The War on Cash

From: The Sil­ver Bar Cafe

Neg­a­tive inter­est rates will only work if the peo­ple can­not remove their funds in the form of cash. Once cash is removed from the sys­tem then “money” is cap­tured within the bank­ing sys­tem and they can charge what­ever neg­a­tive inter­est rates, ser­vice charges and fees that they desire. The only thing that will hold them back at all is com­pe­ti­tion within the bank­ing com­mu­nity and that is dis­ap­pear­ing fast with all the merg­ers and mega-​banks.

Neg­a­tive inter­est rates dis­cour­ages sav­ing and encour­ages spend­ing and imme­di­ate con­sump­tion. The very basis of cap­i­tal­ism is to acquire cap­i­tal through sav­ings. The ditch dig­ger who uses a shovel is trapped with a given pro­duc­tion rate. Regard­less how early he starts and how late he works he can only dig so far. But if he saves his money or cap­i­tal and one day buys a back­hoe he is all of a sud­den 100 times more pro­duc­tive and can earn much more with his labor.

Some­how we have decided that we must bor­row and con­sume to make the econ­omy work prop­erly. Con­sump­tion on the means of pro­duc­tion (such as the back­hoe described above) makes us more pro­duc­tive and there­fore bet­ter off, how­ever, con­sump­tion on items that we really do not need (such as the lat­est new car when our present one is only a year old) nor can afford (pur­chased on credit) only makes us poorer since we are only left with debt and a con­sumed object.

Infla­tion causes a flight from cash. Defla­tion (or a liq­uid­ity cri­sis) causes a rush into cash and slows the veloc­ity of money. It doesn’t mat­ter how much cash the Fed drops from heli­copters or how many ver­sions of QE they come up with if the cash is saved or debt is paid down the veloc­ity of money will not increase. But what if they charge us to hold cash? What if they charge neg­a­tive inter­est rates on sav­ings accounts? What if they charged –20%? Peo­ple would just remove their cash from the banks. But what if there were no cash? Now all saved wealth would be “taxed” and sav­ing would be dis­cour­aged. Even worse, what if VISA, MC, AMEX, Dis­cover, Union, etc, all decided to raise their rates even more? What if debit cards charged 5% to process charges. The major credit card com­pa­nies already charge 1.5 to 4% to process charges even if you pay on time. Of course the mer­chant pays the fees but those fees are added to what you have to pay. Many mer­chants will give a 2% dis­count if you pay cash to avoid the credit card charges they must presently pay. One of the rea­sons that fees are kept low is the unstated threat to just use cash if they become too expen­sive (they already are pretty pricy and siphon off great wealth). But what if there is no cash? What then?

Even more evil is once all your wealth is locked into the bank­ing sys­tem your accounts can be seized by any num­ber of gov­ern­ment agen­cies claim­ing you have bro­ken any one of thou­sands of laws and rules. Try hir­ing a lawyer to defend your­self if your bank account is frozen and you have no cash (because there is no cash any­more). I sup­pose a good pub­lic defender will make things right and stand up to the Fed­eral gov­ern­ment for you.

Even though cash is used most heav­ily by the poor and under class; the mere exis­tence of it pro­tects the wealthy as well. Many well to do peo­ple look down their noses at cash and rarely carry any at all – BUT the fact that it is there, ready and wait­ing to be used, keeps all the alter­na­tives in check on fees.

The US gov­ern­ment has set a limit of $10,000 for cash trans­ac­tions or a CTR must be filled out by some­one. Most car deal­er­ships will not accept cash in excess of $10,000 because they do not want to be bur­dened with the paper­work and will require you to get a money order at the bank and there­fore make the bank fill out the CTR paper­work for them. In Italy this amount is around 1,000 euros. The thresh­old is get­ting lower in many other coun­tries around the world as gov­ern­ments want to know how you spend every penny you have earned.

