we have for the likes of, say, Abe Lincoln.
Trust me,
If you live in Louisiana, the very last thing you want to see as you pull up to your house with no close neighbors, is that your AC condenser is gone off to the scrapyard.
Which became an epidemic because crack-heads like easy money.
The law applies to copper/aluminum coils and precious metals like jewelry. Fences have to pay by check.
Louisiana has a disproportionally high population of freelance entrepreneurs.
They have figured out a way around that here. You have to show id when selling scrap. And then they pay you in cash.
But this is talking about pawn purchases. The barter community is alive and well here in Flyoverville.
De-criminalizing drugs would largely alleviate the theft problem.
+++++ And Super +++++
Vote down! I download every Schiff podcast but must disagree and say that FAITH in gold's value is a necessity. So much of the world is in debt that countries are fleeing anything tangible, wanting to substitute digital assets which are so easy to "produce," and difficult to personally posess like PMs. If governments clamp down on trading valuable personal property, and substitute digits, redistribtion by central governments/bankers is easier because they can own and regulate all the digits.
That is why there is such a war on cash and gold. Dont put it past socialists/communists to kill money as we know it. Pol Pot did it only temporarily but dont expect libs to have learned anything from him. FDR and Nixon had no qualms about fixing gold, and I could expect someone like Obama surpassing them. He has become a man possessed these last days in office.The main salvation for gold is that China likes it and no one is going to tell China that gold should have no or little value.
Thu, 07/23/2015 - 00:04 | 6344
I'm not certain what your problem with "Mr. Phoenix" is..., but here's mine:
He says,
"The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.
This is precisely what happened in 2008…
When the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds."
Is he trying to say that in just 2008 money market depositors withdrew $500 BILLION in PHYSICAL CASH (greenbacks)??? I don't believe there is much over a trillion worth of coins and FRN's (TOTAL) in circulation, is there?
Is he really saying $500 BILLIOM....physical cash.... 2008? His writing is so sloppy that I'm never sure what he's saying.
And, did they succeed? Were the depositors stopped? If they were prevented from withdrawing all that cash, who did that? And, how did they do that? ...again, I can't tell from his post because his writing stinks!!!! AND, HE DOESN'T SEEM TO CARE WHETHER YOU LEARN ANYTHING OR NOT! HE MUST THINK WE'RE ALL IDIOTS WHO WILL LISTEN TO ANY KIND OF HALF-WITTED DRIVEL AS LONG AS IT SOUNDS SCARY AND CONSPIRATORIAL! I keep hinting around about this and I obviously have to be more blunt: if you're gonna keep posting these infomercials, then HIRE A PROOF READER!!!!
(BTW: We have a fractional reserve banking system, so if everyone tries to withdraw cash - physical or otherwise - at the same time, there will be problems no matter what else is going on.)
PS: the primary reason I read ZH is to learn things... and I don't comment on most posts I read. But every time I read one of this guy's posts, I feel like I just ate a mouthful of dirt.
Why horses should eat dirt.
Even bad articles brings out the thoughts and input from the likes of mr ed.
What we don't learn from the article we learn from the horses mouth.
Fiat 'money' is a fraud.
Fractional 'reserve' banking is a fraud. (Which the banksters had their whore lawyer/liar/politicians make 'legal'.) But under real, Universal Natural Law - no one has the right to steal anything from another. Writing %^*# on a piece of paper does not change this.
The criminals are trying to make it 'illegal' for people to try to get their own money. If enough did so, the whole rotten exploitive system would collapse and the fraud exposed for all to experience.
It doesn't matter what they try to do, Universal Natural Law cannot be broken forever.
Karma sucks for breakers of the real Law.
So, just incite a few of your friends to incite others to withdraw their funds from banks. I'm willing to do that.
You have to be dead to get karma, assuming it exists in the first place, and since you are dead there is no awareness of rebirth to a lower or higher lifeform.
Karma doesn't suck. It just is. (or is not, as the case may be)
If you want to conjure a divine retribution, stick with the old Christian eternal lake of fire and stop misrepresenting those poor old Buddhists.
You just add to their suffering that they're tring to work through.
absolutely not:
"You have to be dead to get karma"
read up on what karma is. it is not something magical that happens after you die. it's the conditioning of your mind through the actions you do every day.
nor is it "divine retribution".
don't know where you got these ideas.
http://www.snopes.com/politics/business/cashillegal.asp
Let me add that I do believe that there is a war on cash, and it should be shown to counter powers that believe that they know better than the citizen.
I do have a big problem with presenting views that are potentially important while not using accurate talking points. It discredits the entire argument when scrutinized by those who want to protect those views.
More clean facts and less hyperbole would make your point much more powerful.
i agree with what you say.
however, i would not characterize the author of this article as having used inaccurate talking points.
the louisiana law in question is indeed an attack on those who use cash, an attack on peoples' rights, by government bureaucrats who want to control people.
JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades
I'm certain it was Citi and not JP Morgan. http://www.zerohedge.com/news/2015-03-13/peak-crony-capitalism-first-citi-writes-us-financial-laws-now-boeing-tells-ex-im-ban
Agree, the PTB have much more control of people who do not use cash for transactions. That said, there is a big difference between not being allowed to SPEND your money and not being allowed to hold your money.