In response to an FT article by Chris Giles on 18th September 2015, entitled 'Scrap cash altogether, says Bank of England's chief economist'
"The main problem, he said would be the question of whether the public would accept the new technology instead of cash"
The short answer from me is 'no'. The long answer is what I wrote on August 23rd when the FT ran an FT comment on this entitled "The case for retiring another ‘barbarous relic’". If the 'useful fools' and 'control freaks' amongst the central banking community are going to keep repeating themselves, so shall I. Here it is again:
This is insidious nonsense. We can expect to hear more of this, along with a total absence of any mention of the real 'reasons' for it:
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 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. In the US for example, the government is increasingly developing new ‘cruel and unusual’ policies and forms of taxation such as FATCA and ‘forfeiture’ in the US
6) 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 dramatically, and the ‘herd’ will shift to cash - governments fear this - and that's what this article is really about. This happened in Greece where people took their cash out of banks and stored it outside the system
8) So...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
9) 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 expect the media to increasingly play along with this statist control-freakery. This article is an example of that. The ‘bad’ uses for cash mentioned here maybe 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. This is much worse than a 'nanny state', It will lead to abuse of power.
I pay my taxes, and I obey the law, keep your hands off my cash.