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Myths Behind the War on Cash

Myths Behind the War on Cash5856660723_ef2b89a8e6_z.jpg

The attacks on physical cash from a phalanx of economists, central bankers, commercial banks, and politicians have not diminished in recent years. On the contrary, in the face of the worldwide increase in terror attacks, particularly in Europe, and ongoing pressure on public budgets, the cash ban issue is increasingly dragged into the spotlight.

In a highly-recommended study entitled “Cash, Freedom and Crime. Use and Impact of Cash in a World Going Digital,” Deutsche Bank Research demolishes numerous popular myths surrounding cash, inter alia in the context of crime and terrorism. Without cash there are no longer bank robberies at gun point, instead there are now electronic bank robberies. Fraud involving credit cards and ATM cards is massively increasing in Sweden, the country considered the pioneer of the cashless society. The argument that adopting a cashless payment system would facilitate the fight against terrorism doesn’t hold water either:

As regards terrorism in Europe, an analysis of 40 jihadist attacks in the past 20 years shows that most funding came from delinquents’ own funds and 75% of the attacks cost in total less than USD 10,000 to carry out — sums that will hardly raise suspicions even if paid by card.

Moreover, many terrorists, particularly if they are prepared to risk their own death, won’t be deterred by prohibitions, just as stricter gun laws have no impact on people who must use unregistered weapons for their crimes. Often, they are unable to get hold of a weapon by legal means anyway if they have a criminal record. Planned terror attacks are as a rule characterized by a meticulous and careful approach. At best a cash ban might make financing of terrorism more difficult (even that is doubtful), but at the price of subjecting the law-abiding peaceful population at large to even more intrusive surveillance.

…click on the above link to read the rest of the article…

Cyberattacks & the Vulnerability of a Cashless Society

QUESTION: Cyberattacks vs. Cash elimination – an argument against eliminating cash. Hello Mr. Armstrong, it is quite apparent that no government, no financial institution, Anti-virus software developer, or either ‘whatever’ is is really capable to stop cyberattacks. Now these people want to eliminate cash, make larger cash amounts illegal. So theoretically these cyber attackers could/ maybe will, eventually just stop the whole economy. Nobody may even be able to buy food. So instead of eliminating cash, should it not be policy people carry at least a month’s worth of expenses in cash? Your reply should be quite interesting to us, your readership!

Best,

AP

ANSWER: The WannaCry ransom attack is actually variant from a February 2015 sample attributed to the Lazarus Group, a Kaspersky-tracked actor tied to the North Korean government. Parts of the code go beyond shared code. It appears to be written by the same programmer.

Let’s get something straight here. At the core of those responsible is really the NSA and Microsoft itself. The attack exploited a Windows networking protocol to spread within networks, and while Microsoft released a patch nearly two months ago, it’s become very clear that patch didn’t reach all users particularly because institutions often do not install patches fearing that proprietary software may not function.

If behind the curtain we have government demanding back-doors into iPhones and computer so they can listen to everything everywhere, well guess what – so can everyone else. Patches will work for individual users, but not major institutions. Trying to upgrade their operations is a real effort. They are slow to act and thus vulnerable.

…click on the above link to read the rest of the article…

India: Why its Attempt to Go Digital Will Fail

India Reverts to its Irrational, Tribal Normal (Part XIII)

Over the three years in which Narendra Modi has been in power, his support base has continued to increase. Indian institutions — including the courts and the media — now toe his line.

The President, otherwise a ceremonial rubber-stamp post, but the last obstacle keeping Modi from implementing a police state, comes up for re-election by a vote of the legislative houses in July 2017.  No one should be surprised if a Hindu fanatic is made the next President. India is rapidly entering a new phase.

Indian Prime Minister, Narendra Modi on the cover of an Indian magazine in 2002, when he was the Chief Minister of the Indian province of Gujarat. During his reign in Gujarat, a civil-war like situation erupted, which seriously segregated the province’s society. It brought Hindus into a state of trance and excitement and provided them with the fake-security of the collective. Alas, wealth and civilization are created by an intense focus on value-addition, not from the short-term escapist excitement of mobs expressed through riots and rape. Destructive endeavors are a major vulnerability of poor societies, given their irrationality and lack of foresight and planning, and their short-sighted focus on high time-preference, pleasure-centered activities.

 

Modi, a major world-traveler, who has run around quite a bit to please foreign governments and win the support of identity-lacking non-resident Indians, is no longer going abroad with the same abandon. Historically and even today, whatever gained approval in the West is what Indians have looked up to.

But Modi has matured. Modi has directed the attention of Indians to nationalism, Hindutava (fanatic Hinduism), the army, the flag, the anthem, and other superficial collective “causes” not underpinned any values or wealth-creating, civilization-producing objectives.

