BALTIMORE – Is there really a “War on Cash”?
No. There’s a war on you.
We’ll come back to that in a minute… First, a quick roundup of last week’s action.
Friday brought more bad news for U.S. shale oil producers. (More on this below in today’s Market Insight.) Reports Bloomberg:
The number of rigs drilling for oil and gas in the U.S. is plunging toward the lowest level in more than 75 years of records… culminating in the collapse of almost 75 percent of the rig count.
The fracking boom towns are now turning into ghost towns.
The billions of dollars of investment (the industry has never been cash positive) have stopped flowing into the U.S. shale producers. Revenues (such as they are) have slowed to trickle on a cold day.
And in the tech sector, Yahoo is paying the price for its buying spree. It’s one of the 11 companies that, according to USA TODAY, “lost obscene sums” of money last year:
There are 11 companies in the broad Russell 3000 index, including a whole host of energy companies like Apache but also industrial conglomerate General Electric and struggling online portal Yahoo, that have reported staggering net losses in the just-completed calendar year…
Each of these companies reported net losses of $4 billion or more last year – dwarfing even the impressive $1 billion net loss reported Thursday by struggling retailer Sears.
Pile of Manure
But let us return to the War on Cash. It is far more sinister than you might realize…
Several countries – such as Denmark, Sweden, and Norway – are already almost totally cashless.
Others, such as France, have banned cash transactions over certain amounts. There are even plans at the highest levels of the Indian government – right now one of the most cash dependent societies in the world – to “disincentivize” using cash.
Meanwhile, establishment economists and commentators – most notably Harvard economists Larry Summers and Kenneth Rogoff, Citibank chief economist Willem Buiter, Andy Haldane at the Bank of England, and Martin Wolf at the Financial Times – have come out in favor of a cashless society.
As we recently reported, Summers tells us it’s “time to kill the $100 bill.”
And according to the New York Times, “Getting Rid of Big Currency Notes Could Help Fight Crime.”
Today, we dig a little deeper into this pile of manure to try to find out what it hides.
And what a surprise! There is the Deep State – malodorous, malevolent, and malignant.
Banning Ben Franklins
First, let us dispose – as we would a dirty diaper with an outstretched arm – of the notion that getting rid of Ben Franklins and other large denomination bills would somehow “fight crime.”
If you want to do a $100,000 cash deal now, you need a stack of $100 bills a little more than four inches high.
Now suppose the $100 bill is no longer available. Does the drug dealer say to his client, “Whoa, I guess we can’t do business. I can’t be bothered to carry big wads of cash.”?
Does the crony defense contractor meet a member of the House Armed Services Committee in the parking garage and tell him, “I’m sorry, I just can’t get you the money. It won’t fit in the envelope.”?
Does the prostitute tell her pimp: “I don’t work for 20s.”?
Don’t worry about the criminals. In Argentina, the backbone of the economy is the 100-peso note – worth only about $6.
We have a place in Argentina. We’ve seen how it works. People use 100-peso notes for everything – from buying the morning paper to selling $1 million apartments. They carry it around in paper bags (so as not to attract attention of thieves.) They stash it in safes. Stacks of it bulge from their pants pockets and sit on the counters of the black market money changers.
A crime stopper?
Are you kidding?
Drug sellers, prostitutes, hit men, terrorists, money launderers. They’re already hunted like criminals… and threatened with fines, jail, or death.
Is the inconvenience of small denomination bills going to stop them?
Forget it. They’ll switch to smaller bills, foreign currencies, Bitcoin, gold, or something else. Block the use of convenient currency… and they’ll innovate.
A Savings “Tax”
How about the idea that banning cash will help the economy?
With cash harder to come by, it will be easier for central bankers to impose a negative interest rate on your bank deposits.
Without the option of holding your savings in physical currency, you’ll have no choice but to keep your money on deposit in the bank… and pay to save.
But a negative interest rate is just another tax… one that is imposed by employees of the banking industry cartel and that needs no vote in Congress.
At a negative rate of 1%, you lose $10 for every $1,000 of savings. This is the same as a 1% “savings tax.”
But hold on… Raising taxes does not normally cause people to spend money. It causes them to zip up their purses, not open them.
