Banning Cash Transactions – The Real Reason

Posted | 07/08/2019 / Views | 43619
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There is very understandable and growing concern around the clear agenda of government to move us away from cash and more precisely into banks.  Last May we reported, the day after the budget was handed down, the government plan to ban cash transactions between businesses and individuals over $10,000.  That was supposed to come into effect on the first day of this month but was postponed to January 2020.  We made the point then and reiterate now, our very clear view that this is not about the ‘black economy’ as purported, rather this is about government control of your money through banks.

Very quietly on Friday 26 July, the Treasurer released the exposure draft of the legislation (Currency (Restrictions on the Use of Cash) Bill 2019) with a short 2 week period for public comment ending the end of this week.  Before we get into the mechanics of it lets revisit why we, and many others, are of the clear view this is about fiscal policy not the ‘black economy’.

Back in February this year we wrote this article on the IMF’s agenda to ban cash so that you can’t withdraw your bank deposits when rates go negative.  From the IMF itself:

“In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe recession. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive. This would jolt lending, boost demand, and stimulate the economy.

 

When cash is available, however, cutting rates significantly into negative territory becomes impossible.”

We also have the Bank Bail-In motive at play.  We wrote most recently about bank bail-ins in Australia here, another piece of legislation quietly passed last year.  It’s a little ineffective to take your deposits if you withdraw it all before the bail in, and can exacerbate a bank collapse if there is a bank run of withdrawing deposits as well.  So if cash withdrawals over $10,000 were banned by law… problem solved.

To address the ‘negative interest rates could never happen in Australia’ view, consider that yesterday the RBA held our rates at the all-time low of 1%.  Whilst doing so they made it clear more cuts are likely and the market is expecting us at 0.75% by November and then just 0.5% by early next year.  The Aussie 10yr bond is now below 1% for the first time in history.  Note, those numbers are WITHOUT a recession.  When, not if, the recession arrives they will have little choice but to cut deeply into negative rates as they have left themselves nowhere else to go.  The average historic rate cut to counter a recession is 5.5%, taking us to negative 5% from that projection or even negative 4.5% from where we sit right now.  Paying the bank that sort of rate for the privilege of being an unsecured creditor of a financial institution in the midst of an economic crisis explains the need to force you to do so.  Who would willingly do so otherwise?

So how do they plan to do this?  The legislation itself refers to ALL cash transactions over $10,000, both physical and digital currency.   That ostensibly includes, say, cash withdrawals from a bank, between individuals, and even, per the definition, crypto currencies.  But to fit with the current narrative that this is about the black economy, there is an accompanying instrument called the Currency (Restrictions on the Use of Cash—Excepted Transactions) Instrument 2019.  This ‘instrument’ exempts depositing and withdrawing from a bank, most consumer to consumer transactions, and crypto currencies.

The concern being raised is that the use of this instrument, rather than embedding such exemptions in the actual Act, allows a unilateral change at any point in time by the Treasurer to change those exemptions without Parliamentary approval.  Say, for instance, in the case of a bank run upon rates going negative or, say, if a bank were failing and there was a bank run to avoid being captured by a bail in.  Logically the Treasurer would be simultaneously talking to APRA about the bail in as changing that ‘instrument’ so you’d never have the chance regardless…

Gold and silver have been money for 5,000 years as they escape such games allowed in a Fiat currency system.  It’s ultimately your choice now where you hold your wealth.

 

If you wish to make a submission, you can do so at:

Email: [email protected] 

Subject line:  Submission: Exposure Draft—Currency (Restrictions on the Use of Cash) Bill 2019