But who benefits from the War on Cash?
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
In the wake of the attack on the Christmas market in Berlin in December, the European Commission granted customs and police authorities sweeping new powers to seize cash or precious metals carried by “suspect individuals” entering the EU. People carrying more than €10,000 euros in cash already have to declare this at customs when entering the EU. The new rules would allow authorities to seize money (or precious metals or bitcoin) below that threshold “where there are suspicions of criminal activity.”
It was the latest step in the War on Cash. The powers that want to kill off cash include private and central banks, fintech firms, Silicon Valley magnates like Tim Cook and Bill Gates, telecom behemoths, credit card giants, assorted NGOs, a bewildering alphabet soup of UN agencies and many national governments. They all have their own disparate motives for taking out physical money.
They already have vital technological and generational trends firmly on their side, as well as the the added bonus of widespread public ignorance, apathy, and disinterest. As such, cash’s days as a commonly used payment method may well be numbered anyway. But it could take decades for it to die a natural death, if indeed it does. Cash’s enemies would much rather accelerate its demise.
In Europe authorities continue to escalate their War on Cash by passing increasingly draconian laws that make it harder and harder for people — law-abiding or not — to hold or transact with physical currency. Early last year the European Central Bank announced its decision to end the production and issuance of the €500 note from 2018. Allegedly the currency of choice for organized crime outfits around the world, the so-called “Bin Laden bill” accounts for close to a third of the total amount of cash in existence in the Eurozone.
In Greece, the government has taken a somewhat different tack, by fiscally punishing those who use cash for all their daily transactions and rewarding those who don’t. To qualify for tax credits each citizen must spend a certain fraction of his or her earned income using electronic money. For incomes of less than €10,000 the minimum threshold is 10%, though expenditure on utilities, rent, phone bills or loan repayment do not count. The limit rises to 15% for incomes of between €10,000 and €30,000 and reach as high as 20% for incomes of over €30,000. These kinds of (dis)incentive schemes are going to become an increasingly common tactic in the War on Cash.
The Greek government also dropped the maximum cap for cash transactions by two-thirds, from €1,500 to €500. In simple terms, any legal purchase of a good or service over €500 will need to be done with plastic or mobile money. It’s the lowest cap on cash in the Western hemisphere.
But Spain is not far behind. During the Christmas period, its government also quietly reduced the maximum limit on cash transactions from €2,500 to €1,000, which brings Spain in line with its northern neighbor, France, which was one of the first countries to introduce a €1,000 cap on cash transactions. At the time, it was a statistical outlier but could soon become the norm.
Spain has also become home to a rather curious open-air experiment in cashless economics. The northern region of Cantabria is in the process of launching a pilot scheme across numerous localities aimed at simulating a cashless society. In the localities chosen to take part in the scheme, the use of cash will not be completely banned but it will be strongly discouraged.
The scheme is being led by the region’s somewhat Orwellian-sounding Modernization Forum and is inspired by the pioneering efforts of the governments of Sweden and Denmark to erode the role of physical currency in payment transactions. In an interview with Spain’s Cadena Ser, Emilio Ontiveros, the director of the Monetization Forum (and president of Analistas Financieros Internacionales, a major financial consultancy group, and former director of bankrupt savings bank Caja de Ahorros del Mediterráneo), explained why he thought cash urgently needs replacing:
- Cash is dirty, both literally and figuratively.
- Cash is expensive to print and administer.
- Cash is for criminals and tax evaders. A purely digital payment system would allow for much greater transparency, making it much easier to trace and tax funds.
An added bonus of the scheme is that it would force older generations to take a crash course in digital literacy, whether they want to or not, said Cantabria’s regional president, Miguel Ángel Revilla. Either they get with the program or they jump through hoops just trying to buy their weekly groceries. Ontiveros also mentioned, without elaborating, that cash can place unwelcome limits on the monetary policy of central banks — an oblique reference to the ECB’s beloved NIRP.
This is the key. The only way that central banks can effectively maintain negative interest rates is by abolishing cash altogether. As long as cash exists, depositors will be engaging in the logical counter measure: taking their money out of the bank and parking it where the erosive effects of NIRP can’t reach it. Therefore, central banks and governments see cash as an impediment to their power; and the tech and finance industries, which take a cut at every transaction, see cash as an impediment to their profits. And that’s what will continue to fuel Europe’s escalating War on Cash. By Don Quijones, Raging Bull-Shit.
The banking crisis in Italy and the bailout now underway conform to a well-established script. Read… Who Exactly Benefits from Italy’s Ballooning Bank Bailout?