This Is The Real Reason For The War On Cash

These are strange monetary times, with negative interest rates and central bankers deemed to be masters of the universe. So maybe we shouldn’t be surprised that politicians and central bankers are now waging a war on cash. That’s right, policy makers in Europe and the U.S. want to make it harder for the hoi polloi to hold actual currency.

Mario Draghi fired the latest salvo on Monday when he said the European Central Bank would like to ban €500 notes. A day later Harvard economist and Democratic Party favorite Larry Summers declared that it’s time to kill the $100 bill, which would mean goodbye to Ben Franklin. Alexander Hamilton may soon—and shamefully—be replaced on the $10 bill, but at least the 10-spots would exist for a while longer. Ol’ Ben would be banished from the currency the way dead white males like him are banned from the history books.

Limits on cash transactions have been spreading in Europe since the 2008 financial panic, ostensibly to crack down on crime and tax avoidance. Italy has made it illegal to pay cash for anything worth more than €1,000 ($1,116), while France cut its limit to €1,000 from €3,000 last year. British merchants accepting more than €15,000 in cash per transaction must first register with the tax authorities. Fines for violators can run into the thousands of euros. Germany’s Deputy Finance Minister Michael Meister recently proposed a €5,000 cap on cash transactions. Deutsche Bank CEO John Cryan predicted last month that cash won’t survive another decade.

The enemies of cash claim that only crooks and cranks need large-denomination bills. 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.
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 Janet Yellen said last week the U.S. should be prepared for the possibility. Translation: That’s where the Fed is going in the next recession.

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. It’s harder to keep cash if you can only hold small bills.

So, presto, ban cash. This theme has been pushed by the likes of Bank of England chief economist Andrew Haldane and Harvard’s Kenneth Rogoff, who wrote in the Financial Times that eliminating paper currency would be “by far the simplest” way to “get around” the zero interest-rate bound “that has handcuffed central banks since the financial crisis.” If the benighted peasants won’t spend on their own, well, make it that much harder for them to save money even in their own mattresses.

All of which ignores the virtues of cash for law-abiding citizens. 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’s always a risk of being mugged on the way to the store, digital transactions are subject to hacking and computer theft.

Cash is also the currency of gray markets—amounting to 20% or more of gross domestic product in some European countries—that governments would love to tax. 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.

By all means people should be able to go cashless if they like. But it’s 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’d stop there? Why wouldn’t they eventually ban all cash transactions much as they banned gold and silver as mediums of exchange?

Beware politicians trying to limit the ways you can conduct private economic business. It never turns out well.

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About the Author: Tyler Durden

  • Rag Fish

    You are right to be dead set against the RepubliCrats (it is a bipartisan neo-con-job. However to be caught in the battle over things that do not matter, Left vs. Right falls short of those that matter more – Liberty vs. Tyranny or even more central, the war between Humanity and Transhumanism. The technology that is sold to us as cool and convenient, will ultimately be used by elites to first surveille us and then control every aspect of our lives, before extinguishing the human race. The elite believe they will survive as gods, masters of humanity, before they merge with the AI in what Ray Kurzweil calls “the Singularity”.

  • JohnDille

    Fascism is defined as the binding together of government and large corporations. This what we are witnessing today. EXACTLY… WHICH IS WHY I AM DEAD SET AGAINST REPUBLICANS AND THEIR FASCIST POLICIES. AS FOR THE REST OF YOUR COMMENT…. WHAT SEWER DID YOU DIG ALL OF THAT NONSENSE OUT OF??? RUSH LIMBAUGHS PRIVATE SEPTIC TANK, MAYBE???

  • JohnDille

    YES, I DO!!! I KEEP CLOSE TRACK OF YOU RIGHT WINGERS. YOUR CRIMES AND TREASONS ARE VERY DANGEROUS TO THIS COUNTRY AND ITS PEOPLE!!!

  • JohnDille

    Hold on, this is waiting to be approved by The Trading Report.

