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The Danger Of Eliminating Cash
Submitted by Alasdair Macleod via GoldMoney.com,
In the early days of central banking, one primary objective of the new system was to take ownership of the public's gold, so that in a crisis the public would be unable to withdraw it.
Gold was to be replaced by fiat cash which could be issued by the central bank at will. This removed from the public the power to bring a bank down by withdrawing their property. A primary, if unspoken, objective of modern central banking is to do the same with fiat cash itself.
There are of course other reasons for this course of action. Governments insist that they need to be able to trace all private sector transactions to ensure that criminals do not pursue illegal activities outside the banking system, and that tax is not evaded. For the government, knowledge of everything individuals do is necessary control. However, in the monetary sense, anti-money laundering and tax evasion are not the principal concern. Central banks are fully aware that the financial system is fragile and could face a new crisis at any time. That's why cash in their view must be phased out.
A gold run against a bank or banks, in the ordinary course of banking, is no longer a systemic threat, but the possibility that depositors might queue up to withdraw physical cash from a bank in which they have lost confidence is very real. Furthermore it is a public spectacle associated with monetary disorder of the most alarming sort. It is far better, from a central banker's point of view, to only permit the withdrawal of a deposit to be matched by a redeposit in another bank. That way, a bank run can be hidden through the money markets, with or without the intervention of the central bank, and the deflationary effects of cash hoarding are avoided.
This is commonly understood by followers of monetary matters. What has not been addressed properly is how a cashless economy behaves in the event of a significant alteration in the public's preferences for money relative to goods. Normally, there is a balance in these matters, with the large majority of consumers unconcerned about the objective exchange-value of their money. There are a number of factors that can change this complacent view, but the one that concerns us for the purpose of this article is the speed at which the relationship between the expansion of money and credit and the prices of goods and services can change.
There is no mechanical link between the two, but we can sensibly posit that the extra demand represented by an increase in the money quantity will eventually drive up prices, setting the conditions for a potential shift in public preferences for money, which would drive prices up even more. When the general public perceives that prices are rising and will continue to do so, people will buy in advance of their needs, increasing their preference for goods over holding money.
This is currently desired by central bankers wishing to stimulate demand, but they are under the illusion it is a controllable process. Furthermore, increases in the money quantity are being driven by factors not under the direct control of monetary authorities. Welfare states are themselves insolvent and require the issuance of money and low-interest credit to balance their books. Commercial banks can only continue in business if the purchasing power of money continues to fall, because their customers are over-indebted. Unless the expansion of the money quantity continues at an increasing rate, the whole financial system will most likely grind to a halt. It is now required of central banks to ensure the money quantity continues to expand sufficiently to prevent systemic failure.
It is therefore only a matter of time, so long as current monetary policies persist, before it dawns on the wider public what is happening to money. Preferences will then shift more definitely against holding money, radically altering all price relationships. If this leads into a hyperinflation of prices, which is the logical and unavoidable outcome, the speed at which money collapses will be governed in part by physical factors. In the case of Germany's great inflation in the 1920s, the final collapse can be tied down to a period of six months or so, between May and November in 1923, after a last-ditch attempt to control monetary inflation failed.
The limiting factor in this case was the time taken to clear payments through the banking system, and when prices began to rise so rapidly that cheques lost significant value during the clearing and encashment process, the economy moved entirely to cash. When prices rose faster than cash could be printed, the limitation on the purchase of necessities then became one of cash availability.
It is in truth impossible to isolate all the factors involved, and the course of events during the destruction of a currency's purchasing power is bound to vary from case to case. Today the situation is very different from the hyperinflations in Europe over ninety years ago. A society which uses electronic transfers spends bank deposits instantly. The merchant, who is subject to the same panic over the value of the payment received looks to dispose of his cash balances as rapidly as possible as well. In other words, the electronic transfer of money has the potential to facilitate a collapse in purchasing power at a rate that is far more rapid than previously experienced.
The most obvious delaying factor left becomes the speed with which the public realises that government money has no value at all. People are generally ignorant of monetary matters, and a majority of them have no alternative but to believe in their money, because without it they are reduced to barter. It is entirely human to wish these concerns away. For a minority of the population lucky enough to have a combination of wealth and foreign currency bank accounts the problem was not so great in the past, but the interconnectedness of the global monetary system suggests that all today's fiat currencies face the same problem contemporaneously, and there is no refuge in foreign currency.
These concerns have encouraged the development of alternative solutions, such as our own Bitgold/GoldMoney payment and storage facility, which will allow both consumers and producers to reduce their exposure to the banking system and continue to trade. There are also private currency alternatives such as bitcoin. Whether or not alternative currencies have a future monetary role for ordinary people at this stage looks unlikely, primarily because they are less stable than government currencies; however that might change in the future. They represent a work-in-progress that has the power to undermine the state monopoly on money, not least because they lie outside a government's ability to manage capital controls directed through the banks.
