Are Germans About to Be Made to Pay for Their Love of Cash?

The ECB would do so at its own peril.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Germany loves physical money. According to a Bundesbank study, approximately 80% of payments in Germany are made in cash. Even among millennials, two-thirds say they prefer paying in cash to electronic means, a much higher level than in almost any other advanced economy with the exception of Japan.

This is a big problem for a European establishment that is desperate to consign physical money to the scrap heap. Some countries, including France and Spain, have already set maximum cash limits of €1,000. Greece has dropped its cap for cash transactions from €1,500 to €500.

In January the European Commission telegraphed its intention to implement a mandatory continent-wide limit by 2018, even if it violates the “non-fundamental” rights of over 500 million EU citizens to privacy, anonymity, and personal freedom. The Commission’s plans are likely to meet strong resistance from certain quarters, in particular Germans.

When the Merkel government merely suggested last year that it was considering banning cash payments above €5,000, it triggered a fierce public backlash. The country’s biggest tabloid, Bild, published a scathing open letter titled “Hands Off Our Cash,” while a broad spectrum of political parties condemned the proposed measures as an attack on data protection and privacy.

Even the head of the Bunderbank, Jens Weidmann, criticized the government’s proposals, telling Bild (emphasis added): “It would be fatal if citizens got the impression that cash is being gradually taken away from them.”

Most central bankers do not share Weidmann’s misgivings. On the contrary, most central banks and the big banks whose interests they largely represent are one of three elite groups that are currently waging an existential war against physical money — the other two being the electronic payments industry and government itself.

The main reason for central bankers’ distaste for cash is that it significantly limits their ability to continue conducting arguably the greatest financial heist of the modern age, i.e., negative interest rate policy (NIRP). In a public speech in 2015 Andrew Haldane, chief economist at the Bank of England, admitted as much, arguing that banning cash altogether would give central banks greater “flexibility” in the event of a new crisis.

But the Bundesbank seems to have a very different perspective on the matter, for an obvious reason: it is one of the world’s biggest manufacturers of cash. Since the introduction of the euro in 2002 it has put a net €327 billion into circulation above its on-paper allocation. In total, 592 billion of the 1.1 trillion euros worth of banknotes in circulation at the end of 2016 started life at the Bundesbank.

When contacted by Bloomberg to explain how Germany’s central bank had become the euro area’s most prolific issuer, the European Central Bank said:

“The issuance of euro banknotes is an entirely demand-driven process, and none of the NCBs can control the migration of its issued banknotes. As a result, the number of returned banknotes to NCBs can exceed the number of banknotes issued by them. For example, German tourists travelling to Spain take euro banknotes issued by the Deutsche Bundesbank with them to Spain, which are finally lodged at the Banco de Espana.”

But nonetheless, Germans could be made to pay for their love of cash. As Bloomberg reports, if a national central bank uses more than its allocation of physical cash, it has to pay interest on the overuse, at the ECB’s main refinancing rate. For the moment, the issue is moot since the ECB rate is zero percent, so there is no cost.

But should the ECB, over time, raise benchmark interest rates to, say, 2% (crazier things have happened), that would result in an annual cost of €6.5 billion on the Bundesbank. This would be paid to national central banks such as Spain and Portugal, who are underusing their cash allocation. In other words, the less cash you issue the more you get paid. Luxembourg, too, would have to pay interest to other central banks since it has an allocation of less than €3 billion euros and yet has put over €96 billion into circulation. As Bloomberg notes, in this case holiday makers are probably not to blame.

Perhaps the greatest irony is that for the Bundesbank and the Bank of Luxembourg to be made to pay for their overproduction of cash, the ECB would need to hike interest rates, which defeats the main purpose for which central banks would like to get rid of cash. But still, the ECB will probably find another way of punishing Germany’s hordes of cash lovers.

It does so at its own peril. Already only one in three Germans say they have trust in the ECB. And that was before ECB governor Mario Draghi gave an infamous speech in May last year laying much of the blame for the Eurozone’s weak economy on Germans’ proclivity to save, rather than splash out on foreign imports or invest in the stock market. Once Germans realize that the ECB is considering financially punishing them for their love of cash, their trust in the central bank could also go into negative territory. By Don Quijones.

There’s an air of furtive desperation about the proceedings. Read…  Are We About to See a “European Monetary Fund?”

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  48 comments for “Are Germans About to Be Made to Pay for Their Love of Cash?

