There appears to be a growing war on cash as evidenced by more frequent reports in the mainstream media suggesting central banks and federal governments are supporting the banning of currency (cash) in the foreseeable future. Consumer spending in most developed countries makes up at least 50% of the Gross Domestic Product. However, with sluggish growth at best in most developed countries, the ‘powers that be’ are looking to encourage the populace to spend money rather than save it. Thus the motivation for the war on cash.
War on cash leads to hoarding
In a world of low, zero and negative interest rates, there is little incentive for the traditional saver to accumulate deposits within the current banking system. Therefore, there is an increasing tendency for individuals to hoard cash or cash equivalents outside the banking system.
Japan’s recent plunge in negative interest rates serves as evidence of this. Since rates have gone negative there has been a significant increase in Japanese citizens withdrawing large sums of cash from their banks. In addition sale of cash equivalents, especially gold and silver bullion, have taken off. Interestingly the sale of home safes has boomed as Japanese citizens need a secure means to store the cash and/or other cash equivalents they are accumulating to replace their bank deposits. The main point here is that hoarding cash as a result of low or even negative interest rates is exactly what the ‘powers that be’ want to prevent.
Cash withdrawals, deposits and your local bank
Examples of the war on cash already exist. Have you tried to withdraw or deposit more than a few thousand dollars in cash at your friendly local bank lately? Good luck with that! Besides rejecting your request there is a very good chance that the bank will file a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (FinCEN) based upon your request. By the way, you will would never know if it happens. Banks face severe penalties if a customer is ‘tipped off’ to the filing of a SAR.
Even here at Jack Hunt Gold & Silver our hands are legally tied if a client attempts to spend $10,000 or more in currency for ‘related transactions’ within a calendar year….unless of course you want to fill out the IRS Form 8300. The Form notifies IRS of a large cash transactions and opens customer reported to further government scrutiny.
Classic Keynesian economic theory suggests that if cash was banned everyone would be forced to have a bank account. If everyone had a bank account banks could offer low, zero or negative interest rates with the expectation that people would rather spend their money, thus stimulating the economy, as opposed to losing money with zero or negative interest rates. However, it’s this monetary philosophy that has put the world into unsustainable and unserviceable debt and perhaps has fatally damaged the global banking and financial system.
Benefits of the war on cash, not for you and me
The primary supporters of eliminating currency, which include most developed debt ridden governments, central banks and credit card companies look forward to the following benefits of banning cash:
1. It would assist banks in meeting minimum reserve requirements.
2. Banks could use greater deposits to leverage credit and increase profits.
3. It would be easier to control and manipulate any future bank runs.
4. Makes bank ‘bail-ins’ more effective.
5. Finally, a society with no access to cash is more easily controlled, making it easier to collect taxes and monitor all aspects of individual and corporate finances.
It’s interesting that these benefits go far beyond the stated benefits of a cashless society. Mainly that only tax evaders, drug dealers and terrorists use large sums of cash. The idea that an individual would want to keep their money in cash outside a bank because of perceived risk holds no merit. If you want to hold large sums of cash it’s assumed that you are a criminal.
The war against cash is yet another argument in favor of individuals purchasing and accumulating tangible gold and silver bullion, and storing it outside the banking system.