U.S.War on Cash Declared- from Aug 28th

"Abolish Cash"- KC Fed paper

written by Vince Lanci , Echobay Partners

Jackson Hole as Backdrop to "War on Cash"

Friday at the Fed Symposium a document was handed out in conjunction with a discussion. Note the discussion's title:

11:55 a.m. - Negative Nominal Interest Rates: author Marvin Goodfriend (Carnegie Mellon), discussant Marianne Nessen, head of monetary policy at Sweden’s Riksbanki 

However, the discussion's accompanying handout had a different title: The Case for Unencumbering Interest Rate Policy at the Zero Bound- Marvin Goodfriend.

We initially dismissed this last Thursday as a sales pitch of the Fed's ability to handle NIRP if it came to that. "Risky but in the right hands it can work" was our predicted synopsis

Then we read it Friday.  Our takeaway was that this document was not just a discussion on NIRP risk and how to assess if/when to use it. This was also an answer key on how to make it happen. And among those recommendations was to "Abolish Paper Currency". 

Paper Excerpt: How to Kill Cash

This is a logical extension for using ATMs as profit centers. And just one of many ways you will be sold on the cure for your problems. 

Related Reading

 

Give Me Convenience or Give Me Death

Remember when ATM's were introduced? We were petrified to use our Manny-Hanny cards at first. But they were a cost reducer for banks and the idea was TBTF for them. Tellers could be sacked then and the public embraced it for convenience reasons eventually. Like long lines from no tellers being open ( see EZ Pass today). Then it became a source of revenue as bank ATM's charge you money if the machine is not theirs. Bank sells on a cure for a disease they create. Imagine being a fired teller having to use an ATM the rest of your life. Dehumanizing we'd imagine.

You will eventually be charged for convenience on any innovation that  reduces a company's operating cost through implementation of said innovation. It is the curse of incumbency. Once behavior becomes a habit, it is hard to break. Electronic incumbency is at the top of that list. Electronic Incumbency in business would be a function of lost executive function and addictive behavior in Psychology.

Here are some bullet points to consider on the topic:

  • Abolishing cash makes it easier to manage the markets especially in a NIRP environment
  • The rationale of transacting with ease via electronic swipes of a card is the pretense
  • The reality is once cash is abolished there will be no way to transact business except with a debit/credit card
  • And we will all be locked into the system, our choices made for us.
  • Net effect, reduces bank risk via no clearing time, ease of transactions  for user, forces all trade to be intermediated by a bank
  • Banks get the ultimate  exchange type franchise.
  • Probably right afterwards they become pure utilities for the Government again.
  • our childhood friends wouldn't be able to launder counterfeit $10's at hot dog stands- wait, ignore that one.. You get the point though. You would be a walking EZ Pass

 

Banning Cash Solves Global Economic Problems- Harvard economics professor 

On Saturday, an Echo of Friday's attack on currency was published by the Wall street Journal. If people like  Prof. Kenneth Rogoff have their way In their cashless utopia, you'd have no choice - all purchases and transactions would be recorded, stored, hacked, and sold. It is laughable to say removing the $100 bill would be helpful. Removing the $1000 bill was valid, but that is a factor of 10X Ben Franklin's note. So it is 1/10 as effective practically. Professor Rogoff is also former chief economist of the International Monetary Fund and about to publish a book called we kid you not " The Curse of Cash".

More from the paper. There are too many to go into at this time. We strongly recommend a full reading of  it.

An implication that NIRP was not unlike going off the Gold standard and therefore justified.

Perhaps that is a good parallel but we don't see it. Both actions take us further from hard money and deeper into the realm of subjective valuation. So we see NIRP not as a parallel comparison at all, more of an extension of the first action (No gold standard) by the second action (NIRP). From The Article:

If the Gold standard was a deflationary encumbrance at one extreme, then what can negative interest rates be but its polar opposite? How does putting more control into a subjective authority's  hands increase its credibility to "sustain a stable purchase power of money"? We don't see it.

 

Cash worth Less than e-Cash? YES WE CAN

Here's one Jim Rickards  alerted us to in a twitter comment he made:

 Imagine different $ values for cash & bank deposits not "defended" by Fed. (The) Fed considers it (already)

We  think he is referring to this section from the article which implies that paper money can be made to trade at less than its digital counterpart.

So unless we are misreading this, if used, the Fed would be debasing your faith in a  FIAT paper currency even while it tries to establish an even more esoteric form of FIAT, digital money.   But what would give credibility to a  digital currency that is based only on (unseen) electrons? Janet Yellen's opinion and the occasional fat finger?

Those of us familiar with swaps know that the real thing almost always trades at a premium to the tracking product. Here the tracking product would become the physical, and the physical an unsupported tracking stock. This is about tails wagging dogs.