  1. randombypasser says:

    I can understand the many benefits of totally digital cash, especially the benefits to other transaction entities than the owner of the said cash.

    I personally haven’t used cash in any transaction since maybe 2015 spring or something like that and it’s okay. At least it’s been okay this far…

    But the digital, electricity dependent cash is still very vulnerable in many ways. If it was the only way to complete even basic daily transactions at local grocery store we would have a lot more complications.

    Electricity problems will kill many transactions if not all, seen that couple weeks ago in small mall and in bigger mall at last Xmas. Last week there was short DoS attack against some part of money transfer system in Finland (not published) and i couldn’t get gasoline and lunch at the moment with my cards of one bank.

    Not a good idea to rely on digital transactions only…

    • Gary says:


      Yes, but my biggest concern is that there is nothing stopping all the middlemen from throwing on more and more fees and charges, if all transaction become digital only. Of course they will say it’s for our own good LOL.

    • Jungle Jim says:

      If this is introduced here, it will usher in a golden age of criminal hacking. “Ah, you ain’t seen nothing yet”.

  2. Paulo says:

    I just bought $900 worth of lumber from a local sawmill. Cash. The owner works 5 days per week at a regular job with huge deductions from source. He chooses to spend spare time running his mill as a cottage industry. He gives me a good price and I give him cash. What and how he declares is his business. He already has to pay stumpage (tax) for the logs, GST and PST on all supplies including trucking, fuel, parts, etc. If anymore ‘skim’ is assessed he might as well not bother.

    Peak skim, 2017. No wonder the Germans prefer cash. I know I do. Somedays I think The Sopranos are running Govt. Oh yeah, they kind of are, aren’t they?

    • Suzie Alcatrez says:

      Hyperinflation is still a national memory for Germany.

    • R2D2 says:

      Are you kidding me? Canadian politicians can teach Sopranos not just a couple, but a few hundred skims these poor simple Sopranos haven never even imagined.

    • PIGL says:

      Paying stumpage is not a tax or a skin. It’s payment for wood gate harvested on public lands; in other words for trees your friend does not harvested from land that he does not own. Similarly, sales taxes are not a skim, they are a form of value added tax, they do not increase his cost of doing business.

      • John M says:


        The only value add in sales tax / VAT is to the Government.

      • Will Koenig says:

        PIGL, taxes on wholesale increase the cost of doing business, and all taxes increase the cost to the consumer. The cost of stumpage tax is a logging fee paid to an agency in the form of a tax on logs harvested from public land, rather than being a royalty fee paid to a private land holder from whose land the logs were harvested. And then there is the world we consumers live in, taxes on wholesale plus taxes on retail. This is why governments love consumption and detest saving. We are getting taxed to death, and so they want to tax our savings; which the digital world accommodates much better than the realm of cash. Simple as that.

  3. cdr says:

    My sadness weeps even more sadness for the poor Germans who detest the Eurozone’s need to maintain equilibrium. Germans who want cash are being treated no better than Greeks who want debt without obligation. Germans get the cash in piles from Euro-client states and expect to use it without interference.

    It’s a little early but this will soon devolve into a EuroCageMatch – Germany vs the Eurozone. Germany has the cash. The Eurozone makes the rules. If Germany wins, the Eurozone ends. If the Eurozone wins, a really surreal state of affairs wins … the first bureaucracy in history conquers sovereign nations into a homogenized and distopian submission. I think the Eurozone will win, but only an inch at a time like a slow juggernaut.

    Surreal doesn’t begin to describe it. Willing submission to negative rates is something that would make sheep run. Willing acceptance of the criminalization of holding cash by normal people who like cash is freakish.

    The Germans are going to lose.

    • Will Koenig says:

      We are all going to lose as this unfolds; but there is one form of real money that can not be so easily digitized; and that is physical Gold, and possibly physical silver. Why do you think Central Banks hoard gold whilst belittling it?

  4. Nicko says:

    Living in a developing country where only about 10% of people have an actual bank account, the consequences and bottlenecks of an all-cash society are all too apparent.

    Debit cards, mobile-cash and credits, the technology is becoming cheaper all the time. One huge advantage of going cashless, it brings costs down. The cashless society is inevitable and the transition is happening faster than many realize. There is simply too much corruption in the system.

    • cdr says:

      Hi Nico.

