David Engstrom - LearCapital.com

A firestorm of speculative commentary has been ignited by reports that JP Morgan Chase has ceased to accept cash for payments on credit cards, mortgages, auto loans, lines of credit and so on.  Not to defend any bank actions, but it is not difficult to imagine the chaos at a teller stand when you show up with a wad of green with instructions on how to apply the cash toward a loan payment. 

Of course it would beg the question, where did you get the cash?  Did you steal it?  Is it unreported income?  Did you make it yourself?  Or are you just trying to make a point?  That point being, a ban on cash has begun.

It has long been argued that cash is a relic.  It’s dangerous to carry large amounts; counterfeiting is still a threat; cash enables a myriad of illegal transactions; and, to the extent one can earn cash and bypass tax laws - that hurts everyone. 

These are the arguments in favor of eliminating cash.  As you see they are compelling.  Nonetheless, the dollar bills in your pocket are supposed to be legal tender for all debts public and private.  Instead, a shift in sentiment is relegating the role of cash to a tool used by common criminals to somehow defraud the system.

How ironic, as it was cash that once replaced gold and silver coin under the auspices that cash was good as gold, in fact backed by gold and silver.  This is how far we have come in the evolution of money.  Ben Bernanke once responded to the question, “is gold money?” with the simple answer of “No.” 

The reality is this.  There is already so little cash in circulation as compared to the digital transactions taking place at every level of the economy and in the financial realm, that eliminating cash won’t matter one bit or byte.  This will be illustrated further into this report.  Nonetheless, it appears we are now near a time when cash won’t be money either.  But why?    

Indeed some point to practical reasons for its elimination.  Others claim an insidious plot by the banks to control all your money (for many reasons) and cash gets in the way.  While still others point to an end-times scenario where you cannot buy or sell without using a numbered account.  So, go ahead.  Pick your reason and know, albeit dangerous, the end of cash is coming. 

 The Global War on Cash Reaches DEFCON 2

The war against cash has gone global.  At Midnight on November 8, 2016, the government of India announced a ban on 500 and 1000 rupee notes.  Each represents the equivalent of about $6 and $12 respectively.  The ban was imposed in an effort to stomp out the cash economy where cash transactions go unreported and untaxed.

Subsequently there was a run on gold.  Reports came in that Indian citizens were willing to pay in excess of $2,000 U.S. Dollars for an ounce of gold. 

On November 24, 2016, an IB Times report stated that U.S. CitiBank’s Australian branches were going cashless along with about 900 of Sweden’s 1600 branches.  ATMs are also disappearing from the banking landscape.

And, as reported by Zero Hedge . . .

“France has banned any transaction over €1,000 Euros from using physical cash. Spain has banned transactions over €2,500. Uruguay has banned transactions over $5,000.

Outside of these countries Canada, Norway, Denmark, Australia, New Zealand, Ireland, Mexico and other nations are currently either proposing or rolling out programs that will ban cash from certain transactions if not completely.”

In the U.S. the war against cash is perhaps more covert.  Yes, domestic banks are restricting the use of cash to make loan payments, prohibiting the storage of cash in certain safety deposit boxes and withdrawal of cash from bank accounts is becoming more difficult.

A first step toward eliminating cash in America is the proposed elimination of the $100 bill. As I write, a number of economists are calling for exactly this.  Former secretary of Treasury Larry Summers is a prominent voice in the argument to eliminate the $100 bill.   Harvard Professor Ken Rogoff is another strong advocate.

The next step took place just days ago as the world’s elites gathered in Davos Switzerland for the Davos Economic Forum.  Here the cry from elites went out for the elimination of cash in the United States. 

Joseph Stiglitz, the Nobel Prize winning Professor from Columbia University, reportedly made this statement during the forum.  “I believe very strongly that countries like the United States could and should move to a digital currency.” 

In a CNBC interview from Davos, PayPal CEO, Daniel Schulman, also called for the elimination of cash citing the fact that processing cash to include checks, was costly and wasteful.  He said, digital transactions are “cheaper because they are not subject to fees that often come with cashing checks or transferring money in person.”

Then this bombshell . . .

Now shocking evidence that this process may have already begun has just been uncovered.  On September 29, 2016, I noted the Monetary Base, as reported by the usdebtclock.org was counting backwards. 

The Monetary Base is defined as . . .

“The total amount of currency that is either circulated in the hands of the public or in the commercial bank deposits held in the Central Bank’s reserves.”

On September 29, 2016, the total of these reserves shown to exist were $3.802 trillion dollars.  At the time of this writing, that amount has fallen to $3.5 trillion.  In just over 3 month’s time, $300 billion of currency has vanished from the U.S. financial system.  At the same time, the M2 Money Supply, consisting of . . .

