What Does Going Cashless Really Mean?
by Pam Barker | TLB staff writer/analyst
And banks stand to have all the control as digital transactions flow through their institutions, closely monitored and accumulating fees, penalties and charges that enrich the banks and hold customers hostage. Mac Slavo
If you’re like me, i.e. without a background in economics, you probably look at the news about how we’re increasingly becoming a cashless society and chalk it up to yet another way our governments are allowing the banks to game us and do pretty much whatever they want. And generally you’d be right. But this is a topic well worth having some specifics on, as well as linking to the bigger picture.
The ostensible reasons given for going cashless are to prevent financial crime, money-laundering, and smuggling where large denomination bank notes can be moved around far more easily. Terrorism is also added to that list.
Germany, for example, is a favorite place for the mafia to launder money given the country’s historical preference for the use of cash. Some estimated 50-60 billion euros of illegal proceeds come into the mainstream economy with only about 1% of it picked up by law enforcement.
Only 18.5% of payment transactions in Germany are made with plastic compared to a figure of close to 60% in the UK. In fact, a number of European countries have done away with cash transactions over certain relatively modest limits, such as 1,000 euros in France, Italy with 3,000 euros, and Bulgaria at 2,500 euros. If bank transactions are traceable at, say, 2,000 euros or more, then money laundering would be severely hampered goes the logic, which seems reasonable.
Killing the Big Bills
Abolition of high denomination bank notes is also a current theme in the pursuit of cashlessness. In Germany, it’s notably the Social Democrats who are not only pushing for a 5,000 euro limit on transactions but also for the elimination of the 500 euro bank note – across all EU nations that use the euro.
Tyler Durden of Zerohedge remarks how the 500 euro note makes up 30% of the EU paper currency in circulation. Germany’s SD party, of course, doesn’t have the authority to make this decision for everyone else, but it seems to be in accord with the wishes of Mario Draghi, President of the European Central Bank, who not only wants to do away with the 500 euro bank note but also the 200 and 100. Larry Summers, too, is talking of abolishing the $100 bill.
According to Durden, a Bank of America analysis has already shown this would weaken the currency since a decline in usage of the euro since 2009 has gone hand-in-hand with a weakening of the currency.
But is weakening the currency to dangerous levels what the banking powers-that-be have in mind? Is it really a race to the bottom? Let’s hold that thought for the moment.
Negative Interest Rates, The Big Reason
To handle the current, depressed state of the global economy, banks have already been applying zero interest rate policies to little effect. Now they’re moving to negative interest rates. Called ‘the greatest financial heist of the modern age’ by Don Quijones of Wolf Street, the negative interest rate policy being experimented with currently by the banks is probably the biggest reason for embracing cashlessness:
Cash significantly limits central banks’ ability to continue conducting arguably the greatest financial heist of the modern age, i.e., negative interest rate policy (NIRP). The only way that central banks can maintain negative interest rates ad infinitum is by abolishing cash altogether, as the Bank of England chief economist Andrew Hadlaine all but admitted. As long as cash exists, there’s no way of preventing depositors from doing the logical thing – i.e. taking their money out of the bank and parking it where the erosive effects of NIRP can’t reach it.
Elimination of the $100 bill, for example, means that $1.08 trillion or 78% of the total US paper currency in circulation, which is close to $1.4 trillion, would be taken out. Writes Durden, “[e]liminate those, and suddenly there is nowhere to hide from those trillions in negative interest rate “yielding” bank deposits”.
Let’s be clear: phasing out over a trillion dollars in high denomination paper currency doesn’t mean that sum will be replaced by smaller denomination notes. That personal in-the-hand, paper component of your cash assets has just vanished along with everyone else’s into the trackable digital ether. One can argue that the average person isn’t using denominations of 100 or higher anyway, but that isn’t the point. Neither is it useful to point out that there may be no legal foundation for restricting cash under the European Union’s founding treaties. A lot of banks are simply already on board, making it difficult for consumers to use cash in transactions.
With a global NIRP scheme being rolled out, negative interest rates will be coming into effect on our bank accounts. Rates are already at -0.3% in Europe because of the weak economy. Anything less than the rate of inflation (around 2%) given as interest on our accounts means we’re losing money on our cash asset. But a negative interest rate – below 0% – is worse quite obviously, and means we’re paying the bank to keep our money. With much less, if any, real cash to keep on hand as a way of avoiding this scandalous practice, we’ll be held hostage to whatever rate they decide to impose.
Negative interest rates do have the plus of making it cheap to loan money and boost consumer spending, it being an obvious deterrent to holding onto your money. But there clearly isn’t an option for the citizen who is hostage to an economy with less cash in it or no cash at all.
Durden expresses this well:
As a reminder, the gradual phasing out of cash strips the public of its economic autonomy. Central bankers can only control interest rates down to a certain “lower bound.” Once negative rates are passed on to depositors – and trust us, that’s coming – people will simply start pulling their money out of the bank. The more negative rates go, the faster those withdrawals will be.
When you ban cash you eliminate this problem. In a cashless society with a government-managed digital currency there is no effective lower bound. If the economy isn’t doing what a bunch of bureaucrats want it to do, they can simply make interest rates deeply negative, forcing would-be savers to become consumers by making them choose between spending or watching as the bank simply confiscates their money in the name of NIRP [negative interest rate policy].
