Why We’re Headed Toward A “Cashless Society”

Courtesy of Bill Bonner (annotated Pater Tenebrarum, Acting Man)

Don’t Count on Your ATM Cards

Yesterday, came a report that the prime minister of Poland, Ewa Kopacz, has urged Poles traveling to Greece to take “a larger amount of cash” with them. Why? Because the situation could be “very dynamic,” she says. “Please do not count only on your ATM cards and on ATMs, but take a larger amount of cash with you.”

Greece-bank-run-ATM-queue

Queues are forming at ATMs in Greece of late. These ATMs will keep working as long as the ECB provides ELA financing to Greek banks. Unfortunately, the latter are beginning to run out of collateral. We are guessing they are probably giving the Bank of Greece IOUs now that they are issuing themselves. Yes, the situation is “dynamic”.

Photo credit: Simela Pantzartzi / EPA

It’s not the dynamic situation that would worry us. It’s the dynamite that lies beneath the whole world’s money system. It is a system that is fundamentally flawed. It depends on the intelligence and integrity of its custodians. Not that we think Madame Yellen is dumb. Nor do we doubt her honesty. But she is, after all, only human.

And centrally planning an $18 trillion economy – by manipulating asset prices and interest rates – is a super-human undertaking. The odds that something will go wrong? 100% …

Central_planning_voodoo_cartoon_05.07.2015_normal

It’s all data-dependent …

Cartoon by B. Rich

Controls on Cash

A reader asks a good question:

“I have a question about the recommendation to hold cash. If countries are putting controls on real cash and banking, in what form should a person hold cash? U.S. dollars or some other currency. If we truly go to a “cashless society” what good would having a hoard of cash do?”

We would like to have a better answer, but we only have the one we have. Money is always a convention. It is an understanding. People recognize money as a stand-in for wealth.

Since the beginning of civilization, people have experimented with different kinds of money. They ended up – almost always and almost everywhere – with gold and silver. Why?

Because they were handy. And because they were hard to produce. They were cash that governments could not easily control. No super-humans were needed to manage them.

Governments – the people who are able to boss other people around – always want to control money. They put their faces on it. They mint it. They clip coins. And they print pieces of paper and call it money.

But they could never completely control cash. People hoarded gold. They hid it. They ran away with it. They used it to make trades between themselves… regardless of what the feds said. And when the feds’ money went kaput – which it always did – they turned back to gold, because they knew they could trust it.

And now, the feds are making a new attempt to bring money totally under their control. For example, under the pretext of cutting funding for terrorists, the French government already has a law in the pipeline banning cash transactions of over €1,000 ($1,120).

There’s nothing stopping governments from banning cash transactions altogether… and ending the usage of paper money. Economists pretend it is a matter of convenience to the consumer (no more waiting for the clerk to make change for the fellow in front of you).

… or they try to sell it as a useful macro tool for central planners (they will be able to stimulate demand by imposing negative interest rates)…

… or they say a cashless world will be safer – you won’t be held up at gunpoint, and terrorists will find it harder to get financing.

But the real reason is control. If governments can eliminate cash, they can easily track, tax, and confiscate your money.

bank-robber

Bank robberies of the future

Cartoon via armstrongeconomics.com

When You Need a Stash of Cash

And if the feds can control your money, they will be able to control you. Do you voice an opinion they don’t want to hear? Do you belong to a group they want to get rid of? Do you want to know what happened to your tax money? Watch out… With a keystroke, you could be “disappeared.”

“Sometimes, when the government tells you to do something, it’s best to do the opposite,” says a French neighbor. In 1944, her father was the adjutant mayor of a small town in southwestern France. The Allies had landed in Normandy and the Germans were pulling their forces back to the Rhine. Our friend tells the story:

“Someone had blown up a German truck as it went through town. People were doing that. Taking pot shots at the Germans. The SS didn’t like it. They would gather up the mayor and a few other people. If they didn’t turn over the guilty person, they would kill the mayor. Or sometimes the whole town.

My father got a message that told him he was supposed to go to the town square. Instead, he went into the woods. It’s a good thing he did. Otherwise, I wouldn’t be here.”

When do you need a stash of cash? When the feds try to outlaw it. Hold some dollars. And some gold. We realize that our answer to the reader’s question is insufficient. After all, what good will cash be after it is declared illegal?

We’re not sure. Maybe we’ve spent too much time in Argentina, where people have more supple and more subtle attitudes to monetary regulations. Trading pesos for dollars, on the black market, is illegal. Do it and they take you for a scofflaw. Don’t do it and they take you for a fool.

More to come on this in future updates. Stay tuned …

fool

What not to be in Argentina

Image captions by PT

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

Did you like this? Share it:
About Ilene

Speak Your Mind

%d bloggers like this: