This possibility has been suggested by many fringe
groups and writers for awhile. It’s beginning to enter mainstream thinking.The argument tends to run in this direction:
- In their monetary “race to the bottom”, governments around the world will continue to devalue their currencies through lower and lower rates until virtually all currencies carry negative rates.
- Faced with negative rates (perhaps coupled with crumbling equity prices) investors seeking to preserve buying power will convert their “safe” money from bank & institutional accounts into paper currency.
- This practice, if widespread, would defeat the intent of the central banks
in fostering negative rates.
- As a consequence, governments will need to outlaw all cash transactions, forcing people to keep their “cash” on deposit somewhere until actually spent.
From the first source (Investopedia
): “The ‘war’ on cash has begun with the European Central Bank's proposal to get rid of the 500 euro note and calls for the elimination of the $100 bill in America. While the argument for the move is that these large bills aid in financial crime and terrorism, the ulterior motive may be to make it harder for banks and consumers to avoid negative interest rates by holding on to actual money.
This writer draws from a Forsyth piece that appeared in Barron’s