Tuesday, August 30, 2016

So much for the "cashless society"

There's been lots of talk lately about doing away with bigger banknotes and moving towards a so-called "cashless society".  To name just a few recent articles:

However, when banks start charging you for the privilege of keeping your money in their vaults, that changes the picture.  The Wall Street Journal reports:

For years, Germans kept socking money away in savings accounts despite plunging interest rates. Savers deemed the accounts secure, and they still offered easy cash access. But recently, many have lost faith.

“It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,” said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344), including part of his company pension that he took as a payout.

Interest rates’ plunge into negative territory is now accelerating demand for impregnable metal boxes.

Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump in sales of home safes in the first half of this year compared with the year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”

. . .

Germany’s love of cash is driven largely by its anonymity. One legacy of the Nazis and East Germany’s Stasi secret police is a fear of government snooping, and many Germans are spooked by proposals of banning cash transactions that exceed €5,000. Many Germans think the ECB’s plan to phase out the €500 bill is only the beginning of getting rid of cash altogether.

There's more at the link.

We've already seen calls to eliminate the $100 bill in the USA, and high-denomination bills elsewhere.  They're never made out of concern for our interests - always to benefit Big Brother or the banks.  Every time I hear such calls, I check, double-check and re-check my cash reserves (and expand them, if possible).

The anonymity factor is certainly important to many people, including yours truly.  In an era when certain purchases (e.g. firearms, ammunition, etc.) are 'politically incorrect', I much prefer making private purchases whenever possible, paying cash instead of using credit cards or checks.  (For that matter, some vendors such as PayPal and Square specifically forbid using their systems to buy such items, limiting one's options.)  Also, if electronic payment and/or processing systems should go down for any reason (such as the infamous EBT 'outage' a couple of years ago), cash will instantly be king once more - so it pays (literally) to have some on hand.

I repeat my earlier recommendation.  Try to keep at least one months' expenditure on hand, in cash - preferably in smaller bills such as twenties.  If you can stretch that to two or three months' worth, it's not a bad idea to do so.  You never know when that cash might come in very handy indeed.



JohninMd.(HELP?!??) said...

Peter what's your feelings on silver or gold? In particular, pre- 1964 coinage?

Steffen said...

Over at the Adaptive Curmudgeon's blog, he mentioned and linked someone who came up with the "jews in the attic" measure of economic freedom.

In a society where your information and expenditures all leave a trackable electronic trail, no one will be able to hide from Big Brother. Anyone deemed undesirable by the government will have nowhere to hide.

Peter said...

@John: In the USA, silver has developed something of a unique following based on historical developments. For more information, see https://en.wikipedia.org/wiki/Free_silver . As a result, silver is more highly regarded by some US popular 'authorities' than it is in the rest of the world.

I have no problem keeping a certain amount in silver, but I'm suspicious of its long-term utility as a store of value and a medium of exchange. I think gold is far better suited to those uses, albeit much more expensive, of course. I think that the role often forecast for silver in a 'survival economy' will be filled instead by barter transactions, particularly using commodities that are widely useful (e.g. ammunition, food, etc.)

Personally, I wouldn't keep more than $1,000 to $2,000 in silver, and then I'd have it in one-ounce coins rather than 'old silver'. YMMV, of course.

Uncle Lar said...

As for precious metals in a crisis you have to depend on there being enough societal structure left for someone to be willing to trade things you need for a lump of metal. I'm with Peter, something of immediate value will be far easier to cash in on.
Interesting was it not that the payment of $400 million (totally not a ransom of course) to Iran had to be done with pallet loads of actual currency. Because Iran couldn't accept electronic transfers was the reason given. And how fortunate that particular problem was fixed a week or so later when we paid them an additional 1.3 billion.
One has to wonder to what purpose that 400 mil will be put. Feeding hungry children or funding terrorists?

Will said...

Switching to a cashless nation will crash the US economy. The gray market is supposedly larger than the officially tracked one, by a factor of x2 or x3. Removing the ability to engage in untaxed transactions is the .gov's holy grail, but that also eliminates the attraction for the endevour, in most cases. Bureaucrats are too stupid to understand this simple fact of life.

Thomas W said...

I can't see cash going away, or if it does there will be some other equally anonymous payment method. After all, how do you pay a bribe to your favorite politician if it's all tracked?

Anonymous said...

As for gold and silver I can see keeping some in reserve but from reading about various economic collapses such as Argentina or wars like the ones in the former Yugoslavia (which is what I believe US collapse endgame will most resemble) gold, silver, diamonds etc aren't the universal currencies promoters/sellers would have you believe. Looking in a pure investment sense they suck. I sure wouldn't sink my entire life savings into gold.

Keep a few months of cash, a few months of gold and silver for emergencies but don't expect either to go up in value.

Quick story about a family friend and metals. He played the metals market and also kept his savings in metal. Not so much gold but industrial metals. Had copper anodes ingots of lead and aluminum. Even stuff like cobalt, platinum and palladium. He also had a warehouse to keep it in and fork truck to move it around. Had the connections in industry to sell it which was probably the most important. Not everyone wants a truckload of a specific steel alloy or 40k pounds of copper anodes.

Quentin said...

It used to be quite normal for banks to charge their customers for keeping their money.

Billll said...

Ban the $100 bill? What? They want me to use my credit card every tome I need to buy a pack of gum?

Akatsukami said...

Where do you live that a pack of gum costs $100?

Mike_C said...

>Where do you live that a pack of gum costs $100?
I'm guessing somewhere in the US, in the not-too distant future.

Thomas W said...

Banning the $100 bill is labeled as anti-drugs and anti-corruption. It will take twice the volume to carry the equivalent volume of cash. Of course, it just means $50 bills will be the denomination of choice for criminals. Those wanting anonymous transactions are also starting to use prepaid cards, there's a fee but a lot more can be put on them.

As to a credit card for a pack of gum, that's exactly what those advocating a cashless society want. You use your credit card or some other light weight transaction system for all purchases, including paying the babysitter or the kid next door who mows your lawn.