When cash = liberty.
I don’t know if you caught up with what’s happening over in India. It’s amazing stuff.
Basically, Prime Minister Modi has outlawed the old 500 and 1,000rps notes. They’re being replaced with new ones.
On the same day the America went to the polls, Modi announced that the old notes – worth something like $10 and $20 bucks each, were no longer legal currency. Indians had until the end of the year to deposit them with a bank and start using the new ones.
Doesn’t sound like such a big deal right? It wouldn’t be such a drama if you couldn’t use your 10s and 20s…
But that’s the thing about India. In India, the black market is huge. Only 2% of Indians pay income tax!
And so most Indians – well most of the wealthy – have mattresses and mattresses stuffed with cash.
And that’s exactly the point of the call-back. Modi is trying to bring all of the hidden black-market money back into the light.
And since Indians can only deposit 250,000 rps (about $4000) without proof that they’ve paid taxes, rich Indians are in a panic.
There’s stories of people trying to buy a year’s worth of fruit, or maid services, or yoga lessons – up front!
Other people are ploughing it into designer shoes and dresses or gold jewellery.
Some people are simply burning it or dumping it in the river. There’s several stories of people fishing pillow cases stuffed with cash out of the Ganges river.
And so many industries that rely on cash – from cosmetic surgery to wedding planners – are taking a hit. The real estate industry is in a flap too. Apparently it’s common for 60% of a property’s purchase price to be paid in cash, under the table!
How do you get finance for something like that??
The NY Times is running a story about a guy who had just sold a property and had received 3.5 million rupees, or about $60,000 in cash. He was now hiring 14 low-income people to deposit 250,000 rupees in old notes and launder the money back to him – less a small commission for their trouble.
Wild. And in proof that the “Incompetent Government” league table is extremely competitive, this major change has come with major blunders.
The government failed to make sure it printed enough notes, so even people seeking to exchange legitimate cash had to wait in long queues, if they could get it at all. Worse still, the new money doesn’t fit in the existing ATM machines and they’ve all had to be reworked.
And without money to help the gears go round, India’s previously booming economy has ground to a halt. It’s on track to post a fall of 1-2% this year.
But these SNAFUs are not enough to deter Prime Minister Modi from taking it further. He’s been talking about making India a “cashless society” – even though cash currently accounts for 90% of transactions, and 85% of worker pay.
You don’t make it to the top of the incompetent government leader board by letting facts like that get in your way.
But perhaps this isn’t incompetency at all..?
A few weeks ago, global investment bank UBS called on Australia to eliminate $100 notes. From the AFR:
“Removing large denomination notes in Australia would be good for the economy and good for the banks… Benefits would include reduced crime and welfare fraud, increased tax revenue and a “spike” in bank deposits.
In Australia, 92 percent of all currency by value is in A$50 and A$100 notes, the larger of which is “rarely seen,” according to the UBS report. Removing bigger denominations would boost digital payments in a country where the use of cash payments is continuing to fall, the analysts wrote…
The program would also be positive for banks. If all the A$100 notes were deposited into accounts at the lenders, household deposits would rise by about 4 percent, the UBS analysts said. That would likely be enough to fill the big banks’ regulatory-mandated net stable funding ratios and reduce reliance on offshore funding, they said.”
I was surprised to find that 92% of our cash is in 50s and 100s. It is true that you don’t see a 100 all that often.
So maybe it is true that most 100s are tied up in the black market and organised crime. We do probably want to do something about that.
But I get very nervous when I hear about plans to phase out notes, or cash altogether. Kenneth Rogoff’s been going on about going cashless for years.
For me, cash gives you a way to opt out of the banking system. If there’s no cash, then you’re forced to use an intermediary institution. You’re forced into the system.
I could think of many good reasons why you’d want to keep the banks at arms length – maybe you think they’re all about to collapse, or maybe you’re a dissident worried about the state ‘flipping the switch’ on you.
And what happens as we push further and further towards negative interest rates. What happens when we have to pay banks to hold our money? We could take our cash out and just sit on it, but if cash doesn’t exist, then you’re just forced to pay for the convenience of wealth.
This feels like a slippery slope to me.
You might say that $100 notes wouldn’t be missed, and that maybe true now, but it wasn’t that long ago that the $20 note was serious money.
Inflation keeps on keeping on, and soon we’ll spend 100s the way we currently spend 50s.