      Nice insight but I have a hard time picturing poor people from India or refugees from Syria pulling out their debit cards for a quick meal. You live differently … no bank accounts for most but cash processing is a bottleneck. I know it’s hard to believe, but in some countries, banks are not especially reliable with respect to giving you your money back. Some actually make poor investments and lose it and … NO FDIC!

    • Frederick says:

      Watch Aaron Russo discuss the cashless society that his friend Rockefeller told him about on YouTube It was 20 years ago and explains why they want it

    • 2banana says:

      Corruption in a system based on cash?

      Go Google the Cyprus and Greek bail ins…

      That kind of corruption will take your breath away….

    • intosh says:

      In terms of dollar amount, corruption involving cash is infinitely smaller than corruption involving electronic money.

      • Will Koenig says:

        I call this “Black Money”, which includes both cash (including gold) and digital transfers flowing into: property, businesses, precious metals, jewelry, gemstones, artwork and the likes. Black money always finds a way to flow, be it by cash or digital transactions. It is in a dark cloud that is very difficult to break into percentages.

  5. matt says:

    here’s why everyone should not only resist a digital commerce and use cash as much as possible is the less cash any government has, the less they can steal!

  6. mean chicken says:

    How much interest will be be outstanding on a currency that might be worth almost nothing, say for instance Germany leaves the eurozone?

    Chicken and egg, maybe?

  7. Chhelo says:

    In a cashless world the black/barter markets will allow an alternative. At least until the banksters and government overlords make the Hunger Games for real.

  8. MC says:

    Middlemen is the curse of every industry, just look at the complicated US scheme of getting drugs to the patient. Removing even one middle layer like the noxious PBM will have a noticeable effect on drug pricing.

    Which is why the PBM associations are happy to bash the pharmaceutical companies.

  9. When the free exchange of money for petroleum millions of times per day at gas stations all over the world determines the price of money …

    When the gigantic debts are unmanageable except by way of the monetization shell game …

    When, as a consequence, the central banks make unsecured loans and by doing so negate themselves as lenders of last resort …

    … by doing all these things, the central banks reveal themselves as desperate. There is nothing the banks can do but front running ‘rigged’ markets, ‘jawboning’ and witch-doctoring. As it is they may as well all close up shop and put plywood over the doors and windows. Central banks are irrelevant.

    The economists are hoping to trigger inflation by trapping currency within banking systems. Foolish economists: hoarding money is suggested as the world’s great problem, that the people are hoarding money in the banks rather than spending it. That is a textbook definition of deflation!

    As for negative rates = the real interest rates have been negative for awhile and the outcome is the permanent stupid market in equities and bonds. Negative nominal rates cannot change that; it is finance not the public trading in these things.

    the people who don’t have money cannot spend. Note the oil markets: there is war and threats of war everywhere in the world including Russia and Middle East. What is just happening right now?

    Oil price bumping along at less than $50/barrel. Any squeaking in credit and oil prices will crash to $20. Real rates will turn negative again: where is the inflation?

  10. BobT says:

    I feel more comfortable living in Thailand under a military junta with each article published on Wolf Street.

  11. Realist says:

    A cashless society would offer both government and banks an unprecedented amount of control over citizens. Both state, banks and card companiesnwould have full control over people, having full access to their entire history of transactions. It would be very easy to silence people too. A mouse click and you would be locked out of any access to your funds. But they will succeed, people will accept all this because it is so easy to pay usinh your card, handy etc. People in general are lazy and do their best to avoid anything with a resemblance of actual thinking and consideration of consequences. And among others, Italy needs a cashless society to avoid runs on their failing banks.

    • JMiller says:

      Actually in a cashless society bank runs can still happen. Depositors can still take money out of a bank electronically by transferring it to another financial institution. This is called a silent bank run.

      Only capital controls, such as preventing people from closing accounts and limiting the amount one can withdrawal from their account, can stop bank runs.

      • d says:

        “Actually in a cashless society bank runs can still happen. Depositors can still take money out of a bank electronically by transferring it to another financial institution. This is called a silent bank run.”

        And they can ALL just a silently be stopped, with 1 keyboard entry.

        • JMiller says:

          Yes fear monger. And they all can be stopped with nuclear war, a meteor hitting the Earth, etc… Something close to zero percent chance of happening.

        • JMiller says:

          My apologize d. I should not have called you a fear monger until I know more exactly what you meant by “1 keyboard entry”.