Let's be clear. Gold is the ultimate FIAT money.  It has value because we believe it has value. But it is suited to have value because it is unused in industry and as a monetary unit its supply growth is very predictable. What could change that? Two polar opposite examples would be: If Gold were alchemically synthesized (loses value) or if it were used industrially and  irrecoverably  (gains value). These would undermine Gold's credibility as a stable currency. Our issue here is demoting a tangible object (currency) that represents an intangible store of value (FIAT), to an intangible currency (101101101010's) representing the same.

-follow Vince on twitter @ Vince Lanci

 

Editor's Comment

Given the above concept; How easy would it be for the Fed to declare in an emergency: "All Comex Gold contracts are now settled in cash. Delivery has been suspended by force majeure'. There would be no need to make ownership illegal if it ever came to that. The government has far better tools at its disposal these days to confiscate Gold if it ever needs.

good Luck

 

[VIDEO] Jim Rickards on Central Bankers, Gold, and SDRs

 

Sorenk@marketslant.com

 

 

 

 

 

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30 comments sorted by

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Betty (not verified)

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Its a trap to control and monitor you like momma did when you were a little kid. No one should be able to know where, when and how and on what you spent your money...just another example of the encroaching government and their banker buddies wanting to snoop into private lives....
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Chris Attwell (not verified)

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Must be a priority. Raise taxes by allowing the banks to filter off a % from every transaction for the Government. I mean every transaction. Do away with the bulk of revenue services and costly collectables.
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Soren K.

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Coinflation.com people. I've used your site in past to look up value for my Nickel collection.- good stuff
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In the know (not verified)

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Abolish the FED for starters. EO-11110. The directives are already in place. They can stand in an unemployment line and apply for EBT food stamps and Obama scare. We can print a New US Dollar free of the Fed and backed by Silver. These hand full of thieves and go pound sand.
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Anonymous (not verified)

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A fiat currency is a currency given that status by fiat, meaning government decree. Not the case for gold. Completely opposite actually, gold is a currency by the market's recognition of its reliability as a currency and store of value. Should have put that sentence "Gold is the ultimate Fiat currency" first so I would know immediately this is just another useless anti-gold propaganda article.
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Soren K.

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1- agreed that Fiat is by decree. 2- when the dollar was backed by gold that made it fiat . 3- thank you for your comment
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COOCOOZZ (not verified)

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bitcoin here i come!
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Soren K.

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they'll coopt it first.sadly
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Anonymous (not verified)

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what is coopt?
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Anonymous (not verified)

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What happens in a cashless society when their is a local or more global power failure? No one can purchase food or gasoline? How idiotic!
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Steve (not verified)

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"Let's be clear. Gold is the ultimate FIAT money." Gold has value because; it is rare, does not corrode and has beauty. It also has some industrial applications. Paper money has none of these things and so we call it FIAT. I don't feel that gold is FIAT money.
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Soren K.

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FIAT comes from the Latin "by decree". So when I say Gold is FiAT. That is more correctly stated. Gold is the best choice for FIAT b/c of its limited non-recoverable industrial use, and its stable predictable growth of supply. Many people think that FIAT is rooted in TRUST. True: as in TRUST THAT THE PERSON OR GOVT MAKING DECREE HAS MADE A SOUND CHOICE.Which is why Gold is the best choice IMHO for decree until something better comes along that is not managed by fallible human judgment.
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Anonymous (not verified)

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When you say gold is fiat you could not state it more incorrectly. Fiat currency is that which is basically worthless but is forced upon people - by fiat - for use as currency. In a free market people choose gold, they don't need government coercion to make that choice. Government coercion is used to eliminate the option to transact in gold. I would say you are not qualified to be writing about money given such a basic error in thinking, except that I actually suspect you know perfectly well the confusion you are trying to create. Oh well, it's not like you are the only propagandist operating today. In fact good information is extremely rare and valuable and I should think myself foolish for expecting to find such in a free article on the net. Still, please review an assortment of four letter words to capture an appropriate feeling and response to this "error".
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Aeranium (not verified)

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Is it the case of Paper=Government Fiat vs Gold= People choice's Fiat? All fiat because the value is all in the head.
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Anonymous (not verified)

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it's a fine little tail chasing exercise you have yourself in ... and then the inflation comes and people want gold and silver, not fiat currency dollars.
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Anonymous (not verified)

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not a matter of feeling that way, it is a matter of fact. Gold is not fiat currency.
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Soren K.

