Sliding into the Dark Ages with the Zero Bound
Saturday, 5/23/2015 10:06
Eliminating cash would take humanity back to pre-history...
A VISION of Hell troubles our sleep,
writes Bill Bonner in his Diary of a Rogue Economist.
It is the vision of what the United States will be like when the authorities have obliterated almost three millennia of monetary progress and have their boots on our necks.
Here's Peter Bofinger, a leading German Keynesian economist, in
Der Spiegel magazine:
"With today's technical possibilities, coins and notes are in fact an anachronism. They made payments incredibly difficult, with people wasting all sorts of time at the cashier as they wait for the person ahead of them to dig through their belongings to find some cash, and for the cashier to render change (rather than, for example, waiting for someone to find the right credit card, complete the transaction, and wait for approval)."But the additional time is not the largest benefit of the elimination of cash. It dries out the markets for moonlighting and drug trafficking. Almost a third of the Euro cash in circulation consists of 500-Euro notes. No one needs those for shopping; light-shy figures use them for their activities. [Also] it would be easier for central banks to impose their monetary policies. At this time, they cannot push interest rates appreciably below zero because the savers would hoard cash. If there is no cash, the zero bound is eliminated."
Yes, dear reader, it seems to be coming – a dreadful slide back beyond the darkest ages and into the mud and slime of prehistory.
Back then, modern "money" had not been invented. Using rudimentary credit and barter systems, you could only trade with people you knew – and on a limited scale.
Capitalism was impossible. Progress was unattainable. Wealth couldn't be accumulated.
Then in India, in about the sixth century BC, came silver coins – real cash. You didn't need to know the person you were trading with. You didn't know his family. Or his motives. Or his balance sheet.
And you didn't have to keep track of who owed what to whom. You could just settle up – in specie.
This made modern commerce and industry possible.
This new wealth also provided people with a new kind of liberty. They could travel – and pay for food and lodging with this new money. They could invest...and use this new, private wealth to create even more wealth.
They could even raise armies...build fortifications...and challenge the power of the ruling elites.
But now, governments are trying to abolish cash. Leading economists want it banned, too. Limits on cash use are already in place in many countries.
In France, for instance, a law will come into force in September that will limit cash payments to €1,000 ($1,115).
And in the US, having a large amount of cash is already considered "suspicious activity", subject to forfeiture without due process.
That's right: Thanks to civil forfeiture laws, the feds can seize your property without having to convict you of a crime.
As the
Washington Post reported last year, police
made 61,998 cash seizures – totaling $2.5 billion since 9/11 – without search warrants or indictments.
Why do the feds want to eliminate cash?
Isn't it obvious?
They want to control you and your money.
Where did you get it? They'll want to know. What will you do with it? They'll want a say.
Couldn't you use it for something "bad"?
Heck, you might support "terrorists"...evade taxes...or buy a pack of cigarettes.
The possibilities are too rich to ignore. And the arguments are too persuasive to stop. Zero Hedge summarizes the "pros":
- Enhance the tax base, as most/all transactions in the economy could now be traced by the government;
- Substantially constrain the parallel economy, particularly in illicit activities;
- Force people to convert their savings into consumption and/or investment, thereby providing a boost to GDP and employment.
The arguments are hollow...but they'll probably be convincing.
And for the first time in history, rulers will have a way of controlling people by cutting off their money.
Electronic money, run through a government-controlled banking system, allows the feds to put us where they want us – with bars on our cages and whips on our backs.
All transactions could be subject to approval. And every person would know that he could feel the feds' lash at any time.
Under Argentina's military dictatorship, about 13,000 people "disappeared". That is, they were rounded up by government death squads, interrogated, murdered, and then thrown from planes into rivers.
How much easier it will be – and more humane – simply to cut off their money?
With modern face-recognition technology, the feds could identify almost anyone in any setting – at a café, a public meeting, or an ATM.
Then with a couple of strokes on a keyboard, the accounts could be frozen...or confiscated.
The poor citizen would "disappear" in seconds – unable to participate in public life and forced to scrounge through trash cans to stay alive.
Who would dare to help him? Who would dare to support him?
Who would dare to speak out against this new diabolical system?
They, too, would be marked as undesirable...and disappeared.
Imagine the political candidate who suddenly discovers his backers have no money? Imagine the whistle-blower who suddenly has no whistle to blow?
Are we hallucinating? Are we worrying about nothing?
In Argentina, following a coup d'état in 1976, the military junta first targeted leftist revolutionaries – who may have posed some real threat to the nation.
Then, in what became known as the "Dirty War," the targets grew more diverse – with students, political adversaries, intellectuals, trade unionists, and anyone the junta wanted to get rid of caught in the net.
This period of terror only came to a close in 1983, after the generals unwisely invaded the Falkland Islands and proclaimed Argentine sovereignty over a British overseas territory.
The plain people are easily led into war – no matter how moronic the pretense. As they had hoped, the Argentines rallied behind their soldiers.
But the British, led by the "Iron Lady" Margaret Thatcher, did not play the role the generals had expected.
Rather than negotiate a settlement, they sent a task force to the South Atlantic, including a nuclear submarine, two aircraft carriers, 42 fighter jets, a brigade of Royal Marine commandos, and an infantry brigade.
In a matter of weeks, the British submariners had sunk Argentina's World War II-era cruiser the General Belgrano...as the Royal Marines, the soldiers of the 5th Infantry Brigade, and the RAF hammered away at the ill-prepared and ill-equipped Argentine troops shivering out in the South Atlantic.
This was too great a humiliation for the Argentines to take. The Union Jack went up once again over the Falklands, the military junta was thrown out of office, and the disappearances stopped.
Are Americans smarter than Argentines? Are their politicians more honest or more faithful to the rule of law? Does power corrupt less in the Northern Hemisphere than it does south of the equator?
We doubt it.
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