All around the world, governments and central bankers are looking at waging a war; not the kind of war that is fought on the battlefields with weapons, but rather a war against cash itself.
You may have read in the international news recently that the Prime Minister of India, Narendra Modi in a shock move abruptly announced that the two largest Indian banknotes the 500 and 1,000 rupee notes, would cease to become legal tender. He made this announcement via an unscheduled live television address on November 8; on midnight November 9 all 500 and 1,000 rupee notes, which represented 86% of all cash in circulation, were no longer legal tender.
Make no mistake, while India may be all the way on the other side of the globe, the move by India is just the latest in the global war on cash; a war that may soon reach American shores.
Harvard University professor Larry Summers who has served as the Chief Economist for the World Bank, as Treasury Secretary under the Clinton administration, as Director of the National Economic Council under the Obama administration and almost succeeded Ben Bernanke as Head of the Federal Reserve has openly advocated for removing the $100 bill from circulation. In an op-ed for the Washington Post, he writes:
Even better than unilateral measures in Europe would be a global agreement to stop issuing notes worth more than say $50 or $100. Such an agreement would be as significant as anything else the G7 or G20 has done in years. China, which is hosting the next G-20 in September, has made attacking corruption a central part of its economic and political strategy. More generally, at a time when such a demonstration is very much needed, a global agreement to stop issuing high denomination notes would also show that the global financial groupings can stand up against “big money” and for the interests of ordinary citizens.
Summers wrote this op-ed in February 2016, right on the heels of the European Central Bank announcing that it was considering stopping production and issuance of the EUR500 bill, the largest European banknote, a move which the central bank formalized in May 2016. The reasons for this were similar to Summer’s reasoning: to ostensibly make life harder for the bad guys such as terrorists, tax evaders, drug dealers, human traffickers, and the like, while making life easier for ordinary citizens like us.
But is this really the full extent of the reasoning for this war against cash?
No, in fact another main reason, or perhaps the primary reason, for this war against high denomination notes is to give the central bank more control over the economy. Since the global financial crisis, interest rates in the West have been near zero (the current Federal interest rate is 0.50% while the European interest rate is 0.00%) in order to stimulate the economy. In fact, if it weren’t for cash, more central bankers would in fact be applying negative interest rates on individual savers, meaning that your deposits in the bank would become less and less over time, and that’s not even taking into consideration bank fees and the like or the declining real value due to inflation.
Yes, negative interest rates are designed to reduce the value of your savings and hence discourage savings so that you will go out and spend instead. Of course, this means that many people would elect to hold cash instead, which is why cracking down on cash is key to making negative interest rates work.
Monetary policy aside, what about the core issues of personal privacy or control? The less cash we have to use in our day-to-day transactions, the more our personal spending habits are exposed. Of course, Big Brother would have you believe that only criminals want the anonymity that is provided by cash, a justification that seems very familiar; if you have nothing to hide, you have nothing to worry about, right?
Regardless of the justification that is being pushed forward to support the war on cash, one thing is clear; no matter how much money we have, the value of fiat currencies such as the US dollar, by its very nature, is open to manipulation by the issuing government. This is why it is important to diversify into assets such as gold, which function as a store of value which are less susceptible to government manipulation.
One of the easiest ways to get started protecting your future is with a precious metals IRA.
You can get started with our free Gold Investors Guide to learn more about the benefits of investing in gold & silver IRAs and other precious metals. Also, when you're ready to talk with advisors, see our list of top gold ira companies and get in touch with experts to set up the right investment vehicle for you.