If we give it up now, there’s no guarantee we’ll get it back, particularly if it’s not politically convenient to give people the option at the time.
And you might say that this is targeted at criminals, so if you’re not a criminal you’ve got nothing to hide.
This is deeply flawed logic. I’m not a criminal now, but I reserve the right to become one if the state goes rouge. If the government decides it wants to persecute millionaire trouble-makers, I’d like to have as many options open to me as I can have, thanks.
I feel conflicted about this every time I revel in the convenience of pay-wave. But as they say, the price of liberty is vigilance.
And when it comes to the concentration of power in the financial sector, we have to be particularly vigilant.
So watch out for this one. They can have my 100s when they prise them from my cold dead hands.
What do you reckon? Is India on the right path? Would you go cashless?
Peter says
Going cashless is just another means of elitist control of the masses.
If there is no cash everyone will be forced to be in the system, with their digital assets coralled and controlled. Never forget; Cash is King. Wake up people.
Tell these public servants to do our bidding, as they are supposed to. The tail is wagging the bloody dog!!
ron goddard says
hi jonno and right on peter. a cashless society gives ‘governments’ (pests) and banksters COMPLETE control of everything. financial haircuts will be made in the national interest, plus other nasty things. its the jews controlling all and sundry. rothschilds etc. will start new wars. they are always planning wars, and get other people to fight them and then pick up the bargains. silly buggers ‘fight for their country’ and get posthumous medals. oh wonderful!! you don’t see many jews in the armed forces. they stay behind and ‘look after’ the many widows and g/f/s.
cashless society ? well if its a level playing field, why not? (joking). indian p.m. is being told what to do by the jews. soon oz will follow. it is written. set in stone. now what about trumpie? is assassination on the cards? hillary is back. there will be no college election. the f.b.i. (35,000 members) is on red alert to protect both trump and comey from the murderous c.i.a. who are planning, to get rid of both trump and comey, (shades of kennedy?) the mass media are saying that the election(08/11/2016) was a ‘false flag’ event, engineered by the russians, so it is invalid. according to an amendment to the american constitution (1783) which states that any candidate who is aggrieved and loses the election due to interference by a foreign entity or government shall be considered to have won the election by the invalidation of the ‘winning’ candidate who so gained preference by that foreign government or entity’s interference. so there you have it. there will not be a ww3, but a civil war in america and a general slaughter in europe. hundreds of thousands of troops loyal to trump (imported 1 month ago you remember?) and over 2,000,000 farmers armed to the teeth are gonna fight all this b.s. on the other side is hillary’s mob. the regular military and also, to add flavour are the islamic fellas armed by obama with ground to air missile launchers. and there many, many thousands of these buggers in usa. so we have trump(christian), vs clinton’s mob(jews) vs islam. could be quite a party. maybe it will go live on tv. then there is the euro. situation. ditto for many, many islamic buggers with the aforesaid missile launchers, supplied by clinton and obama.. oz ?? who knows.
russia? they will just stay home in russia as usual and let the western world play around, merry xmas.
Stephen King says
the issue will not stop at going “cashless” as the local governments will be able to pass local laws that prevent growing of your own food. simple things like growing vegetables in your backyard have a couple chickens, raising fish for yourself will become outlawed as it will be deemed “only criminals ” would use a barter system. it will go on untill everybody is under complete gavernemtncontrol.
Sean says
Totally agree with you John. I would even vote for Pauline if that’s what it took to keep cash in the system.
The banks would love it as it would reduce their overheads and force everybody to have an account & cards.
The govt would love it because it would maximise their tax take.
But the public would all be that much worse off. Small businesses would suffer the most because they would have to gear up to accept cards. Anybody conducting small transactions would suffer. Garage sales and buying/selling second hand goods would become extinct (unless buying thru ‘Çrime Converters’). It would be another example of the little people getting screwed over by the powers that be and I’m sick of the top end of town getting fatter at our expense. And I don’t buy the ‘it will prevent the criminals’ argument. If anybody thinks that withdrawing cash from the system will stop criminal behaviour from happening, then your living in la la land. It will only drive the BarterCard system and Bitcoin on to greater highs.
I can remember a time when it was illegal to not accept cash for your goods and services.
I also am no criminal (nor a millionaire) but this is one big brother move too far and will fight to ensure it doesn’t happen.