        • d says:

          Its very simple.

          You stop an electronic bank run, by taking the Bank, off line.

          This takes as very little.

          As effectively “1 Keyboard Entry.”

          These days your access to so many things, Electricity, Phones, Banks, library, Etc, can be revoked by “1 Keyboard Entry”

          I worked in the first online at the counter bank in our country.

          Any branch, or every branch, could be cut off/shut down, by “1 Keyboard Entry” the “Computer Mouse” was not in existence then.

          Today, it is a much faster and easier process, it could probably be done with “1 Mouse Click”

      • Fhowell says:

        Meaning there will be no bank runs.

    • Green Rock says:

      As a small merchant, I agree that “cashless” means control.
      What no one ever points out is that our choices will be controlled. They will penalize small independent businesses by making it very hard to get paid. Then the corporations own all the commerce. Has the “farm to table movement” helped small farmers? NO. In my state, the small ones are completely controlled by Farmer Markets, which are part of the BIG AG structure.
      Cashless means you buy what they want to let you buy & how they let you buy it. All these “improvements” are on their own terms of benefits.

      Thailand’s junta looks more inviting every day to this small business person.

  12. Emanon says:

    I was running behind schedule today and I had to get a haircut just before the place closed.

    I was out of paper money (cash) – I had intended to go to the bank first, but I did not have the time and hit the ATM later.

    I gave the stylist a small tip, and charged it on my credit card.

    When I did that, there was an electronic record of the transaction.

    The US government collected 15.2% of the tip for FICA (Social Security and Medicare) taxes.

    The US government collected perhaps 15% of the tip for income tax, at the highest marginal rate. If the woman was married and the total income of the couple was over $75,900, it would be 25%.

    The state government collected about 3% of the tip for income tax.

    The state government collected about 1% of the tip for income tax.

    Add it up, and about 34% of my tip went to the government at some level.

    For every $3 I tip, she loses $1.02 or so to the government and keeps just under $2. If she and her hubby make more than $75,900, then the marginal rate is 44%, or about $1.32 for the government and about $1.68 for the actual workers.

    Next time, if I have cash, I’ll give her cash and she gets 100% and the government gets nada, unless she is fanatical about tracking tips, which is unusual.

    I don’t feel one damn bit guilty about using cash to put a dollar in the hands of a worker rather than a bureaucrat, and the government hates me for it.

    THAT’S why they want to ban cash – they want to be able to track, tax, and if they want, simply take every last dollar.

    Imagine the NSA tracking every single dollar in the economy – you couldn’t give your kid a dollar to buy candy without them tracking it.

    That’s why people think of verses like this when the subject arises:

    “The Mark of the Beast

    And the second beast required all people small and great, rich and poor, free and slave, to receive a mark on their right hand or on their forehead, so that no one could buy or sell unless he had the mark—the name of the beast or the number of its name.”

    Revelations 13:16-17

    Bio-implanted chips are next on the agenda …

    • Emanon says:

      Correction: local gov. got the last 1%.

    • Frederick says:

      Emanon only if we the people let that happen

    • Jan-Peter Brodersen says:

      Yes, banning cash opens up the possibility of total control of people and will end in total slavery. Who wants to take an opposing stand to the government when they just by a mouse click set your virtual money on zero. You won’t be able to feed your family and nobody would be able/willing to help you because they know everything about any transaction.

      Cash is freedom!

  13. Dan Romig says:

    “… privacy, anonymity, and personal freedom.”

    This is what the war on cash is trying to exterminate. This is what differentiates being in control of one’s destiny versus being controlled by Big Brother and the global banking cartel.

    How can a rational human think it would be preferable to throw away privacy, anonymity, and personal freedom by outlawing cash?

    • d says:

      “How can a rational human”

      The people driving this are perfectly rational, to their agenda.

      Their agenda, is not in the interests of the people on the street, and never has been.

      Mao committed segments of chinese society to death by: starvation, deliberate sacrifice in combat (Korea) and firing Squad’s (death in the field’s). All act’s of genocide, and crimes against humanity. The western world did NOTHING, about it.

      It was perfectly rational, his society, he deemed, didnt need those people.

      What is and is not rational, depend on the objective, of the person making the decision.

      • Dan Romig says:

        Good points, and don’t forget that 200 years ago if you were a white man living south of the Mason-Dixon line, it was rational to purchase and own a black man.