What fascinates many of those with an understanding of anticipatory private sector solutions, is the potential for triggering a seismic change in the money used today. They have the ultimate potential to free commerce from the whole concept of a state-directed monetary policy. Rapidly developing technological solutions are therefore another factor that could accelerate the public rejection of government money and the state-licensed banking system, simply by offering a practical alternative to a debasing currency. With the progress being made to eliminate cash and the private sector's ability to develop an alternative financial system in advance, if the collapse of government money comes, it could be very swift indeed.
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"It ain't the stock ... its the flow" - Tylers long held mantra...
The Banks and Fed have to control the flow... elecdtronic flow..skimming their nickels and dimes with each flow transaction. especially in ties of no margin ZIRP.
https://www.youtube.com/watch?v=Z-DtANcWQnE
They’ll ban cash soon enough. They only know how to extend the credit bubble by lowering rates, and just admitted that QE doesn’t work. The only thing standing in their way is the zero lower bound aka the limit imposed by cash.
A loss of confidence in gvt would have an even more detrimental effect than a loss of gvt monetary solutions, or better put, consequences and timers bitches!!
Honest, hard working, people are not at all ignorant of monetary matters.
Honest, hard working, people are deceived and therefore ignorant of counterfeiting matters.
The deception is because of the teachers, writers, editors.
Ignorance learned is due to lack of intelligence taught.
Fawke cash and fawke anyone who still likes cash. Why? For all of the trace elements of cocaine, snot and fecal matter it carries? There is not one thing that cash can do that Bitcoin cannot do 1000X better.
Cash is grand as long as it is money and not counterfeit.
http://ocsure.blogspot.com/2015/05/what-is-fractional-reserve.html
All the elimination of cash will do is completely impoverish the 99%. It will solve nothing. Then the 1% will turn on itself.
Good luck to them elliminating the digital cash - I'll get myself big bag of popcorn and watch their attempts to axe bitcoin.
Haha... look at all teh junk we can collect here! Fake fawking sell-out pro-gov shills on ZH! Same as it ever was! At the end of teh day, you will side with the Federal Reserve System & BIG .GOV before you side with teh cryptoanarchists!
And PS you little worthless bitches... I was a cryptoanarchist (who were fighting the state) before you had ever heard of "Ron Paul" or "End the Fed".
If need be they can control the flow as well. Just make it law that a government functioary has to approve every purchase before it can take place. Just think how many affirmative action "jobs" that could create.
NOTHING wrong in the USA today that couldn't be fixed with a few more William McKinley's, Grover Cleveland's, James Madison's and Salmon P.Chase's floating around. And I mean NOTHING
Its NOT about the cash
Its ALL about the control; the control freaks are in full panic mode at this point-and because they can't control cash its their next pathological objective
Its always all about the control with these people.
Its the same demented mindset as communism/socialism-they're always looking for just one more law or rule that will magically may the whole crappy system "truly" work right.
The Central Banks have so much control already that the freedoms required from the world to generate collateral and cash flow to meet the debts extended can never materialize.
As debt increases, the Bankers increase regulation, taxes and insurance costs trying to gain the "edge" on the risks they took. All that "control" they try to exert does, is compromise their ability to ever be repaid.
Its a truly beautiful paradox; they try to control/enslave people and entire nations with debt, and in so doing they are deprived of the proceeds of the debt.
Aw thought this would be a Marty Armstrong article.
Cash is King.
Gold is king.
Gold, the other alternative currency...which also happens to be money. Do you know the difference between money and currency? You soon will
Best of luck with picking up your gold from the storage facility after TSHTF...
You won't have to if you have a computer.
In a sense, once cash is gone, everything will be free!
Whoopie!
the dollar index is rising on the world markets and this article is worried about hyperinflation? I call BS!!!
Before Cash can collapse, debt has to collapse. That means long term rates will rise sharply even with the Fed trying to keep ZIRP alive. Its only AFTER the systemic meltdown when defaults on bonds soar, the Fed may try to monetize insolvent bonds or future liabilities and that could possibly cause hyperinflation. I say "possibly" because it seems to me interest rates would soar even higher as confidence in the financial system is lost and the Fed would soon realize that the day of reckoning is at hand.
Your post shows you do not understand the credit markets and how they can cause severe supply problems.
Cash is LIQUID and debt is ILLIQUID. Therefore, before Cash can collapse, debt will default.
Keep going...USD-denominated debt will default in the EMs, resulting in deflation of the USD money supply, resulting in derivative and other hypothecation chains popping....and systemic collapse.