    OBVIOUSLY, YOU BELIEVE RIGHT WING LIES AND BALONEY… SO HERE ARE A FEW CRUMBS FOR YOU TO CHEW ON! MAYBE YOU WILL GAG ON THOSE CRUMBS… IN WHICH CASE… GOOD!!! WE LIBERALS SEE THIS KIND OF GARBAGE AS BEING THE ONLY KIND OF CRAP THAT RIGHT WINGERS ACTUALLY BELIEF!
    Alex Jones: Obama Murdered Justice Scalia And Donald Trump Is Next Submitted by Brian Tashman on Sunday, 2/14/2016 5:15 pm In an “emergency transmission” to his Facebook fans today, conspiracy theorist radio host Alex Jones floated his suspicions that the late Justice Antonin Scalia was “murdered,” just like conservative activist Andrew Breitbart. While accusing Obama of a litany crimes, including secretly funding ISIS and blackmailing Supreme Court justices, Jones said that “this is the season of treason, this is the time of betrayal and we would be fools not to ask the question” if Scalia was assassinated, suggesting that bad actors may have slipped something into the justice’s drink to trigger a heart attack.

  • Rag Fish

    Fascism is defined as the binding together of government and large corporations. This what we are witnessing today. In the US, the government has gone worse than AWOL, as borders are not only pourous, but the administration is paying to fly Middle Eastern migrants via UPS, while waiving busloads of migrants into the US via our southern border.
    Your analysis of business vs. government is fatuous, as the more accurate perspective is governments on a global scale and multinational corporation particularly banks are wedded vs. the citizens of the West. The objective is the collapse of the West into a transnational empire, with an eradication of personal liberty and wealth. The use of domestic terror events, in part enabled by border security failure by design, is used to justify a total surveillance state in order to “keep us safe”.
    Also is your caps key stuck?

  • Rick

    Odille, you sure seem to know a lot about criminal activity.

  • Rick

    Odille, I realize that you are a liberal nut who would give up all of your freedom and privacy for a few free crumbs, and so does everyone else. So, have your fun looney tooney. But, know this, crazy man, I am a patriotic law abiding American, so you do not have the slightest idea of what you are talking about, which is nothing new for you.

  • JohnDille

    LETS SEE NOW…. CORPORATE AMERICA HAS ALMOST 10 TIMES AS MUCH GROSS REVENUES AS THE ENTIRE FEDERAL GOVERNMENT HAS… AND HAS ABOUT 40 TIMES AS MANY EMPLOYEES… AND HAS AT LEAST A HUNDRED TIMES AS MANY TOTAL ASSETS, AND MORE LIKE 500 TIMES AS MANY ASSETS IF YOU EXCLUDE THE US MILITARY, AND EXCLUDE ALL THE BARREN EMPTY MOSTLY WORTHLESS LAND THAT THE FEDERAL GOVERNMENT CONTROLS. EVEN WORSE THAN ALL THAT, CORPORATE AMERICA CAN DO PRETTY MUCH ANYTHING IT WANTS WITH ITS ALMOST 40 TRILLION DOLLARS IN GROSS ANNUAL REVENUES… WHILE THE FEDERAL GOVERNMENT MUST SPEND ALL OF ITS MONEY ON TAKING CARE OF THE PROBLEMS CREATED BY CORPORATE AMERICA… SUPPORTING ALL THE PEOPLE CHEATED AND ROBBED BY CORPORATE AMERICA, AND CLEANING UP THE ENVIRONMENTAL AND FINANCIAL AND SOCIAL AND POLITICAL AND FOREIGN POLICY MESSES CREATED BY CORPORATE AMERICA… AND DEFENDING CORPORATE AMERICAS BEST INTERESTS IN NATIONS ALL OVER THE WORLD. SO… ANYONE WHO SAYS THAT THE FEDERAL GOVERNMENT IS THE BIG BAD GUY…. IS EITHER A TOTAL IDIOT… OR HAS JUST NEVER SAT DOWN AND ACTUALLY THOUGHT ABOUT WHO IS BIGGEST AND MOST POWERFUL…. THE RELATIVELY TINY AND PUNY AND WEAK FEDERAL GOVERNMENT… OR THE GIGANTIC CORPORATE MONSTER THAT HAS THE WEALTH AND THE POWER AND THE ABILITY TO CONTROL ALMOST EVERYONES LIVES… FROM CRADLE TO GRAVE!!! ON TOP OF ALL THAT… THE GOVERNMENT IS CONTROLLED BY PEOPLE ELECTED BY POPULAR VOTE… AND THUS ITS POWER IS TOTALLY DIVIDED BETWEEN THE RICH AND POWERFUL 1%… WHO OWN AND CONTROL THE REPUBLICAN PARTY… AND EVERYONE ELSE… WHO SORT OF HAVE SOME SAY IN THE DEMOCRATS WHO MUST FIGHT THE PREDATORYPRACTICES OF THE 1% AND THEIR REPUBLICAN PROSTITUTES…. VERSUS THE BILLIONAIRES AND MULTI MILLIONAIRES WHO TOTALLY CONTROL CORPORATE AMERICA… AND WHO MUST ANSWER TO ABSOLUTELY NO ONE… EXCEPT OTHER MILLIONIARES AND BILLIONAIRES!!! WHEN YOU LOOK AT THINGS THAT WAY…. YOU REALIZE THE FEDERAL GOVERNMENT IS TOTALY OUT GUNNED, AND IS TOO WEAK TO DO MUCH OF ANYTHING…. WHICH IS JUST THE WAY THE RICH AND THEIR REPUBLICAN PROSTITUTES LIKE IT!!! AND THEIR STUPID BRAIN DEAD RIGHT WING REPUBLICAN PUPPETS, AS WELL!!!

