Last Friday, Japan was the first major economy to cross the ‘Rubicon’ by implementing negative interest rates (NIRP) in an attempt to force their people to spend, and slow deflation as the 3rd largest economy moves into recession. However, in this Japan is not an island, with several other nations already preparing to do the same to protect their diminishing economies.
And in all of this there is one surprising country that appears to also be preparing for NIRP as on Feb. 3, coalition group of German legislators introduced a bill to limit the use of cash, and to ban the use of the 500 Euro bill in personal and non-bank transactions.
The significance of this is that when a central bank implements policies that make holding your money in a bank a liability, then the natural recourse is for depositors and account holders to simply take it out and move their wealth into assets that are either outside their nation’s currency, or into commodities such as gold and silver which provide no benefit to an economy that desperately needs its people to spend and create inflation and growth.
On Tuesday we got the latest evidence that officials across the globe are preparing to institute a cashless “utopia” when Handelsblatt reported (in a piece called “The Death of Cash) that the Social Democrats – the junior partner in Angela Merkel’s coalition government – have proposed a €5,000 limit on cash transactions and the elimination of the €500 note.
Berlin is using a familiar scapegoat to justify the plan: the need to fight “terrorists” and “foreign criminals.”
“Limits on cash transactions would discourage foreign criminals from coming here to launder money,” says a paper penned by the Social Democrats. “If sums over €5,000 have to pass through traceable bank transactions, laundering would be severely hampered, it adds.”
As a reminder, the gradual phasing out of cash strips the public of its economic autonomy. Central bankers can only control interest rates down to a certain “lower bound.” Once negative rates are passed on to depositors – and trust us, that’s coming – people will simply start pulling their money out of the bank. The more negative rates go, the faster those withdrawals will be.
When you ban cash you eliminate this problem. In a cashless society with a government-managed digital currency there is no effective lower bound. If the economy isn’t doing what a bunch of bureaucrats want it to do, they can simply make interest rates deeply negative, forcing would-be savers to become consumers by making them choose between spending or watching as the bank simply confiscates their money in the name of NIRP. – Zerohedge
The implementation of negative interest rates and capital controls are tools normally reserved for Banana Republics and 3rd world countries who are desperate to keep financing their debt, and create artificial inflation by forcing consumers to spend. And without the coercion of capital controls such as limiting cash, limiting bank withdrawals, and shutting off the moving of money offshore, this is exactly what would occur as people lose confidence not only in their own banking system, but in the foundation of their currencies as well.
The world never truly got out of the Great Recession that sprung up in the aftermath of the 2008 Credit Crisis, and has simply been masked by tens of trillions in new debt and money printing to keep the markets growing. But now that Quantitative Easing has passed the point of diminishing returns, it appears that the only source of viable cash is that held and owned by the people themselves in checking, savings, and retirement accounts, and the era of forced spending of that money through negative interest rates is no longer just a random occurrence, but oncoming global policy.