The rise of the dollar will cause it's plummet thereafter. Jim Willie uses an interesting analogy in his latest letter of tying someone to a bunch of balloons so that they rise into the ether. They die of asphyxiation, the balloons eventually burst in the low-density air, and the entire mess falls to the ground.
He very well may be right. A strong USD is a death knell for the USD with 9T in USD-denominated debt in the EM. Once they default, they'll move on to using local currencies. Those currency swaps that have been set up over the past few years weren't for show. They're to be used.
And the IMF now has a backseat in the EM due to China's AIIB (?) coming online to perform the same function with a $100B backing.
Seems everything is falling into place.
Got popcorn?
No it won't, 2008 proved the fed will just inflate their way out of a monetary default, a gvt default based on confidence is an entirely different subject with far(er)? reaching and greater consequences.
If you do not agree that eliminating cash is a good idea, then you must be a terrorist.
We laugh now, but wait until someone actually says it.
Gather it now, in daily increments of 20s that will be worth multiples of that in the early going of the collapse, after which a monster box will be equally or more valuable — https://www.golddealer.com/product/american-silver-eagle-monster-box-of-... — with gold for large purchases at a song.
Already have...
"“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”
This from a US kangaroo court convicting Bernard von NotHaus of Liberty Dollar of counterfeiting the U.S dollar which hasn't been issued in years.
https://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of...
It takes a real sick mind to accuse and punish a person of something the Federal Government and the Federal Reserve have been doing for years.
And incidentally,,, no help whatsoever from the so called real money groups and websites which makes me very suspicious of anyone or any website that spouts real money.... Hypocrites.
"These concerns have encouraged the development of alternative solutions, such as our own Bitgold/GoldMoney payment and storage facility"
The Bitgold storage facility could be confiscated by government and then what? In fact it would probably be one of the first hits. At the very minimum making it's usage illegal would make it useless. And trust me,,, even a security code from here to the moon would be easily broken. After all,,, the developers usually work with the governments.
Even gold / silver or currency held in a mattress or buried is subject to government confiscation. Looking around the usa with the now robber barren police squads stealing money "legally" tells me this will happen for sure. With Mr. digital following, tracking and spying on your communications, finding it would not prove a big problem,,, even unfortunate boating accident losses would not be difficult to find these days :)
The only viably solution is the elimination of the threat itself...
Dubious, the gvt couldn't find a needle in a haystack with a giant Earth magnet.
Well, being Canadian I looked into the safety and security issue around bitgold before I put any money there. Assets held in their safekeeping are protected under the bailment laws of Canada. Here is the excerpt from their website:
"Every metric gram, kilogram, or tonne of gold that a customer has acquired through BitGold is owned and allocated to the customer once transactions have settled. BitGold Inc. Customer Agreement and Terms of Service unequivocally state that all customer assets are held by BitGold Inc. as bailee for the benefit of customers. A "bailment" occurs when a person (the "bailor") delivers personal property into the possession of another person (the "bailee") for safekeeping but retains legal title to the property. The bailee (the person who has possession of the goods) holds possession of the property on the understanding that the property will be returned to the bailor (you) once the bailment relationship is terminated according to the bailor's (your) instructions"
Now, could the government change the law? I suppose they could try but then it would be a matter for the Supreme Court of Canada and I doubt that they would support the government in contravention of the Constitution and the Charter of Rights and Freedoms. If they did, there would be revolution since people would instantly realize that the government had become rogue and was no longer to be listened to.
It would seem to me that in a crisis where all 'official' fiat oriented economic activity ceased, a smart government would be looking to encourage financial transactions, not discourage them. The more you can satisfy people's needs through any type of payment system, the more stable things become, and restoring stability would be a top priority.
Nothing is 100% safe or secure. Holding physical assets has all kinds of risks, problems, security issues and hassles associated with it. However, in the case of bitgold I am sastisfied they have really thought this thing through and have covered off all the basis. And no, I don't work for them but I do have a shitload of gold with them.
The larger issue as far as I'm concerned is what the US financial system, i.e. the Fed and Comex, would do to the price of gold just prior to and going into a crisis. Undoubtedly they would stomp on it supremely hard as they would have absolutely nothing left to lose. That means that during the initial phases of a crisis your actual dollar/yen/pound/franc value of gold would be severley depressed, at least for a period of time. But if you used the payment system in gold that is part of bitgold, then none of that would matter.
Finally, even if they did manage to 'seize' the gold then there would have to be compensation for it, since laws surrouding private property are a cornerstone of Anglo/American legal traditions going back thousands of years. In order for the small amount of gold that they could get their hands on to be effective in restoring liquidity, each ounce would necesarily have to be worth many thousands of dollars, and even then the liquidity in the system would still be nowhere near the amounts that can be achieved with a printing press. The more likely course of action would be some kind of law directing all output from the gold miners to be sent to federal treasuries until such time as governments had sufficient gold to cover their paper notes.