…click on the above link to read the rest of the article…

It’s time to become your own banker. Here’s how–

It’s time to become your own banker. Here’s how–

Sometimes I wonder why most of the giant mega-banks are based in New York.

They should be here in Las Vegas, the gambling capital of the world. Because that’s precisely what they’re doing with your money.

Actually it’s not even your money.

From a legal perspective, every single penny you deposit at the bank becomes THEIR money. You’re nothing more than an unsecured creditor of the bank.

And now that they legally own what used to be your money, the bank can gamble it away on whatever crazy investment fad best serves their interests.

Here’s an easy way to understand it:

Imagine you were moving and needed to rent a storage facility for a few months to store your stuff.

You rent a U-Haul and move everything into the storage unit.

The way banking works, the second you drive away, the storage company now owns your furniture. Not you.

And as the brand new owners of what used to be your furniture, the storage company can do whatever they want with it.

They can rent out the furniture to another customer, charging steep fees to let a complete stranger sit on your sofa and watch your TV.

(Naturally you’ll never see a penny of that money.)

Of course, that complete stranger might not treat your furniture all that well. He might even destroy it. No more furniture.

Often the facilities get in on the business together; one storage company will rent your furniture to another company, which rents it to another, and then another.

After a while no one actually knows where your sofa is. But it doesn’t matter because the storage companies are all making lots of money, and few people ever really ask.

Eventually their standards drop so low that they stop performing credit checks altogether when someone wants to rent furniture from them.

…click on the above link to read the rest of the article…

It’s a revolution: German banks told to start hoarding cash

It’s a revolution: German banks told to start hoarding cash

German newspaper Der Spiegel reported yesterday that the Bavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.

Europe, of course, has been battling with negative interest rates for quite some time.

What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank.

In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic.

They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow.

This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook.

Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history.

It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago).

Banks are supposed to be conservative, responsible managers of other people’s money.

When central bank policies penalize that practice, bad things tend to happen.

Traditionally when a commercial bank in Europe wants to play it safe with its customers’ funds, they would hold excess reserves on deposit with the European Central Bank.

In the past, they might even have been paid interest on those excess reserves as an extra incentive to be conservative.

Now it’s the exact opposite. If a bank holds excess reserves on deposit at the ECB to ensure that they have a greater margin of safety, they must now pay 0.3% to the ECB.

That’s what it means to have negative interest rates. And for the bank, this eats into their profits, especially when they have tens of billions in excess reserves.

…click on the above link to read the rest of the article…

 

The Global Run On Physical Cash Has Begun: Why It Pays To Panic First

The Global Run On Physical Cash Has Begun: Why It Pays To Panic First

Back in August 2012, when negative interest rates were still merely viewed as sheer monetary lunacy instead of pervasive global monetary reality that has pushed over $6 trillion in global bonds into negative yield territory, the NY Fed mused hypothetically about negative rates and wrote “Be Careful What You Wish For” saying that “if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.”

Well, maybe not… especially if physical currency is gradually phased out in favor of some digital currency “equivalent” as so many “erudite economists” and corporate media have suggested recently, for the simple reason that in a world of negative rates, physical currency – just like physical gold – provides a convenient loophole to the financial repression of keeping one’s savings in digital form in a bank where said savings are taxed at -0.1%, or -1% or -10% or more per year by a central bank and government both hoping to force consumers to spend instead of save.

For now cash is still legal, and NIRP – while a reality for the banks – has yet to be fully passed on to depositors.

The bigger problem is that in all countries that have launched NIRP, instead of forcing spending precisely the opposite has happened: as we showed last October, when Bank of America looked at savings patterns in European nations with NIRP, instead of facilitating spending, what has happened is precisely the opposite: “as the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

…click on the above link to read the rest of the article…

It’s Official: Cash is Now Public Enemy Number One

It’s Official: Cash is Now Public Enemy Number One

First Major Offensive in War on Cash

Terrorists are no longer public enemy number one. Nor are drug lords, people traffickers, arms dealers, cyber terrorists, or any other unsavory do-badder. Today, the biggest threat to global peace and security is physical cash, a means of exchange that has flourished for over 4,000 years but which now stands accused of being the world’s biggest enabler of criminality.

A Criminal’s Accomplice

The latest person to publicly highlight the deadly threat posed by cash is Peter Sands, the former CEO of the British bank Standard Chartered, who just published a report for Harvard Kennedy School of Government imploring central banks around the world to stop issuing high-denomination notes and bills. They include the €500 note, the $100 bill, the CHF1,000 note and the £50 note.

