Dateline: Tbilisi, Georgia
The 21st century has seen the emergence of a war unlike any other. On one side of the battlefield are governments, banks, credit card companies, central banks and other financial institutions. On the other side . . . cash and anybody who uses it.
While proponents of a cashless society would have you believe that terrorists, drug lords and criminals are the only people who would ever use cash, there are more people than you would imagine on what seems to be the losing side of the war.
Regular, law-abiding people often use cash to make legitimate transactions without paying fees to a credit-card processor. There are also many low-income people who only use cash because they do not have a bank account. And then there are those individuals who simply don’t trust financial institutions that want to gamble with their money.
The War on Cash would translate that mistrust for criminality.
What the War on Cash is really about
Before we go any further, let’s get a couple things straight: First, the demise of cash can be contributed in part to the ease of payment through digital financial transactions, but the War on Cash that aims to obliterate it’s use is not.
Second, as much as the government would like to paint the War on Cash as an indispensable measure for taking down criminals, drug dealers, bribers, terrorism and tax evasion, it’s not a convincing argument.
Not convincing enough.
Not even the government believes the War on Cash is enough to take down criminal activity. Why else would US counterterrorist officials monitor money via the Swift global system? Criminals will find a way to be criminals, with or without cash.
So what is this war really about?
One word: Control.
We all know that governments – especially western ones – love to tax away much of what you earn with the argument that without them, you’d be a subsistence farmer living in a mud hut. But taxes aren’t enough to appease government thirst. Corrupt, bankrupt governments don’t just want to know what you do with whatever you have left, they also want to control it.
Cash limits their control.
Central bankers and politicians alike recognize that cash gets in the way of their monetary experiments with negative interest rates. Before the era of negative interest rates, banks would pay you, in interest, for the money you placed in their coffers. With negative interest, there’s not much incentive to keep your money in a bank nowadays.
And that’s exactly what the government and central banks want.
If you can’t save it, you spend it, right? And if people are forced to spend their money, that will stimulate the economy, right? Except for the people who don’t allow the government to manipulate their actions and choose to save their money — in cash — under their mattress.
That would explain why demand for cash and the sale of safes have both increased dramatically in recent years. It also explains the sudden, forceful attack on cash. Without cash, there’s little you can do to avoid the scheme of central economic planners.
Battles lost in the War on Cash
So what exactly have governments, banks and economic planners accomplished in the most recent battles of the War on Cash? Here’s a list of just a few of the measures they’ve taken or suggested:
- France has introduced laws restricting French citizens from making cash payments over €1,000 (down from €3,000) and reduced the limit for currency payments by tourists from €15,000 to €10,000.
- Russia, Italy, Mexico, Uruguay and Spain have created similar laws limiting cash payments over a certain amount.
- The European Central Bank has officially voted to eliminate the €500 note, reducing the amount of physical cash by approximately 30%.
- In the name of fighting money laundering and black market sales, Norway’s largest bank has called for the elimination of cash.
- Big banks that operate in the United States, like Citibank, are lobbying for the same.
- Larry Summers, a Harvard economist, has said it’s time to say goodbye to Benjamin Franklin, and there are even reports of people in favor of getting rid of the $50, as well.
- Merchants in Britain now have to register with the tax authorities before accepting more than €15,000 in cash for any transaction.
And then there are the reporting requirements you are subjected to at the airport, and the policy that requires every bank in the Land of the Free to report any “suspicious activity” — which can mean something as simple as making regular deposits of large amounts of cash. In 2013, the federal government received roughly 1.6 million such suspicious activity reports.
You could have been one of them.
The list of attacks reveals the mindset of today’s liberal economic policymakers. Seth Lipsky of the New York Post has called the proposal to ban the $100 bill the financial equivalent of gun control: Criminals use guns, so ban guns. Criminals use cash, so ban cash. That’s the logic. But — like I said before — criminals will find ways to be criminals, ban or no ban. It’s not’ about guns or cash.
Still, experts such as Deutsche Bank CEO, John Cryan, have predicted that cash will be gone within a decade.
And, even if you don’t use cash, don’t make the mistake of thinking this doesn’t impact you. Steve Forbes said it well when he warned, “Beware politicians trying to limit the ways you can conduct private economic business. It never turns out well.”
So what can you do?
4 ways to avoid becoming a casualty of the War on Cash
I said earlier that if the West manages to eliminate cash, there would be little you could do to avoid the strategies of politicians and central bankers to either make you spend your money or accept negative interest rates. And that’s true if you are still stuck in the West.
But you don’t have to resign yourself to conducting your financial business in the West.
Here are four of my suggestions for coming out of the War on Cash without a scratch.
1.Have cash in smaller countries
By storing your cash in smaller countries you can take advantage of higher interest rates and systems that are friendlier to the wealthy and their wealth.
2.Have cash other than the US dollar
Diversifying from the US dollar and the euro is important. Stick with countries that do not take issue with cash. I actually think holding Russian rubles is not a bad bet due to two important factors. First, it’s been badly beaten up, which means it will recover as the dollar gradually weakens in the mid-term. Second, it’s not tied into the cashless societies.
3.Have a store of value in another country
Having a store of value in large quantities in a friendly country will become important as the War on Cash intensifies. For example, without 500 euro notes, just as there has long been no $500 note, traveling will become harder. Store some gold coins or bars in a place where you might need to access that money. That could be a place like Austria — that is still gold friendly — or Singapore.
4. Avoid Central America
The US will cause Central America to fold like a tent. Sadly this includes Panama banks. I like Panama, but they are a dollar economy and so connected with the US.
If you are ready to diversify your money out of the West, but don’t know where to start, apply for a free strategy call and we can discuss your options.