Sure glad you trust them,,, I sure as heck don't.... Good Luck!
In a state of emergency the Government would change the law in a flash to seize all depositories of gold, as well as mines etc.
Nowhere is completely safe.
SMART phones are mostly used by the DUMB; just listen and observe...a mirror helps for most. Given a long enough time-frame; cashless will arrive at near 100% approval via "convenience". However, the needed time-frame to reach such levels is too long for the "Central Planners".
Dudes you'll all be the property of banksters (financial perverts and pedophiles) if you let them go cashless.
This is all the cash I have for the next 10 days.
https://www.dropbox.com/s/dqqzir7i452ys4c/2015-09-07%2020.16.35.jpg?dl=0
This is all the cash I have for the next 10 days.
https://www.dropbox.com/s/dqqzir7i452ys4c/2015-09-07%2020.16.35.jpg?dl=0
Does burning down the banks and a few government buildings count as a systemic threat?
I'm already cashless thanks to QE, the Recovery, and my 'free' Obamacare.......
Stupid twats will never see this coming. Go cashless Janet I dare ya.
Pure 1984
If this leads into a hyperinflation of prices, which is the logical and unavoidable outcome, the speed at which money collapses will be governed in part by physical factors. In the case of Germany's great inflation in the 1920s,
There ain't gonna be no hyperinflation. I read a lot of books on the Weimer inflation. They all left out one important detail which I owe to Martin Armstrong.
The Weimer Republic went socialist. They printed because they couldn't get credit. It was a new government that didn't have the trust of the people. Because the people didn't trust the government, they didn't trust the currency. So they tried to get rid of the currency as fast as they could. The USSA has a long way to go before it gets to that stage.
The US Fed owns 30% of US Treasuries. It's like kiting checks to create imaginary cash flow and liquidity.Illegal if common folk do it, absolutely required by a system that can't get credit.Your argument is no protection against hyperinflation.
Weimar is a dump in Minnesota. No wonder people didn't trust whoever was running the place.
Oh my God. More garbage. It is ALWAYS the socialists who are at the root of every problem in the world eh?
So your premise isn't even true. It was the reparations demanded by the Allies that sank them. France in partiuclar was to blame. With no money for investing in a rebuild of industry and all available money going out the door to France, a collapse was inevetibale and had been fortold by your own President Woodrow Wilson.
Worldwide, 20 Trillion had to be 'printed' to keep the banking system solvent. Your country alone, with 3% of the worlds population printed 25% of that total. They can't remove that money because if they did tne zombie banks (JPM, BAC, GS) would collase. Sooner or later that money will have to enter the larger economy, and when it does, if there isn't the supply to match the demand then you will most definitely have hyperinflation. Stockman proved in the 80's that inflation is not merely the prescence of new notes but an abscence of supply to match the demand.
So get off this 'it's the socialist' bankwagon ok? While your at it you may want to ask yourself about the similarities between the years before the French Revolution and today in the US.
I foresee a roaring trade in pet rocks.
BARTERTOWN!
it's gonna happen
there will be blood
Cash is what is standing in the way of NIRP. Take rates negative in the USA and the run to mattress money will be mind boggling.
Eliminate cash and the muppets will have no where to hide.
It will happen soon.
Two articles about this topic:
http://www.zerohedge.com/news/2015-03-08/time-some-mattress-padding
https://mises.ca/posts/articles/keep-your-old-dimes-safe/
The logic is irrefutable:
1. If interest rates go negative, it will be preferable to hold cash in hand as opposed to money on deposit
2. People withdrawing their deposits for cash, though, will mean the end of the banks, so
3. The banks are calling for the elimination of physical cash.
What I really wonder about is whether most people will mind. It will be sold as a 'convenience' - and if it is somehow linked to a smartphone app, people will be all over it. The older I get, the more I think that people will tolerate fraud so long as it is packaged as convenience.
"The older I get, the more I think that people will tolerate fraud so long as it is packaged as convenience."
That is a profound statement. Well said. And it's been going on a long time. After a while we'll all have barcodes tattooed on our wrist and can just scan those at the counter. Oh, wait, that sounds very Naziesque doesn't it? Well, a phone app is no different, it achieves the same goal. Any of these things is the mark of the Beast. We are so far off the map of the Constitution it isn't even funny. And NO ONE cares, virtually no one anyway. Our founding fathers went through the same thing in their time, it's why they designed our Republic the way they did. And they knew it would face many threats and take a very strong-willed populace to maintain. Well, we've failed miserably. And we will pay the price.