How did we get here? What is the his­tory of our money? Early in the his­tory of the US indi­vid­ual states printed their own paper money or credit. The Con­ti­nen­tal Con­gress printed “con­ti­nen­tal dol­lars” which were non-​interest bear­ing notes. They depre­ci­ated so quickly that they caused a great infla­tion early on in our his­tory. This was so ingrained in everyone’s recent mem­ory that the con­sti­tu­tion required the US gov­ern­ment “To coin money reg­u­late the value thereof, and of for­eign coin, and fix the stan­dard of weights and mea­sures.” . One of the first pub­lic build­ings con­structed in the new capi­tol of Wash­ing­ton DC was the US Mint. At the time for­eign coins cir­cu­lated in the US, the most com­mon of which were the Span­ish and Mex­i­can 90% sil­ver coins. Small change was almost non-​existent so it was com­mon to cut up for­eign sil­ver dol­lars into 8 pie shaped pieces called “bits”. Two bits was a quar­ter. Since the mint could not pos­si­bly hope to strike enough coins to sat­isfy pub­lic demand con­gress reg­u­lated the value of for­eign coins in cir­cu­la­tion and declared them legal ten­der within the US. A Mex­i­can sil­ver dol­lar was sup­posed to con­tain 378 grains of sil­ver (0.787 troy oz). A great sam­pling of these coins was taken and it was dis­cov­ered that due to heavy use the aver­age amount of sil­ver in each coin was only 371 ¼ grains (0.773 troy oz). Thus is was declared that US sil­ver dol­lars would all con­tain 371 ¼ grains of sil­ver (0.77 troy oz) and that held true until the US struck its last sil­ver dol­lar and they were all taken out of ser­vice in 1965.

Due to the lack of small change the first coin minted by the new US mint was the cop­per penny. A cou­ple of years later the mint started melt­ing down for­eign sil­ver coins and re-​striking them as US sil­ver dol­lars. How­ever, decades and decades later for­eign sil­ver coins were still cir­cu­lat­ing in the US and were rec­og­nized as legal ten­der coins while the mint labored to make enough coins for our domes­tic use.

In the 19th cen­tury the US mint decided to strike “trade dol­lars” for use in Asian trade. The Asians did not like our “light weight” sil­ver dol­lar at 371 ¼ grains of sil­ver and so we struck a 378 grain sil­ver “trade dol­lar” to be used exclu­sively in Asian trade to com­pete with Span­ish and Mex­i­can coins. So many of these sil­ver coins cir­cu­lated in Asia from West­ern coun­tries that they were know in China as yuan which meant “round things”. The Japan­ese used the word yen which meant the same.

The found­ing fathers that wrote the con­sti­tu­tion had just had a bad expe­ri­ence with paper dol­lars or non-​interest bear­ing notes and their sub­se­quent default. They rec­og­nized that sil­ver coins were wealth regard­less of what coun­try issued them. It was just a source of national pride to melt down the for­eign coins and recast them as our own. The sil­ver is what gave them their value. Paper money that rep­re­sented sil­ver and gold as ware­house receipts grew in accep­tance because of con­ve­nience. FDR sev­ered the link as ware­house receipts for domes­tic use and Nixon fin­ished the job later on to declare all paper money fiat backed by noth­ing. Now elec­tronic dig­its in bank com­put­ers con­sti­tute most of our money. If you don’t believe it just look at our mod­ern banks. The vaults are mere after­thoughts com­pared to bank vaults from 100 years ago. Back then the money was in the vault. Now all the secu­rity at the bank is in the com­puter sys­tem because that is where all the money resides. Very lit­tle paper money remains at the bank in the small vaults now built as an after­thought. Paper cash, even though it is fiat, still plays a role today. It still allows you to phys­i­cally hold notes in your hand out­side of the bank­ing sys­tem. Once your money is “trapped” in the bank and the gov­ern­ment can freeze your account they can decide who can buy and sell and who becomes a “non-​person”.

They may say that it is all about fight­ing the “war on drugs” or “ter­ror­ism” or even “income tax cheats” but don’t believe it. It is about one thing and only one thing – total con­trol. Fight for your free­dom before it is all gone.

The con­sti­tu­tion? I’m pretty sure the patriot act killed it to ensure our free­doms.”
Bart Simpson

The “War on Cash” in 10 Spine-​Chilling Quotes

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