“Such notes are the preferred payment mechanism of those pursuing illicit activities, given the anonymity and lack of transaction record they offer, and the relative ease with which they can be transported and moved,” the report warns. In other words, only criminals use cash. High-denomination notes, the report adds, “play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy.”

Sands is no doubt a leading authority on the role of cash in the criminal economy, having led a company that schemed with the government of Iran to avoid U.S. sanctions and “hide from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars in fees.”

That’s according to the New York State department, which in 2012 fined Standard Chartered close to a billion dollars for leaving the US financial system “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.”

…click on the above link to read the rest of the article…

 

Germany Unveils “Cash Controls” Push: Ban Transactions Over €5,000, €500 Euro Note

Germany Unveils “Cash Controls” Push: Ban Transactions Over €5,000, €500 Euro Note

It was just two days ago that Bloomberg implored officials to “bring on a cashless future” in an Op-Ed that calls notes and coins “dirty, dangerous, unwieldy, and expensive.”

You probably never thought of your cash that way, but increasingly, authorities and the powers that be seem determined to lay the groundwork for the abolition of what Bloomberg calls “antiquated” physical money.

We’ve documented the cash ban calls on a number of occasions including, most recently, those that emanated from DNB, Norway’s largest bank where executive Trond Bentestuen said that although “there is approximately 50 billion kroner in circulation, the Norges Bank can only account for 40 percent of its use.”

That, Bentestuen figures, “means that 60 percent of money usage is outside of any control.” “We believe,” he continues, “that is due to under-the-table money and laundering.”

DNB goes on to say that after identifying “many dangers and disadvantages” associated with cash, the bank has “concluded that it should be phased out.”

On Tuesday we got the latest evidence that officials across the globe are preparing to institute a cashless “utopia” when Handelsblatt reported (in a piece called “The Death of Cash) that the Social Democrats – the junior partner in Angela Merkel’s coalition government – have proposed a €5,000 limit on cash transactions and the elimination of the €500 note. 


Berlin is using a familiar scapegoat to justify the plan: the need to fight “terrorists” and “foreign criminals.”

“Limits on cash transactions would discourage foreign criminals from coming here to launder money,” says a paper penned by the Social Democrats. “If sums over €5,000 have to pass through traceable bank transactions, laundering would be severely hampered, it adds.”

…click on the above link to read the rest of the article…

The International War on Cash

The International War on Cash

Back in 2008, I began warning of increasing capital controls that we would see in the future, as a component in the decline of Western economies (Western in the broad sense, including Japan, Australia, etc.)

Along the way, it occurred to me that, at some point, governments might collectively attempt to eliminate paper currency in favour of an electronic currency – transferred from party to party solely through licensed banks. Sound farfetched? Well, maybe, but what if the U.S. and EU agreed on an overall plan, then suggested it to other governments? On the face of it, this smacks of conspiracy theory, yet certainly, all governments would benefit from this control and would be likely to get on board. In fact, it might prove to be the only way out of their present economic problems.

So, how would it play out? Here’s roughly how I saw Phase I:

  • Link the free movement of cash to terrorism (Create a consciousness that any movement of large sums suggests criminal activity.);
  • Establish upper limits on the amount of money that can be moved without reporting to some government investigatory agency;
  • Periodically lower those limits;
  • Accustom people to making all purchases, however small or large, through a bank card;
  • Create a consciousness that the mere possession of cash is suspect, since it’s no longer “necessary”.

When I first wrote on the subject, there was considerable criticism as to the possibility that such a programme would ever be attempted, let alone succeed. And, granted, it was so Orwellian that it was understandably seen as a crackpot idea. But since that time, the programme has been developing extremely rapidly. In the last six months alone, it has become so visible that it has even garnered a name – “the War on Cash”.

…click on the above link to read the rest of the article…

Who Exactly is Trying to Kill off Cash?

Who Exactly is Trying to Kill off Cash?

In the Irish city of Cork, business leaders recently launched a three-month pilot project to encourage consumers to abandon the archaic use of cash by offering the chance to enter into a prize draw if they use electronic means of payment. It is a cheap, almost insulting inducement, but nonetheless probably an effective one. The ultimate aim of the scheme is to transform Cork into the first Irish city to go completely cashless.

The Race to Kill Off Cash

A few years ago such an aspiration — to do away with physical cash, a form of payment that has served mankind, for better or worse, richer or poorer, for millennia — might have seemed a little odd. Not anymore. Today cities all over the globe and even entire nations appear to be in a mad rush to kill off cash.

