The War on Cash & Negative Interest Rates
....... It sounds crazy but the elimination of cash in modern economies was the subject of one of the closed-door meetings at Davos. Below is a chronology of what happened after the meeting:
Chronology of Events After the Davos Meeting
The CEO of Deutsche Bank, predicted cash would not exist in 10 years.Next, the editorial board of Bloomberg called for the elimination of cash (yes the same Bloomberg that wanted to run for President). Five days later, the Financial Times ran an op-ed that called for scrapping cash. Within two weeks, Mario Draghi head of the European Central Bank said he decided to phase out the 500 Euro note.The next day Larry Summers former Treasury Secretary called for the end of the $100 bill in the Washington Post. Not to be outdone, the New York Times came out with a story about the need to get rid of big notes such as the $100 bills.
Last week the famous bond fund manager Bill Gross noted the “somewhat suspicious uniform attack on high denomination bills of global currencies”. These are very notable individuals here, what is going on?
Governments and Central Banks are moving towards negative interest rates to grow their economies. The idea is to persuade people that if they do not spend their savings, they will lose two to three percent per year. This is not as crazy as it sounds as currently forty percent of European countries have negative yields. Over the last month, Japan has moved to negative interest rates.
Governments and Banks fear that people will start pulling money out of banks and start holding cash. If you have $100,000 in the bank and you are going to lose 2% or $2000 per year why not just get cash in a safe deposit box. Thus, we have the war on cash.
We see a couple of problems with negative interest rates. We believe the capitalistic system will begin to fail as negative interest rates destroy price discovery and capital allocation. Secondly, how does a cashless society function if you have no electricity in a crisis? For example, living in a major metropolitan area like Houston, and a hurricane hits. The whole town is without power for days, how will the people survive?
Negative interest rates are a very bad idea and can only be called a symptom of a failing Central Bank policies that have resulted in the worst global recovery since the Great Depression.
From a newsletter I get.
If the economic powers decide they need to take interest rates negative .. I suppose to make people spend instead of save ..... they need to keep ppl from escaping the capital loss from negative rates. So get rid of big bills first, then all cash. Make everyone use electronic cash on cards of some kind. If everyone's cash is sitting in electronic accounts, they can impose the negative rates on everyone.
How about corps with cash on hand ... will they accept this or will they get around somehow. Moving capital around the world to wherever it can be held.
Or will people revive use of the barbarous relics?
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