The War on Cash (and on you)

Governments throughout the world are having a hard time coming out on what you pay them, and I believe that many are planning to implement policies of negative interest rates. See the November 2 post (http://gordonfeil.blogspot.ca/2016/11/election-bombs-and-closing-casino.html) which elaborates.

Negative interest rates will help their friends, the banks. You can be sure that banks won’t pay you to borrow money from them when they charge customers for deposits.

Scrapping Cash

Negative interest rates will not help governments unless they get rid of cash. Many people would choose to save cash instead of bank deposits in a negative interest rate environment. Governments don’t want your assets hidden. They want the fruit glistening in the sunlight ready for picking.

I see that last week, India made known that 500 and 1000 rupee banknotes are no longer legal tender. 500 rupees is about $10 Canadian. Combined with that are government restrictions on daily limits for cash withdrawals from ATMs. People with these notes (which accounted for 80% of the cash in circulation in India) had a choice. They could deposit them into a bank for cyber credit, or they could sell them on the black market at deep discounts.  It’s a loss either way because the bank deposits prompt queries from tax collectors on the source of the money.

The problem with no cash isn’t just the risk of confiscation. It’s also the cyber risk. Hackers might wipe out records of your deposits. Electric power might go out and you are unable to use your bankcard. Removing cash from circulation is bad economic policy. For more, see http://www.bbc.com/news/world-asia-india-37970965