Thursday, 5 November 2015

The War on Cash 2

The Grauniad picks up the idea of the cashless society, meanwhile last week Business Insider had this to say about Sweden:

Sweden is shaping up to be the first country to plunge its citizens into a fascinating — and terrifying — economic experiment: negative interest rates in a cashless society. The Swedish central bank, the Sveriges Riksbank, on Wednesday held its benchmark interest rate at -0.35%, the level it has been at since July.

Though retail banks have yet to pass that negative rate on to Swedish consumers, they face increased pressure to do so as long as the rates remain where they are. That's a problem, because Sweden is the closest country on the planet to becoming an all-electronic cashless society. 

Remember, Sweden is the place where, if you use too much cash, banks call the police because they think you might be a terrorist or a criminal. Swedish banks have started removing cash ATMs from rural areas, annoying old people and farmers. Credit Suisse says the rule of thumb in Scandinavia is: ‘If you have to pay in cash, something is wrong.’

Brett Scott in the Guardian thinks the same might happen here:

"There is another – hidden – agenda though. If the only means of holding money is in the form of electronic bank deposits, a central bank can do something it cannot do with cash. It can set negative interest rates to erode people’s money in times of recession, making it costly to hoard it, and thereby theoretically stimulating economic activity. Bank of England chief economist Andy Haldane recently said as much."

Cash is, in fact, a zero-interest loan from the citizenry to the Government. In times of high interest rates this is a good deal for the Government, but if interest rates go below zero, then it's the only money the creditors aren't paying the Government to borrow. If you have a lot of debt, then what better way to pay it down than to get your creditors to do the paying? To do that, though, you have to get rid of cash.


Mark Wadsworth said...

Agreed. Although I've always operated cashless, except when paying builders. That is about the only thing I have needed physical cash for. But by the same token I have no savings so -ve interest rates do not scare me.

Most people don't understand the concept of "interest free loan to the government" or indeed that burning physical cash is like a voluntary tax payment. Let's see if anybody rises to that bait.

mombers said...

I always pay cash if there's a discount. Moral posturing by the hypocritical Tories about VAT evasion is a load of nonsense. The alternative to VAT evasion for some things is to do the job yourself, e.g. instead of employing a craftsman to do maintenance that you couldn't be arsed to do, save a bunch of VAT by just doing it yourself. Hardly a good result for society if that job is destroyed...

mombers said...

If Libertas over at HPC ever gets a -ve rate mortgage, I'm going cash only. Not subsidising his Enfield miracle if I can help it...

DP said...

Dear Bayard

State attacks on cash are all part of the state's programme to erode privacy. Without privacy, we are livestock.

Absent a legal tender, money substitutes will appear, including bills of exchange, tokens, commodities ('snout') and cryptocurrencies. Other ways round a ‘cashless society’ include trading favours and trotting round to the supermarket and buying your plumber's weekly shop on your card.

Of course the courageous state could easily monitor the plumber's grocery purchases and flag up an investigation into why he and his family seem to survive on £49.27p's worth of groceries a year, but buying booze and cigarettes could sidestep that. Meanwhile said courageous state might launch an investigation into the buying habits of a self-declared teetotal, non-smoking patient at the local GPs. Smoking and drinking licences might make this a bit trickier too. Home brewing? They’ll be monitoring sugar purchases.

The sad fact is that the existing database state is capable of doing this already. As human productivity continues to rise, surplus labour is being soaked up by government into the legions of Panopticia.

Just one of the many reasons I detest my government and almost all its agents. Even those ‘government’ services I need, I use with caution. And almost all businesses have been co-opted as government spies. All employees of banks, solicitors, accountants. financial services, TV and high value retailers are required to spy on their customers to comply with government regulations.

The question is – what to do about it? The government has all the power and resources it needs to maintain its position. Short of building a parallel society, where the real society operates with the spare resources left after the government has squandered the bulk of societies’ output on itself, its friends, its enforcers and sundry hangers-on, there is little scope to do anything other than make the best of the situation, which is sustained at its current level by the availability of cheap energy. Imagine if you will, what life would – make that will – be like without cheap energy.


Bayard said...

"If Libertas over at HPC ever gets a -ve rate mortgage, I'm going cash only. Not subsidising his Enfield miracle if I can help it."

Of course us little people won't be getting negative rate mortgages. Only the banks and the government will be paid to borrow, everyone else will still be paying.

DBC Reed said...

If the plan is to stop money hoarding in deposit accounts, this is much the same as making people pay LVT to stop them hoarding monetary value in land. Silvio Gessel made people pay for not spending money: they had to buy stamps and stick them on notes or else they would go out of circulation.This system worked in the Tyrol in the 30's; a small revival scheme in the area works now.
Of course if you can't hoard money in the bank the incentive is to stick more money into landed property and hoard it there where it will appreciate at inflationary rates higher than any interest rates.
The fact that the BoE is actively disincentivising saving on deposit shows they have given up pretending that savings are needed for loans.

Bayard said...

"Of course if you can't hoard money in the bank the incentive is to stick more money into landed property and hoard it there where it will appreciate at inflationary rates higher than any interest rates."

Yup, if the government is proposing to do anything and you ask "cui bono", the answer is nearly always, "landowners".

When I started reading about this, before I wrote the first "War on Cash" post, I did think that as money left cash it would tend to go into land, especially after I read that the USA had, at one point, forced everyone to sell their gold to the government.

Gotta keep that ol' land bubble inflated,'cos you know what happens if you don't....

Lola said...

And I have to 'hoard cash' in a bank account - it's part of the FCA's rules...(I have a retail FS business)..