  • GWDenier

    JohnDille, you’re such a left-wing douche you would approve of anything big government does. To you, big government is your god, all-powerful, all-knowing, and capable of destroying your perceived enemies (e.g., all of us “right-wingers”, meaning anyone who disagrees with you). FEMA could announce the opening of internment camps for reeducation of citizens who espouse limited government and expanded personal freedom and you would still be on the board here blasting away in CAPITAL LETTERS about how great your big government is. Viewing the war on cash as anything else than an attack on your freedom means you are mentally ill. The fact that you think anyone who wants to use cash for transactions must be a criminal proves how brainwashed you have been by the power elites. Vladimir Lenin coined the term “useful idiots” to describe people like you who advocated for and defended Bolshevik tyranny.

  • JohnDille

    THE TOP 1% OF ALL AMERICANS OWN MORE WEALTH THAN THE BOTTOM 90%… AND MOST OF THE WEALTH OWNED BY THE BOTTOM 95% IS TIED UP IN THEIR HOMES… WHICH MEANS THAT THE TOP 1% HAVE MORE FINANCIAL WEALTH… AND INCOME FROM THAT WEALTH… THAN EVERYONE ELSE… COMBINED! ANYTHING THE FED… OR ANYONE ELSE DOES,,, THAT IMPACTS THE ECONOMY WILL HIT THE RICH BY FAR THE HARDEST! AND WHO PICKS WHO WILL BE IN THE FEDERAL STATE AND LOCAL GOVERNMENTS, AND ANY OTHER OFFICE OF ANY CONSEQUENCE??? THE 1%… PERIOD! SO… WHY WOULD THE 1% SUPPORT ANYONE OR ANYTHING THAT WOULD HURT THEIR BEST INTERESTS?? IN FACT, THAT IS THE KEY TO UNDERSTANDING WHY REPUBLICAN POLICIES HAVE HURT THE UNITED STATES SO BADLY OVER THE LAST 35 TO 45 YEARS…. REPUBLICANS ARE THE PAWNS OF THE 1%… AND THUS REPUBLICANS WILL NEVER DO ANYTHING TO HURT THE 1%. AND DEMOCRATS HAVE ALMOST NO REAL POWER OVER ANY OF THAT…. THEIR CONSTITENTS ARE ORDINARY PEOPLE… THE BOTTOM 95% WHOSE COMBINED INCOME AND NET WORTH ARE A MINORITY OF ALL INCOME AND NET WORTH… AND DISTRIBUTED AMONG FAR FAR FAR MORE PEOPLE… THUS IS VASTLY WATERED DOWN. THAT IS WHY DEMOCRRATS HAVE SO LITTLE REAL CONTROL OVER ANYTHING… AND WHY THE RICH CONTROL AMERICA… AND ITS GOVERNMENTS AND AGENCIES, INCLUDING THE FED! ANYONE WHO DISAGREES WITH THAT JUST FLAT OUT HAS NO IDEA WHAT THEY ARE TALKING ABOUT!!! RIGHT WING REPUBLICANS WHO CONSTANTLY BLAME DEMOCRATS FOR ALL OF OUR PROBLEMS ARE JUST DUPES OF THEIR BILLIONAIRE MASTERS, OR ARE TOO STUPID TO PAY ANY ATTENTION TO… OR BOTH, MOST LIKELY!!!

