In response to an FT article by Josephine Cumbo on 19th May 2015, entitled 'Pensions for nannies spark black market warning'
'Nanny agencies are warning of a growing “black market” in childcare as middle-class parents resort to cash-in-hand payments to avoid new pensions duties.
“The black market for cash-in-hand nannies — who don’t go through payroll — will definitely grow,” said Sarah-Jane Butler, a solicitor and director of Parental Choice, a childcare agency.
Agencies have warned that this could tempt more parents to fly under the radar, opting to pay nannies in cash to save thousands in pension, national insurance and income tax contributions, plus the hassle of setting up a scheme'
This is symptomatic of an emerging theme across the developed world and goes to a far more worrying trend than simply nannies - absolutely no disrespect to nannies intended.
1. Governments cannot afford to pay the promises they have made in unfunded liabilities. Trillions of such liabilities are kept off balance sheet and are glossed over by politicians because they know how bad the figures look - none of them want the bubble to burst on their watch
2. Already the interest on government debt is larger than some departmental budgets and this will accelerate, E.G. the older boomers are retiring and the younger ones are passing peak spending (early fifties)
3. Real interest rates are already negative in many countries, and even negative nominal rates are in effect on trillions of dollars of bonds
4. Central banks are attempting to boost aggregate demand to keep the debt bubble from bursting i.e prevent a massive deleveraging and debt deflation. In effect they are are attempting to create further debt fuelled spending - their cure for debt is more debt
5) Governments and opposition parties, particularly those approaching an election cycle, are making further pledges that they cannot fund, in order to bribe their electorates to put them/keep them in power. Further, they are promising not to raise the ‘usual suspects’ taxes such as income tax. Consequently they are increasingly developing new ‘cruel and unusual’ policies and forms of taxation such as FATCA and ‘forfeiture’ in the US
6) The 'supposed' plans to increase interest rates risk bursting the bond bubble, setting off the debt deflation mentioned at point 4. Therefore, I believe, we can expect the continuation and increase of negative interest rates
7) Negative interest rates encourage people to move to cash - why pay a bank for the privilege of lending them money? We are not there yet, but there will be a point where sentiment shifts, and the ‘herd’ will shift to cash - governments fear this.
8)This is already happening in Greece where people are taking their cash out of banks and storing it outside the system - they are even buying cars rather than keep their money in banks (Mercedes is the preferred marque, which is ironic to say the least)
9) Increasingly the idea of a cashless society is being floated by various US states and in Europe, notably Denmark. Transactions in cash are being regulated and limited in France
10) We should expect to read an increasing number of government announcements and articles where cash is demonised and 'blamed' for issues such as drug dealing, money laundering, funding terrorism, tax evasion, wicked landlords, rich people paying peanuts to part-time employees, minimum wage evasion, wicked X taking advantage of poor Y etc. Also, we can expect to see an increase in derogatory terminology such as ‘hoarding’ and ‘rentier’.
This poses a question - do I want to live in an electronically controlled, cashless society where the government can effectively a) 'force' me to spend by taxing any unspent deposits, b) bail me in, in the 'national interest' of course, anytime they please c) regulate all my transactions...bearing in mind that governments take power, they don't give it back.
I raise this because I do not expect the media to do so - I expect the media to play along. The ‘bad’ uses for cash are real albeit exaggerated - but they are not the real reason. The real reason is this - the only way governments can keep this bubble from bursting is through taking ever increasing control of the economy, and by default therefore, our private lives. Forgive the pun - this is much worse than a 'nanny state'. It will lead to abuse of power.
So my answer to the question I posed is this - 'I pay my taxes, I obey the law, keep your hands off my cash’.