May 11, 2015
By: Kelly Diamond, Publisher
Imagine if I offered to sell you something. You decided you needed that good or service, so you agree to purchase it. (So far, so good!) Now it comes down to price. I say a price, but you offer to pay me in pixie dust or genie wishes.
Absurd? Obviously. If anyone came to you and offered to pay you in pixie dust or genie wishes, you’d think they were kidding. Let’s say they were serious! The next logical step in that conversation is: Okay, show me the pixie dust or genie wishes. Or at the very least show me how the pixie dust works (whereby proving value) or introduce me to your genie.
I purposely used something fantastic in this example to demonstrate how when individuals engage in commerce there is a minimum expectation of value-for-value exchange.
When we barter, we are often catering to each other’s specific needs or wants. I’ll trade you my skateboard for your 3 volumes of comics. You can’t buy groceries with a skateboard or comics, but you can get one for the other if the parties are both amenable. The same goes for virtual currencies. Not everyone deals in them. That’s okay! But amongst those who ascribe value to them, they are clear on what virtual currency IS and what it ISN’T, and trade accordingly.
Here’s where things get sticky:
- Regression of the dollar: from representing something of substance and value, to representing a transfer of debt. Last April, I wrote a blog called “US Banking = Selling Marks”. It outlined how our currency went from representing a certain value in gold to nothing more than a transfer of debts.
- The rejection of the Federal Reserve Note entirely under certain circumstances as a form of tender. I wrote about how Federal Reserve Notes were no longer acceptable forms of payment – in fact are illegal forms of payment – in Louisiana for certain types of vendors.
- The suspicion of criminality ascribed to cash transaction at banks. I wrote about the heightened scrutiny of American bank transactions. Prior to all this, I wrote about the War on Virtual Currency, and how the US Department of Treasury issued vague “guidance” on how to regulate its use by largely building an association between virtual currency and money laundering. This has gone so far that small businesses are having their cash assets seized to large companies like Ripple being hit with a $700,000 fine for not reporting attempts at opening accounts. Never mind that the account was never opened or started! The mere fact that the attempt was made and a “Suspicious Activity Report” wasn’t filed to account for it was criminal enough to warrant a $700,000 fine. The feds are watching, and they are cracking down.
So what’s left?! How the hell do I buy and sell stuff anymore? Valid question.
The point of “money” was to have a portable and agreeable means of transferring value: to streamline commerce so we weren’t left to bring large, cumbersome, hard assets with us to every shopping trip. But it seems like barter isn’t the inconvenience that it used to be considering the potential encumbrances associated with dealing in cash these days!
Well, the go-along-to-get-along answer is through traceable 0’s and 1’s. Cash is too suspect and subject to forfeiture, and the fact is, less than 10% of the USD in circulation right now actually has a physical note to go with it! That’s right: 90% of US currency is only in 0’s and 1’s.
I asked once if all this pointed toward a war on capitalism or a war on commerce or a war on private property. I then alluded that maybe these are all small battles in a larger war on something else. What is that “something else” though?
Some have suggested that it’s a war on currency or at the very least a smear campaign on cash in an effort to compete with other countries’ currency devaluations, and ultimately do away with physical cash.
In addition to banks and other MSBs (Money Services Businesses) being required to file Suspicious Activity Reports (SARs) on cash transactions over a certain amount, they are being disincentivized (if that’s not a word, I just made it one!) to “hoard” money – i.e. punished for not lending out more money – with fines and negative interest rates. The central banks in Europe are essentially imposing a fee of sorts to store money in hopes that it likewise prompts banks to lend more. So the depositor pays to store money, and in theory the banks pay people to borrow money… but that’s not how it would play out in reality.
In the United States, according to Marketwatch, JP Morgan Chase is turning down large accounts because “new federal rules essentially penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment.” Likewise, many banks across the European Union are operating at negative interest rates, i.e. charging people to store their money in the banks. In a really desperate attempt at trying to get people to spend and borrow, they are making it so that it costs money to save.
This *should* stimulate an economy right? Oh! Money is expensive to save and cheap to borrow, I should borrow and spend! I supposed that’s true for the incurably irresponsible, entitled, and economically shortsighted. Think of the profile of the person applying for the loans. Much like the housing crisis, this appeals to people who are really quite underqualified, but nonetheless feel entitled to homeownership. A person like myself would be thinking about running on the bank and getting my cash out, however. So people with no money are willing to borrow, people with money would withdraw, and whatever short term gains there were to be had are swallowed by the instability of (rightfully) panicked account holders.
Drawing the higher risk liabilities to the table doesn’t bode well for the finance industry. Chasing away financial assets by turning down large depositors and scaring the savers into closing their accounts also doesn’t sound promising.
This brings us back to the very likely possibility that the US and other struggling first world countries are looking to phase out physical cash entirely so that not only are all transactions traceable and visible to the government, but also so that lending and spending come easier to people.
Part of what keeps the masses so damn docile is the fact that we’re never shown an itemized bill for all the needless crap our tax dollars pay for. If instead of having our wages garnished and a portion sent back to us every year, we were just sent a bill for all the spending itemized in order of price, would we be so blithe to pay it?
There is a method Dave Ramsey uses to help people stay on track; to get people who became addicted to credit off that habit and onto the habit of paying cash on the barrel. He encourages people to go grocery shopping with a budgeted amount of cash in an envelope along with a calculator to track how much you’re spending. You only spend what you got: nothing more. When you physically run out of money, you stop buying, so you’re never going below zero. Not the case with credit cards, however.
This is all just another effort to numb the masses monetarily. If they never have to deal with physical cash, they never really “run out” of money because they’ll just take out lines of credit to continue “stimulating the economy”. Call it what you want – War on Currency, War on Cash, War on Commerce, War on Property – but given the types of people getting snagged in this dragnet and the asinine charges under which they lose their assets, it’s looking like all this is just one big power grab and the War is on Liberty.
Phasing out the gold standard resulted in the US dollar losing over 90% of its value in under 100 years. Phasing out physical cash will make the US dollar basically nothing more than pixie dust and genie wishes.