The war on cash, negative interest and the flight in gold

August 29 2019

The visitor to this website will not have missed it. Governments worldwide are going further and further in their restrictions on cash transactions. The proposal in the Netherlands is to ban cash transactions in excess of 3000 euros per transaction. In other countries the amounts are different but the principle and the arguments mentioned are the same. Cash transactions above an arbitrarily chosen amount are prohibited to reduce the "laundering" of drug and criminal money.

Between 0.8 and 2 trillion dollars is laundered annually. As a security expert and Certified Security Intelligence Professional, I have been able to delve into the flow of financing for criminal organizations and my professional opinion is one that is not entirely in line with both the prohibition and itsmotivation. That does not mean that I do not see the realmotivation. There are a number of clear reasons why governments around the world benefit and are therefore motivated to criminalize cash transactions and thus increase control over your assets.

Central banks

Central banks have effectively made the ability to save impossible in the past 10 years. Whereas a savings rate in the 90’s averaged around 4%, we now have to do it with a 98% lower interest rate of 0.02%. To express this percentage in euros. If you have 100,000 euros in an account, you would get 4,000 euros in interest. Now you get 20 euros interest after a year. Of course you also have to pay for keeping an account with the bank, soa return iseffectivelynegative already. That is in addition to the tax that you pay for having assets. However, all this doesn’t deter enoughbecause too many people seem to be saving too muchmoney. Our Calvinistic attitudeisto postpone consumption and forlateruse, for example to start a business, build a homeor saveup a pension. This isa thorn in the eyes of the policy makers.

Negative interest and a cash ban

Negative Interest Rate Policy (NIRP) has been a reality for years, but so far negative interest rates for savers andbankaccount holders have notbeen implemented. With the possible ECB plans to lower interest rates even further into negative territory, banks will not be able to excludecustomers and they also will have to pay for "the privilege" of saving money. With a banon cash transactions above certain amounts, governments can now also make it easier to charge negative intereston banking and savings accounts. Maintaining legally earnedbut large amounts of cash immediately makes you suspiciousso people will air n the side of caution and keep their savings in bank even though they will slowly lose it due to NIRP. Both the prohibition on cash transactions but also the setting of negative interest rates are therefore remarkably coincidental and implemented virtually simultaneously.

Results known

The prohibition of fair trade with legal currencies based on arbitrary standards and under the guise of vague concepts such as “money laundering” has previously been attempted. However, so-called capital controls or the application of financial repression are more often than not attempts by authorities to save failing financial systems or to kick the canfor the eventual collapse of those systems. And especially in the euro area, the number of problems has been a concern since the introduction of the single currency. The single currency is not only an experiment in linking fundamentally different economies, but has also had to deal with a number of major setbacks. From budget deficits of up to 3% that have not been respected since their introduction, to the transfer of sovereignty and the support needed to link countries that have had a different fiscal culture for centuries in a monetary pact.

Flee into what's real

Looking at recent history and the problems that are gathering like dark clouds over the economy, the turmoil that recently caused the flight in real estate and equities, for example, seems to be moving to precious metals and specifically gold. The precious metal is, measured on August 29,in euros, already above its alltime high of 2012. And for good reason! The cracks in the economy are becoming visible to ever expanding amounts of investorsand gold has proven itself over the centuries as the ultimate protector of wealth and purchasing power. Ultimately is gold that is real money.

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