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On eliminating cash ...

edited September 12 in Off-Topic
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.

https://www.investopedia.com/articles/investing/021816/why-governments-want-eliminate-cash.asp


This writer draws from a Forsyth piece that appeared in Barron’s:
https://www.equities.com/news/cash-hoarding-has-thrust-negative-rates-into-lead-role-for-next-crash

Comments

  • Hank, I recall the info in your linked Barron's article; from 2016.
    Also, a section of the Investopedia article discusses the problem of folks removing large amount of "cash", as during the 2008 market melt.........a run on the banks.

    A cashless society has been a part of discussions going back for some time. Hell, much of society today has become cashless from their choice of technology, yes? Twenty years ago, the majority of transactions that were cashless, were online or via a telephone call to use a Visa or MC card.

    NEXT paragraph not a direct relation to your thread.....just a side thought of mine.
    Ironically, Regulation D for the consumer financial sector went into law on August 1, 2008. Did they have a feeling of what was around the corner? Probably, just a big coincidence, eh?
    Wishing I had an old copy (1970's) of my contract to open a bank account. These contracts contained restrictions regarding the legality of the bank to not have to release funds to the account holders for 30 days (I believe I recall this correctly).

    And what is the deal with crypto currency? A few years back, I expected central banks or official government agencies to fully state that they could not or would not allow such transactions outside of government regulation. I'm not aware of such. If one wants to get way off the track, it could be suggested that crypto currency and related transactions actually had its birth within the CIA or similar agency. I will guess such stories have been written.

    Crypto definition = crypto- before vowels crypt-, word-forming element meaning "secret" or "hidden," used in forming English words since at least 1760, from Latinized form of Greek kryptos "hidden, concealed, secret"

    Unless there is something really sinister coming from the backrooms of central banks and their friends; I do believe the full intent of the Europeans with negative yield rates was to push along the spending of money into the economy; as spending the cash is better than dead money in a bank account. Perhaps just a simple economic theory, that hasn't worked to date.

    Reads like a story for PBS, Frontline, a 3 hour version.
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