One obvious place that springs to mind is Scandinavia, where Denmark and Sweden are engaged in a neck and neck race to become Europe’s first cashless nation. But the trend extends far beyond Scandinavia. In London, where physical money has been practically abolished from the public transport system, the borough of Brent has proudly declared itself the first district council to go completely cashless — with a little bit of help from MasterCard.

In May this year the city of Bergamo launched an ambitious pilot schemeto become Italy’s first cashless city. The initiative, which awards people who use electronic payments with discounts on retail products, is sponsored by (once again) MasterCard, together with CartaSi, Visa, UbiBanca, Banca Popolare di Bergamo and Banco Popolare.

Meanwhile, in the UK region of South Gloucestershire, the local Conservative Party is spitting venom about the lack of “a genuinely comprehensive, multi-model, London-style [i.e. completely cashless] ‘Oyster’ payment system” for new planned Metrobus routes.

…click on the above link to read the rest of the article…

When Bonds Go Kaboom!

When Bonds Go Kaboom!

We’re not the only ones giving Neanderthal advice about holding on to physical cash. British newspaper the Telegraph reports:

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress. Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008…

The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts. But he went further, suggesting it was wise to hold some “physical cash,” an unusual suggestion from a mainstream fund manager.

The Fuse Is Lit

The markets seem to be in wait-and-see mode. Yesterday, we were waiting to see what happens in Greece. Today, we wait to see what happens in the bond markets. We watch them like we watch a stick of dynamite. For a long time, it might sit there… silent… still…

Then all of a sudden – kaboom!

At the end of January, it looked as though bond yields had finally found their bottom. With $5 trillion of sovereign debt trading at negative yields, bond prices began to fall. And yields, which move in the opposite direction to prices, started to rise.

Not for the first time did we think: The fuse is lit!

We were 33 years old when this bond market made its last turn. The yield on the 10-year Treasury bond hit a high of almost 15% in 1982. Yields have been trending downward ever since. If we had only imagined what would happen next!

 

…click on the above link to read the rest of the article…

The War On Cash: Officially Sanctioned Theft

The War On Cash: Officially Sanctioned Theft

How banks & the government are diminishing your savings

You’ve probably read that there is a “war on cash” being waged on various fronts around the world. What exactly does a “war on cash” mean?

It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

These limits are broadly called capital controls.

The War On Cash: Why Now?

Why are governments suddenly acting as if cash money is a bad thing that must be severely limited or eliminated?

Before we get to that, let’s distinguish between physical cash—currency and coins in your possession—and digital cash in the bank. The difference is self-evident: cash in hand cannot be confiscated by a “bail-in” (i.e. officially sanctioned theft) in which the government or bank expropriates a percentage of cash deposited in the bank.  Cash in hand cannot be chipped away by negative interest rates or fees like cash held in a bank.

Cash in the bank cannot be withdrawn in a financial emergency that shutters the banks, i.e. a bank holiday.

When pundits suggest cash is “obsolete,” they mean physical paper money and coins, not cash in a bank. Cash in the bank is perfectly fine with the government and its well-paid yes-men (paging Mr. Rogoff and Mr. Buiter) because this cash can be expropriated by either “bail-ins” or by negative interest rates.

Mr. Buiter, for example, recently opined that the spot of bother in 2008-09 (the Global Financial Meltdown) could have been avoided if banks had only charged a 6% negative interest rate on cash: in effect, taking 6% of the depositor’s cash to force everyone to spend what cash they might have.

 

…click on the above link to read the rest of the article…

The trouble with cash

The trouble with cash

When interest rates are zero and it costs a bank to look after your money it becomes an unattractive asset. Banks in some jurisdictions (such as Switzerland, Denmark and Sweden) are even charging customers interest on cash and deposits. And if you go to your bank and withdraw large amounts in the form of folding notes to avoid these charges you will be lucky if you are not treated as a sort of pariah. For the moment, at least, these problems do not extend to sound money, in other words gold.

There are two distinct issues involved with government-issued currency: zero-to-negative interest rates, which all but eliminate any interest turn on deposits for the banks, and a systemic issue that arises if too many people withdraw their money from the banking system. The problems with the latter would become significant if enough people decide to effectively opt out of holding money in the banks.

Conversion of bank deposits into physical cash increases reserve ratios, restricting the banks’ ability to create credit. However, while the banks are contractually obliged to supply physical cash to anyone who wants it, a drawdown on bank deposits is a bad thing from a central bank’s point of view. A desire for physical cash is, therefore, discouraged. Instead, if the option of owning physical cash was removed and there was only electronic money, deposits would simply be transferred from one bank to another and any imbalances between the banks resolved through the money markets, with or without the assistance of a central bank. The destabilising effects of bank runs would be eliminated entirely.

…click on the above link to read the rest of the article…

 

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