        The agenda of those declaring war on cash is control and submission of the masses. I have always been a free-thinking individual, but my Dad did remind me of a cliche, “The nail that sticks up gets hammered down.” He also reminded me, “Remember son, half the people in the world have below-average intelligence.”

        It is those people that worry me as there seems to be quite a few people that are happy to trade away cash for electronic money.

        • steve says:

          That would remain to be true no matter how smart people overall became. Perhaps there was some other lesson your father was pointing to???

  14. Mel says:

    Is there anything about the Eurozone that *isn’t* a problem?
    The peripheral countries can’t earn enough money to buy the things Germany wants to sell. Problem.
    When they do earn some money, it unbalances the physical cash allocations. Problem.
    There’s an ECB that contemplates putting a stick between the spokes of the economy when it looks to be sort of working. Problem.

    Aeon ran an interesting article about money ( I liked it because I’d been pondering money, and it showed that I had started on a good trail, and was going to arrive at some useful ideas.
    Cash is government fiat, represented by physical tokens. When you take your cash to a bank, and deposit it in an account, your money becomes bank fiat: you only have it because the *bank* says you do. That answers a question of mine about “high quality securities”, needed often for collateral. Isn’t money a high quality security? No. Especially not among bankers. Only something as safe as a treasury bond, even a NIRP treasury bond will do.

    • Petunia says:

      You are mistaken about US cash not being good collateral. Bankers would use it if it was on deposit with the other party, but that is generally not the case. Bankers keep their own cash, which in the US is a security(Federal Reserve Note). Treasuries are also easier to identify.

      Cash also has more stable value than the Treasuries. You can use Treasuries on a swap, if you think their value will be lower later, and let the other party keep the collateral they accepted. Good for you, bad for them.

      • Mel says:

        I may have been confused/confusing. My thinking was that cash is not usually available. In context, I said “money”, and my thesis here is that money usually means bank deposits even though I used to think it meant cash.
        I’m still laboring to understand repo and bank dealings, so all advice, clarifications, second opinions, such as yours, are gratefully received.

        • d says:

          in your research you will find the US federal reserve, and the US dollar unusual.

          The US govt, the issuer of US Treasuries, can go bankrupt, with it treasuries becoming worthless.

          Yet the US Dollar could, and probably would, remain stable, as the US Federal Reserve, the Issuer of US dollar cash (even though the cash is signed by the treasury secretary), is not a Government owned entity.

          Conversely, the US Federal Reserve could fail, whilst US Govt and its treasuries, would still be stable.

          This is one of the thing that keeps the US $ its safe haven status.

          That china has not, and could not with trust recreate. The US $ value, may go through the floor, but it is still independent, of the US govt.

  15. Ishkabibble says:

    The TBTF banks know only one thing with certainty:
    and by getting total control over it, THEY get TOTAL, and I do mean TOTAL, control of all of us.

  16. d says:

    “sales taxes are not a skim, they are a form of value added tax,”

    You have just perfectly contradicted yourself.

    Any Tax is a skim.

    The taxer, takes my money (Skims it off of my income), and uses a small segment of it, for thing’s I dont want, own, or need. Then puts the large segment of it, in his pocket

    Stumpage which we call timber royalty, is a fee to the timber grower/land owner, it is not a tax skim. Unless it is paid to a local authority who does not own the land, lease the land, or plant and maintain the tree’s. Then it is a Tax, and a skim.

    Alll taxes legal, and illegal, are skim’s.

    A portion of municipal fees are not, as long as you get something in return, you need.

  17. Kevin Beck says:

    Why should everything be done for the “convenience” of banksters and the central governments? And why should anyone really believe that central governments, which are formed and exist to protect the rights of those within their borders, would do anything in their powers, whether proper or not, to erode those same rights? And regarding the electrical grid maintaining the lifeline to money: Why are we finding ways to always add more burdens to the grid? What will protect those who cannot get access to funds because the bank “conveniently” lost the account keys? Or allowed a government to siphon their savings away under false pretenses?

    I don’t know the correct answers to these questions, but these are the questions that are never asked of those who want to take away physical cash.

    Oh…one more thing…Why should the banksters be concerned what we do with cash once we earned it? After they extract the taxes on the original payment, why should they care how it’s spent? We need to eliminate capital controls, and make money separate from government again.

    That’s the solution I’ll offer to the problem.

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