As of this week, it looks as if the plan will be to phase out large notes, with Europe as the driving force. Writes Larry Summers himself in the Washington Post:
What should happen next? I’d guess the idea of removing existing notes is a step too far. But a moratorium on printing new high denomination notes would make the world a better place. In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100.
Notice the ‘mak[ing] the world a better place’ comment?
Clearly these plans have global reach [emphasis mine]:
These are difficult times in Europe with the refugee crisis, economic weakness, security issues and the rise of populist movements. There are real limits on what it can do to address global problems. But here is a step that will represent a global contribution with only the tiniest impact on legitimate commerce or on government budgets. It may not be a free lunch, but it is a very cheap lunch.
Even better than unilateral measures in Europe would be a global agreement to stop issuing notes worth more than say $50 or $100. Such an agreement would be as significant as anything else the G7 or G20 has done in years. China, which is hosting the next G-20 in September, has made attacking corruption a central part of its economic and political strategy. More generally, at a time when such a demonstration is very much needed, a global agreement to stop issuing high denomination notes would also show that the global financial groupings can stand up against “big money” and for the interests of ordinary citizens.
It’s curious that in mentioning ‘the interest of ordinary citizens’, there is a deafening silence as to what all this actually means for the ordinary citizen. Leave it to the alternative media to do that.
Don Quijones efficiently sums up other agendas and players in the move to cashlessness:
Cash also serves as a means of exchange in which the relevant rent seekers (banks, credit card companies, tech firms) are left out of the equation, unable to wet their beaks in commissions and fees and to collect the treasure of consumer data that comes with electronic payments. Throw in the nagging fact that in a world where physical currency continues to exist, government and corporations cannot track and trace your every movement, and it’s not hard to understand why cash is now public enemy number one in many of the world’s jurisdictions.
However, Not All Countries Are On Board
The push towards cashlessness is advancing faster in countries where trust in government runs higher, such as the Nordic countries. It is noteworthy that it’s the Social Democrats in Germany who are promoting these policies against criticism from the right. The Global South and Japan, as well as Germany and Austria, still revere cash and have less trust in government.
Indeed, the recently announced German move to limit cash transactions over 5,000 euros has met with fierce opposition from a cross-section of the political spectrum as well as the major German newspaper, Das Bild. Writes German Green MP Konstantin von Notz:
Cash allows us to remain anonymous during day-to-day transactions. In a constitutional democracy, that is a freedom that has to be defended.
Other Trends Worth Noting
This trend coincides with another, that of the minimum monthly payment. An idea getting under way in Finland during 2017 as a pilot test, the practice is intended to encourage the unemployed to take up low-paid employment without financial penalty instead of remaining unemployed. Boosting the earnings of people in low-paying jobs would also bolster spending in the economy. Many Dutch cities will be implementing this during 2016.
Whatever the pros and cons of this scheme are, which is beyond the scope of this article, it will be the first step to putting grateful, unsuspecting people on traceable plastic cards with government-allocated money:
To make this highly deceptive idea more palatable, the banning of the use of cash will be dangled on to hapless masses via a debit card with regular monthly stipend for every adult in Finland and elsewhere.
Our Technocratic Future
A cashless society renders everybody traceable and identifiable in a variety of ways, and dependent both on the state and a fully automated banking system like never before. So too for the monthly basic income which automatically holds hostage a certain demographic group. Cashlessness also enables banks and tech companies to digitally skim off money like never before, and would allow the state to pull the plug on our accounts to ensure compliance under the right circumstances. And with everybody in lockstep, even China.
A fully automated banking system is, of course, in line with the technocratic future awaiting us, of which Agenda 2030 is a part, if the global elites get their way. Another aspect of the technocratic revolution is the economic ‘race to the bottom’ so as to tank the economy, which is a necessary prelude to the collapse of capitalism in favor of the Green Economy based on energy credits. Patrick Wood, author of Technocracy Rising, made this point about engineered financial collapse in a recent interview with Weaponized News where he noted that central banks are intentionally behaving in irrational ways. As noted by Geopolitic, the Fed itself is continuing to encourage reckless lending on top of having $4.5 trillion worth of bad assets on its books:
With unitary payment medium for the exchange of goods and services, the bank’s ability to hide and mask the true value of the whole fiat economy will be greatly heightened, and in line with that, the Federal Reserve itself is now prescribing the creation of more debt to make the banks “safer and highly leveraged.”
“We are in the midst of an unprecedented collapse in commodity and oil markets, fueling fears about every kind of debt from emerging markets to junk bonds held in U.S. listed Exchange Traded Funds (ETFs). In this midst of this raging fear, what has the U.S. Federal Reserve proposed? It’s proposed a plan to make banks “safer” by making them issue more debt and become more highly leveraged. We’re not kidding folks.”
I’ll let Tyler Durden have the final word, hoping fervently that citizens and government representatives in those societies such as Germany’s that have already experienced financial collapse and extreme government overreach continue to fight this truly insidious trend:
We would argue that the cost to society of creating an economy wherein people’s economic decisions are completely dictated by small groups of economists far outweighs any benefits that would accrue from using a centrally planned digital currency to deter crime.
About the author:
Pam Barker is a TLB staff writer/analyst. She has an extensive background in the educational system of several countries at the college and university level as a teacher and administrator.