  • Eileen

    I once saw a little old lady write a check for $100 for a $2.00 purchase. Doesn’t seem like a crook to me. Such genealizations don’t do anything positive for the conversation. People are watching Europe and don’t see money laundering. What they do see is the ECB instituting financial repression with the outlawing of big bills. Perhaps it would be a good idea to present some references backing up your claim that ONLY crooks use big bills.

    It is very easy to steal people’s accounts when everything is held in a financial institution. With cash, that’s not possible. First is cash, then precious metals, then real estate. it would be very easy to move on to cars, personal homes, income from a job. If you think this will only affect the rich, think again.

  • JohnDille

    SO…. YOU RIGHT WINGERS JUST NATURALLY ASSUME THAT THE COLD HARD TRUTH IS LIES AND BITTERNESS AND HATE… SPEWED BY MALCONTENTS AND SCOCIALISTS???? NO WONDER YOU RIGHT WINGERS ARE SO MONUMENTALLY STUPID! YOU PROBABLY HATED ALL YOUR TEACHERS… MOST ESPCAILLY THOSE THAT TRIED TO TEACH YOU THE HARD STUFF THAT WAS OF THE GREATEST IMPORTANCE TO YOU. THAT WOULD ALSO EXPLAIN WHY REPUBLICANS ARE DUMB AS ROCKS…. THEY SEE EDUCATION AND HARD FACTS AS THE PRODUCT OF LIBERAL LIES AND NONSENSE!

  • Joe Cabot

    You seem overly bitter and miserable today, even by your standards. Seems like a conversation about money strikes a bit too close to home, given your endless bleating about your lack of it.

  • JohnDille

    YEAH…. BY THE BROADEST MEASURE OF MONEY… WHICH WOULD INCLUDE ALL POSSIBLE FORMS OF MONEY… THERE IS SOMETHING LIKE 200 TO 300 TRILLION DOLLARS WORTH OF ASSETS THAT ARE LIQUID ENOUGH TO BE CONSIDERED CASH! THAT MUCH ACTUAL CASH WOULD REQUIRE A MOUNTAIN OF PAPER THAT COULD TOTALLY BURY MOUNT EVEREST… AND MOST OF THE REST OF THE HIMALAYAS, AS WELL! ONLY IDIOTS AND RIGHT WING PUPPETS WOULD SUPPORT TURNING ALL OF THOSE ASSETS INTO PAPER MONEY! AND GIVEN THAT YOU WOULD NEED A MOUNT EVEREST SIZE PILE OF GOLD AND SILVER TO EQUAL THE VALUE OF ALL THOSE MONEY LIKE ASSETS… AND THAT ALL THE GOLD AN SILVE EVER MINED IN ALL OF HUMAN HISTORY WOULD NOT EVEN MAKE A DECENT SIZED HILL…. THOSE FOLKS WHO CLAIM WE SHOULD BASE ALL OF OUR MONEY ON GOLD AND SILVER ARE SIMPLY IDIOTS… OR CLUELESS RIGHT WING MORONS!!!

  • JohnDille

    WHAT FREEDOMS ARE THEY TAKLING AWAY FROM YOU??? PERVERTING YOUR CRIMINAL ACTIVITIES OR YOUR SUPPORT OF TERRORISTS…. OR PAYING CASH FOR THE DRUGS YOU USE OR THE HOOKERS YOU RENT??? NORMAL PEOPLE HAVE ABSOLUTELY NO SYMPATHY FOR YOU OR YOUR PRO CRIME HATRED OF LAW ENFORCEMENT!!! TO NORMAL PEOPLE… YOU WOULD BE JUST ANOTHER MONUMENTALLY STUPID RIGHT WING PUPPET… OR A HARD CORE CRIMINAL, TRYING TO HIDE YOUR CRIMINAL BEHAVIORS AND ACTIVITIES!!!!

  • JohnDille

    WHAT A BUNCH OF RIGHT WING HOG WASH!!! THE PEOPLE MENTIONED SAID.. FLAT OUT… THAT THEY HAVE BEEN TRYING TO GET RID OF BIG BILLS FOR MANY YEARS… BECAUSE BIG BILLS MAKE IT FAR EASIER FOR CRIMINALS AND TERRORISTS TO CARRY OUT THEIR CRIMES! PERIOD! IN A GLOBAL BANKING SYSTEM WHERE FAR LESS THAN 1% OF ALL TRANSACTIONS ARE IN ACTUAL CASH, LARGE BILLS ARE A CONVENIENCE FOR PEOPLE WHO LIKE TO PAY FOR EVERYTHING IN CASH…. ME… FOR INSTANCE… OR WHO LIKE TO BE ABLE TO HIDE A COUPLE OF THOUSAND OF DOLLARS IN CASH FOR EMERGENCY PURPOSES WITHOUT ANYONE EVER KNOWING THAT YOU ARE DOING SO… AGAIN… ME, FOR EXAMPLE! BEYOND THAT… THERE REALLY IS NO NEED FOR BIG BILLS… AT ALL… BECAUSE MOST LARGE PURCHASES ARE DONE ELECTRONICALLY! WHEN IS THE LAST TIME ANYONE PAID FOR A HOUSE OR A CAR OR FOR A HUNDRED SHARES OF STOCK, ETC ETC ETC… WITH CASH?? I GREATLY PREFER CASH… BUT I HAVE NOT MADE A SINGLE LARGE PURCHASE OR TRANSACTION IN CASH… EVER… IN MY ENTIRE LIFE! BEFORE ELECTRONIC CASH, I PAID WITH A CHECK… JUST LIKE EVERYONE ELSE DID. NOW, I USE ELECTRONIC MEANS… JUST LIKE EVERYONE ELSE DOES!!! SO… THE HOOEY ABOVE IS JUST RIGHT WING BALONEY… RIGHT WING CRIMINALS DEFENDING THE RIGHT OF CRIMINALS EVERYWHERE TO KEEP ON DOING THINGS THEWAY CRIMINALS DO THINGS…. USING CASH… MOSTLY IN VERY LARGE BILLS… TO HIDE THEIR ACTIVITIES FROM LAW ENFORCEMENT AGENCIES!!! AND I HAVE ABSOLUTELY NO SYMPATHY FOR CRIMINALS OR TERRORISTS… THOUGH MANY RIGHT WINGERS ON THIS BOARD CLEARLY DO!!!

  • Rick

    These creeps will stop at nothing to take our freedom away. They want to be able to monitor every aspect of our lives. We already have a smart meter on our houses to monitor our lives through our electric usage. And, they know where we are at all times through our phones. Now they want to monitor every penny we spend. I see where even the makers of the game Monopoly are doing away with the paper money and replacing it with a bank cards. The young people probably won’t care, as they are ready to give up the country to Socialism anyway. We are screwed.

  • Fabian

    The real reason is even worts than that; people couldn’t take cash out of the bank because there is not enough cash to cover all net credit balances. You have at most $ 2 bucks in cash for each $ 100 of claim. Can you imagine the run on the banks?
    People don’t realize that the money they think they have is only a scriptural claim, not real money; we live in a fractional reserve system. But, if banks had to keep cash for cash, that would be the end of credit.