As we said in the previous post, the War On Cash is a war for power. (Like pretty much every war is.) On one side are the central planners, governments, central banks. On the other side is the rest of the world.
The central planners see that their vast experiment post-2008 is failing. As such they are getting desperate. The planners are increasingly of the opinion that the real problem is that they don’t have tight enough control over the world economy (let that sink in) and that cash in the hands of everyday people is a danger to their centralized regime. And they are right. It is.
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.