M1 plus savings deposits, small denomination time deposits, Individual Retirement Accounts (IRA) and Keough balances at depository institutions, and balances in retail money market mutual funds.

. . . have risen from $13.016 trillion dollars to $13.394 trillion dollars at the time of this writing.  So while the supply of currency has decreased by some $300 billion dollars, the overall money supply has increased by nearly $400 trillion.  The rise of digital money appears to be rising in correlation to the declining supply of currency.

By today’s measure, more than $1 billion per day of currency is disappearing from circulation and central bank reserves.  At the same time our National Debt grows at a rate of $4.4 billion per week, U.S. Total debt to include unfunded liabilities grows at a rate of $18 billion per day, while currency and credit derivatives grow at a rate of $12 billion per hour.  Who says you need cash to run a growing economy?

In this context, cash is already gone.  You can hardly blame cash for the tremendous bubbles that have been blown up in our financial system.  In fact you could make the case that digital money, has enabled the expansion of the biggest debt bubbles in the history of history.

The amount of cash circulating in our multi trillion dollar system could be compared to a bag of quarters circulating in Disney World.  If Disney World were dependent solely on the circulation of a bag of quarters throughout the park, it would not be long before all the rides would have to shut down.  What remains are merely tattered remnants of a flourishing society.  As these last remnants of cash finally disappear so too will our protection against wealth destruction. 

Alan Greenspan once wrote:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

Perhaps no truer words were ever written.  Alan Greenspan wrote these words in 1966.  At this time, cash was still backed by gold.  Since then and as a consequence of cash losing its gold backing in 1971, inflation has robbed the dollar of 87% of its purchasing power. If this be the consequence of a financial system no longer backed by gold, what now are the consequences of a financial system where there is no cash?  Think about it.

- Negative Interest Rates – Without cash, there would be no way to protect yourself against negative interest rates.  Today it is estimated that near one third of all bonds held globally, pay negative returns.  That is to say to own a bond that matures at $100 face value, may cost $101 to purchase.

- Bail-Ins – New laws, written to protect banks against failure, now allow failed banks to confiscate depositor funds to facilitate a bail-in.  Holding cash in hand could insulate one from having to personally bailout their own bank.

- The Power to Tax – Today politicians talk about the tax return filed on a post card.  However, if there were no cash and all you earn and spend is digitally recorded, the potential exists for the IRS to simply take taxes from an account on an as-needed basis.

- Hackability – Internet banking and digital fund transfers have given birth to a new kind of robber – The Hacker!  Certainly the elimination of cash does not ensure the elimination of theft.

- Electronic System Failures – Cell phones drop calls, satellite TV goes blank and cable internet stops working.  When your wealth is converted to a collection of bits and bytes, how safe is it really?

- Privacy – As the argument goes, if you have nothing to hide why do you need privacy?  Why does it matter that your whereabouts and your activities are known by what you spend, where you spend it and when?  Does it matter to you?     

If you are one who has stashed cash in the mattress or behind a loose brick, imagine the pain if it is one day announced that we have a new currency or no currency.  Or, what if one day, we learn the world has a new reservecurrency.  The dollar would plummet in value [it’s already in a bubble] and you would be left holding a pile of currency relegated to the role of fireplace kindling.  I see it now.  A pile of 20s laying right next to the pile of wood that you could not buy with the cash you now use to start your fire.

Why would you want to store something whose value can disappear in a blink.  Why would you ascribe any value to something they print, at a whim, by the trillions?  And, if you use cash to buy bonds, the returns you get basically scream that your dollar is going to be worth less when this bond matures than it is today. 

The Last Defense Against Total Wealth Destruction

Now, that we have settled on the inevitability, that the end of cash is approaching, what do we do about it?  I say let them! Then figure out how to take advantage of the fact that the end of the dollar is coming.  How?  It’s simple!  Don’t bet on the dollar. 

While the dollar is high, diversify dollars into REAL ASSETS!

Assets that can never be worth zero.  Warren Buffett owns railroads, Goldman Sachs tried to stockpile aluminum, JP Morgan is stockpiling silver, [more on that to come]  oil barons are buying up oil rigs, farmland sales are booming, Chinese citizens are stashing gold and billionaires are buying collectible art and tons of physical gold and silver.  

If you think the end of the dollar is coming, Don’t Stash Dollars!  Don’t whine when the banker tells you he doesn’t like cash anymore.  Instead, go with it.  Own something real, just like smart money is doing all over the world!     

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