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thank you
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Aeranium (not verified)

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I think gold or even ramen noodles are both FIAT in the broad sense that people are willing to readily exchange and transact in them. If rarity is the criteria, potable water should be a better currency, like 'hydro' in Waterworld. But human are more shallow and greedy than that.
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Kevin (not verified)

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Ramen noodles are neither a fiat currency nor a monetary medium. Governments do not assign a value to ramen noodles, they have no intrinsic value, and no one uses them as money. And once they spoil, they have no value to anyone. Gold is also not fiat-- no government assigns it an arbitrary value to be used as money. It is not a currency, but a monetary medium that has intrinsic value and which has been around for millennia. Even if the authority that issued gold coins in the past goes bankrupt or no longer exists, the gold will still have value, and today that is always higher than the original face value. Paper money, on the other hand, is, by definition, fiat. The paper itself has no intrinsic value; an issuing authority merely arbitrarily assigns various values to it. Two sheets of blank paper, for example, can be assigned values of 1 dollar and 100 dollars, respectively, even though the blank paper itself has no intrinsic value. These arbitrarily assigned values hold so long as there is confidence in the issuing authority and the market is not flooded with paper. However, there are numerous cases of countries (such as Zimbabwe, Yugoslavia, Argentina, Brazil, Germany, Hungary, etc.) and other issuing authorities (such as the American "wildcat" banks of the 1800s) that issued fiat paper currency which later became worthless.
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Aeranium (not verified)

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What if the Govt confiscates your gold? How is it any more secure or less fiat than paper? I'm sorry I might sound pedantic but I just really want to get into the bottom of what 'fiat' means. I do agree with you though that gold has more intrinsic value that ramen or paper, their presence is permanent.
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Kevin (not verified)

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"Fiat" has to be considered in the context of "fiat currency". The threat of confiscation has nothing to do with whether a currency is fiat or not. Even when the United States confiscated gold back in the 1930s, there was a loophole that allowed people (like my grandparents) to keep gold coins of up to $100 in total face value. And after that, the government arbitrarily raised the price of gold, from $20.63 per troy ounce (which it had been for essentially 100 years), to $35 per troy ounce, after gold had ceased to be a currency. So while the US government declared by fiat what it thought gold should be worth, gold was not a fiat currency, as it had ceased to circulate. Modern governments and other currency-issuing authorities do not assign values to food to be used as money. Food therefore is not a fiat currency in modern society. In the case of bullion coins, governments have randomly assigned values to those coins, but they do not circulate as money because the intrinsic value of the gold (or silver, or platinum) they contain is far higher than the value the government has stamped on them and they are therefore not fiat currency.
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bILL (not verified)

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WHERE IS MY PITCHFORK?!!!!
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Anonymous (not verified)

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Yea, we might as well make some hay bales of small bills and store them.
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Soren K.

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lol
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Aeranium (not verified)

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The Government can do whatever they so desire. Hence a saying in my country that 'some privileges cannot be bought and sold'.
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donny doolittle (not verified)

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may I ask what country you are from? it sounds like something one would hear from a latin america country where the promises of socialism always gives way to a certain despotism that oppress the people all over again. Any anti-US sentiment I can wholly appreciate as I do not support the methods of control the US Govt employs and has employed in the region. As an American it's a disgusting reality that we cannot stop our Us Govt from committing atrocities at its pleasure. I don't care about the so-called white papers that will one will read in Foreign Affairs (a CFR production) or the other various think-tank mags, which makes the intellectual case for all of these contraventions into foreign lands. America was a far better country when political isolationism ruled the roost. WWII was both our shining hour (from which all of the good will earned has been long used-up) and the curse of "broadmindedness" (in foeign affairs), if you will. After the German reclamation project after WWII (where america led) and the Greek Aid Mission (Greece was a very important delineation marker between West and Soviet influence and communists (our uncomfortable allies in WWII), who were highly active in Greece in the after-war period. My mother's uncle actually led the GAM, so I have a little familiarity with the issue. Why do I mention all of this? Because we the people may never extricate ourselves from this growing monolithic enterprise (NWO) if we don't take accountability for our role in allowing the US military (for all intents and purposes, since nothing means nothing except at the point of a gun) to become the playground for the filthiest group of high-level criminals that have ever existed (to give them their due). When one recognizes the leaders of this world for who they are (gang leaders, pimps, criminals of the HIGHEST order) , when the cloak is removed, one realizes that everything makes sense in a very disturbing sort of way. What's disturbing is that virtually everything represented as truth - especially within the msm, including the music one is apt to listen to, and the movies and other dramas that receive universal distribution - are lies. The MSM degrades society, you better believe that. Virtually everything people parrot from the msm degrades society much to the pleasure of the overlords. This monlithic structure exists in the dialogue of cartoons and feature-length movies we devour because of our favorite stars. The process destroys the individuality of human beings. It manipulates a person's mind in ways that benefit only the approved message (and anti-message in some cases, aka controlled opposition) depending on whether one is a red dot or a blue dot.
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Aeranium (not verified)

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Your post confirms my hunch that despotism is just as pervasive in America as anywhere else, regardless where you're from. Controlled democracy is just another benign form of authoritarianism. In the end, we're not that different, especially with regard to how the Govts control wealth.
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Anonymous (not verified)

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That's why your country sucks and we don't want that shit coming here.
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Aeranium (not verified)

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That's rich coming from a country governed by strings of dynastic presidents.
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Anonymous (not verified)

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Hence Trump. We are all hoping he burns DC to the ground.