Taking away your money leaves you with less of it. (Duh!) You have to cut back. And if you are saving for your retirement, a tax on your savings means you will have to save more (and spend less) of what you earn.
There is no evidence anywhere in the historical record of an economy helped by taking money away from people. The idea is so absurd it could only come from a PhD economist… or a scoundrel.
But to fully understand it… we need to go back hundreds of years.
Further Reading: Negative interest rates are just the latest battle in the War on Cash. And as Bill has been warning, this will all lead to economic collapse more devastating than anything we’ve seen.
That’s why Bill has gone to such lengths to explain what’s really going on. He knows that helping you understand the situation is the first step in showing you how to protect yourself. Find full details here.
|BY CHRIS LOWE, EDITOR AT LARGE|
The House of Saud’s plan seems to be working.
As Bill reports, the U.S. oil rig count is plunging.
As you can see from the chart below, the number of U.S. oil rigs is back to levels last seen in late December 2009.
And if the Saudis don’t cut production… and the price of oil stays low… we could see a retest of the 2002 low.
China Mulls Launching Its Own Digital Currency
China’s central bank is considering issuing its own digital currency… and aiming to roll out a product as soon as possible. It’s part of a worldwide effort by governments to stamp out cash.
Ex-CIA Chief: U.S. Has “Unspoken Contract” With Saudi Arabia
Saudi Arabia is the world’s largest sponsor of Islamist terrorism. That doesn’t stop Washington pandering to the Saudi government. It’s all part of an “unspoken contract,” according to ex-CIA chief Michael Hayden.
This Will Trigger a Banking Collapse
One market expert says banks are headed for collapse… and it’s all because of one small misunderstanding. Something that not even one in every 1,000 people understands.
Great reader feedback on the latest issue of Bill’s monthly publication, The Bill Bonner Letter – about the insanity of negative interest rates. (Paid-up subscribers can access it here.)
Your “The Day the Earth Stood Still” piece feels at first read to be the most important thing, word for word, that I have ever read. I have seen all of the concepts and most of the facts before, but you have put them into a coherent whole and the modern context better than anyone I have encountered. Many thanks.— William C.
Wow. I am once again awed by your analysis in the latest Letter.
To be honest, however, I have to say I haven’t the slightest idea whether it is correct or not. What I DO know is that virtually no financial adviser I have ever dealt with or come across – or their masters in the hierarchy – ever expressed the slightest opinion about anything beyond the supposed past record of what they were trying to sell.
On that basis, and my intuitions, feeble though they be, I thank you from the bottom of my heart. This has led me to, among other things: (a) buy a modest amount of gold; (b) get myself a safe and put a reasonable amount of money in it; (c) buy modest amounts of the least volatile of dividend-paying stocks; (d) raise cash in my investment accounts to the highest levels of the past few years; (e) keep a steady eye on the markets in preparation for a quick escape.
I pray I have understood the message, but if nothing else, feel I have and sleep the better for it.— Dave H.
I am reading your excellent letter just out. While I agree with your analysis, you go into length about the drawdown of China reserves. In other things I have read, there are several parts to the drawdown – one of which is simply spending reserves to buy stuff. They may, for instance, be getting out of U.S. dollars to buy resources and American companies.
I do not pretend to know anything, and believe your analysis is correct. Just wondering about the extent of the drawdown being not only from the problems you address, but simple spending as well. Keep up the good work.— Larry B.
And also this about the War on Cash…
Agora has been in the forefront warning about the death of money. I have also saved paper money. What will be used as an exchange medium if it is not paper dollars?— Frederick S.
Chris comment: The simple answer is a state-run version of digital currency Bitcoin. Central banks in Britain and China are already mulling plans to roll their own digital currencies.
These official digital currency systems would be similar to Bitcoin. The main difference would be that issuing governments would not tolerate anonymity. Users of the ePound or eYuan would have to register with the state. This would give it full power to monitor and track all transactions.
In Case You Missed It…
Since the start of the year, the Dow is down well over 1,o00 points. And the analysts at Dent Research claim it’s got another 10,000 points to drop before all is said and done.
But their top expert explains what you can do to sidestep the carnage… Watch here now.