Kathy says
It will be a very bad thing if (when) cash gets outlawed. It’s not going to happen overnight, but our politicians will introduce it slowly, exactly like what is happening now with certain notes being removed from circulation. The US has already removed the US$10,000, US$5,000 and US$1,000 notes. Look at India’s recent debacle with removing their most commonly used notes. The EU is considering getting rid of the 500 Euro note. Australia is being urged to get rid of the $100. And countless other countries will follow suit.
Until slowly but surely legal tender suddenly isn’t. You’re forced to have a bank account and can only make electronic payments for everything, regardless of how small the transaction, and you’ll most likely be charged for this privilege.
When that happens we no longer have any control of our money at all. Suddenly the bank’s website goes down when we need to transfer funds, or the payment terminals at the shops go off line. And there will be nothing to stop the government from confiscating our money if it needs to fill in their massive deficits.
Banks can withhold our own money for a compulsory “bail in” when they start to fail. Banks can take as much risk with “our” money as they want, because people won’t be able to withdraw “their” money when they go belly up. No more bank runs.!
And no more being able to give your change to charity collectors either. The man from the Salvos rattling his bucket is “out of business”. Charities will want to sign us up for regular monthly withdrawals, which many people won’t be happy to do, so donations to charities begin to fall. The good old sausage sizzle at Bunnings or cake stall at school halls during elections will become a thing of the past.
We can no longer leave a cash tip for our wait staff or drop our change in a glass or bowl at our favourite restaurant for all the wait staff to share.
Buskers, beggars and panhandlers will just have to accept whatever “stuff” we happen to have on us as we walk past or do without. Or maybe they’ll all start carrying EFTPOS terminals?
And more than likely unemployment will rise because a lot of people working for cash will no longer be employed.
And of course the ultimate irony is that criminals will always find a way around this and continue to operate, even if cash is outlawed. Surely we don’t seriously think that they’re going to shrug their shoulders and give up their life of crime and go straight? How deluded are these politicians and proponents of this complete ridiculousness?
KatM says
Just wanted to pay a tax bill yesterday…another waste of time and energy. This morning I found out that ATO systems are down. Rang them to discover those folks in Albury can’t even write notes on paper any more! We’ve experienced it with the Census but at least ABS were able to post out the form to us.
Maybe it’s good intentions to go paperless but unless the online systems are 100% 24/7 reliable and secure, taxpayers should always have the hardcopy back-up, which includes hard currency. No digital BS! In fact lets get some minted noble metal coinage with high-tech embedded security (RFID?). You can recycle, shred or burn paper when you’re done with it. I don’t know about our plastic notes maybe make raincoats out of them… Devil knows how all the digital data is going to be disposed of when it becomes irrelevant. Big brother will find ways to repackage and sell the data mines.
Rob says
There was an interesting article in the SMH a few years ago highlighting the cost of the cash-in-hand economy. In 2012 it was estimated to be $5 billion a year and I suspect that this has gone up not down. Moving to a cashless society would help to reduce this and ensure that those currently dodging their tax responsibilities pay their fair share.
I routinely come across tradies working for cash and of course the illicit drug trade is also heavily cash based. Sure, moving to a cashless society will result in a degree of bartering but nowhere near the scale of cash payments.
I would be happy to give up cash to see those that are currently robbing the system pay their fair share.
brett duck says
You mentioned ATM machines not being able to use the new notes. When the Australian Government decided to change the $5 note a problem now exists that electronic note readers cannot read them. Another example of non existent forward planning by the Australian Government !
Alan Maurice says
Having just returned from India and this poor painful execution of ‘demonitisation’, the reasons are numerous as shared by the PM and the Indian media, to include your observations as well as hit hard at the money funding terrorism and corruption all through India! Time will tell
Mark says
Easy. Ban the current $100 note, then introduce a new one. The only way to exchange would be to deposit to a bank account. Anyone with legitimate cash holdings is mildly inconvenienced. Outlaw gangs, drug dealers etc suddenly have a huge problem (a la India). We could do this with any denomination and every few years. “normal” people wouldn’t be bothered by it, but criminal elements would not be able to operate in the cash arena.
Brett says
Observations from history. Every currency from 600BC on eventually falls to zero. Worldwide there is a risk of this happening now. The easiest, cheapest way to do this is go cashless, digitise everything give every one a number to be able to trade and let the net keep track Or descend into anarchy. Ah la Zimbabwe a few years ago and between the wars Germany.
Hmmm. 666 and the book of Revelations. ?