{"id":31599,"date":"2016-02-18T11:01:09","date_gmt":"2016-02-18T15:01:09","guid":{"rendered":"https:\/\/stateofthenation2012.com\/?p=31599"},"modified":"2016-02-18T11:01:09","modified_gmt":"2016-02-18T15:01:09","slug":"this-is-the-real-reason-for-the-war-on-cash","status":"publish","type":"post","link":"https:\/\/stateofthenation2012.com\/?p=31599","title":{"rendered":"This Is The Real Reason For The War On Cash"},"content":{"rendered":"

The Political War on Cash<\/span><\/strong><\/h1>\n

So long, Ben Franklin. Politicians want to coerce you to spend.<\/h3>\n

<\/p>\n

These are strange monetary times, with negative interest rates and central bankers deemed to be masters of the universe. So maybe we shouldn\u2019t be surprised that politicians and central bankers are now waging a war on cash.<\/b> That\u2019s right, policy makers in Europe and the U.S. want to make it harder for the hoi polloi to hold actual currency.<\/span><\/p>\n

Mario Draghi<\/a><\/span> fired the latest salvo on Monday when he said the European Central Bank would like to ban \u20ac500 notes. A day later Harvard economist and Democratic Party favorite Larry Summers declared that it\u2019s time to kill the $100 bill, which would mean goodbye to Ben Franklin. Alexander Hamilton may soon\u2014and shamefully\u2014be replaced on the $10 bill, but at least the 10-spots would exist for a while longer. Ol\u2019 Ben would be banished from the currency the way dead white males like him are banned from the history books.<\/span><\/p>\n

Limits on cash transactions have been spreading in Europe since the 2008 financial panic, ostensibly to crack down on crime and tax avoidance.<\/b> Italy has made it illegal to pay cash for anything worth more than \u20ac1,000 ($1,116), while France cut its limit to \u20ac1,000 from \u20ac3,000 last year. British merchants accepting more than \u20ac15,000 in cash per transaction must first register with the tax authorities. Fines for violators can run into the thousands of euros. Germany\u2019s Deputy Finance Minister Michael Meister recently proposed a \u20ac5,000 cap on cash transactions. Deutsche Bank CEO John Cryan<\/span><\/a> predicted last month that cash won\u2019t survive another decade.<\/span><\/p>\n

The enemies of cash claim that only crooks and cranks need large-denomination bills.<\/b> They want large transactions to be made electronically so government can follow them. Yet these are some of the same European politicians who blew a gasket when they learned that U.S. counterterrorist officials were monitoring money through the Swift global system. Criminals will find a way, large bills or not.<\/span><\/p>\n

The real reason the war on cash is gearing up now is political: Politicians and central bankers fear that holders of currency could undermine their brave new monetary world of negative interest rates. Japan and Europe are already deep into negative territory, and U.S. Federal Reserve Chair <\/b>Janet Yellen<\/b><\/span><\/a> said last week the U.S. should be prepared for the possibility. Translation: That\u2019s where the Fed is going in the next recession.<\/b><\/span><\/p>\n

Negative rates are a tax on deposits with banks, with the goal of prodding depositors to remove their cash and spend it to increase economic demand. But that goal will be undermined if citizens hoard cash. And hoarding cash is easier if you can take your deposits out in large-denomination bills you can stick in a safe<\/b>. It\u2019s harder to keep cash if you can only hold small bills.<\/span><\/p>\n

So, presto, ban cash. <\/b><\/span>This theme has been pushed by the likes of Bank of England chief economist Andrew Haldane and Harvard\u2019s Kenneth Rogoff, who wrote in the Financial Times that eliminating paper currency would be \u201cby far the simplest\u201d way to \u201cget around\u201d the zero interest-rate bound \u201cthat has handcuffed central banks since the financial crisis.\u201d If the benighted peasants won\u2019t spend on their own, well, make it that much harder for them to save money even in their own mattresses.<\/span><\/p>\n

All of which ignores the virtues of cash for law-abiding citizens.<\/b> Cash allows legitimate transactions to be executed quickly, without either party paying fees to a bank or credit-card processor. Cash also lets millions of low-income people participate in the economy without maintaining a bank account, the costs of which are mounting as post-2008 regulations drop the ax on fee-free retail banking. While there\u2019s always a risk of being mugged on the way to the store, digital transactions are subject to hacking and computer theft.<\/span><\/p>\n

Cash is also the currency of gray markets\u2014amounting to 20% or more of gross domestic product in some European countries\u2014that governments would love to tax. <\/b>But the reason gray markets exist is because high taxes and regulatory costs drive otherwise honest businesses off the books. Politicians may want to think twice about cracking down on the cash economy in a way that might destroy businesses and add millions to the jobless rolls. The Italian economy might shut down without cash.<\/b><\/span><\/p>\n

By all means people should be able to go cashless if they like. But it\u2019s hard to avoid the conclusion that the politicians want to bar cash as one more infringement on economic liberty. They may go after the big bills now, but does anyone think they\u2019d stop there? Why wouldn\u2019t they eventually ban all cash transactions much as they banned gold and silver as mediums of exchange?<\/b><\/span><\/p>\n

Beware politicians trying to limit the ways you can conduct private economic business. It never turns out well.<\/b><\/span><\/p>\n

___
\nhttp:\/\/www.zerohedge.com\/news\/2016-02-18\/end-economic-liberty-war-cash-wont-end-well<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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