Submitted by Nick Giambruno via InternationalMan.com,
“It’s a big club and you ain’t in it!”
I’m often reminded of these words, spoken by the great comedian George Carlin, when I read about the annual World Economic Forum meeting in Davos, Switzerland.
That’s where the global power elite gather to discuss the big issues of the day. The most important world leaders attend. As do the CEOs of the largest companies, leaders in the mainstream media and top academics. Central bankers attend, too, along with a wide assortment of celebrities.
Three types of meetings happen in Davos, according to the BBC:
- Public meetings, which anyone can attend.
- Closed meetings, which you can only attend by invitation.
- Secret meetings, which are unannounced. The public doesn’t know the agenda or who attends.
The biggest and most important deals take shape in these secret meetings. And this year, I think there was one secret meeting with huge historical significance.
I think world leaders decided to dramatically escalate the War on Cash, making it easier for them to impose negative interest rates.
Negative interest rates mean the lender pays the borrower for the privilege of lending him money. It’s a bizarre, upside-down concept.
Negative rates could not exist in a free market. They can only exist in an Alice in Wonderland economy created by central bankers.
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[ZH: We confirmed this belief last week when we pointed out the rather disturbing headline spotted in a Davos presentation...
the most disturbing development we have seen yet in the push for a cashless society has come from the following slide in a Morgan Stanley presentation, one in which the bank's head of EMEA equity research Huw van Steenis, pointed out the following...
... and added this:
One of the most surprising comments this year came from a closed session on fintech where I sat next to someone in policy circles who argued that we should move quickly to a cashless economy so that we could introduce negative rates well below 1% – as they were concerned that Larry Summers' secular stagnation was indeed playing out and we would be stuck with negative rates for a decade in Europe. They felt below (1.5)% depositors would start to hoard notes, leading to yet further complexities for monetary policy.
Consider this the latest, and loudest, warning on the road to digital fiat serfdom.]
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Punishment Interest
Think of it as “punishment interest.”
That’s a common term in Germany for negative interest rates. I think it’s an apt description.
Punishing savers is exactly what central bankers—who are really central economic planners—would like to do. They think stinging savers with negative interest rates will encourage them to spend now. It’s effectively a tax on saving money.
Central planners just want you to spend money. Even if you have to go into debt to do it. Consumption based on fear of negative interest rates is somehow supposed to “stimulate” the economy.
However, their harebrained scheme is not working. Switzerland, Denmark and Sweden all have negative interest rates. But consumer spending is not being “stimulated” in those countries. It’s totally (and predictably) backfiring on the central planners. And it’s easy to see why.
Negative interest rates make it harder to save. Put $1,000 in your bank account at the beginning of the year, and it becomes $950 by the end of the year. And that’s not even accounting for inflation.
This scenario scares people. It doesn't induce them to spend.
Producing more than you consume and saving the difference has always been the basis of prosperity. Prudent saving and thriftiness are supposed to be good things. However, negative interest rates destroy the incentive to save. That’s just one of the reasons it’s such a toxic concept.
But there’s another important reason to fear negative interest rates…
If you don’t like the sting of negative interest, you can withdraw your money from the bank and stash the cash under your mattress. The more it costs to store money at the bank, the less inclined people are to do it.
Of course, this is not the outcome central economic planners want. It puts a natural limit on how far down they can drive interest rates.
Their solution to this “problem” is to push the world closer to a cashless society. That cuts off your main escape route from punishment interest.
Central planners are doing this by phasing out larger denominations of currency notes, which makes large cash transactions impractical. Some are outright prohibiting cash transactions over a certain amount. France recently made cash transactions over €1,000 illegal, down from the previous limit of €3,000.
Statist economists even advocate declaring all dollar bills with a serial number ending in “9” invalid.
These are just some of their methods. They all make it inconvenient or illegal to use cash. This forces people to use electronic payment methods more and more, which, of course, is what the U.S. government wants.
It’s exactly like Ron Paul said: “The cashless society is the IRS’s dream: total knowledge of, and control over, the finances of every single American.”
After Davos, the War on Cash Goes into Overdrive
For weeks, Haruhiko Kuroda, the head of Japan’s central bank, repeatedly denied plans to adopt negative interest rates.
Kuroda was at the January 20–23 summit in Davos.
A few days later, on January 29, he decided to impose negative interest rates in Japan for the first time ever. Something must have changed his mind.
I don’t think this was an isolated incident. I’m quite sure global leaders secretly discussed ramping up the War on Cash in Davos.
There was a flurry of related activity during and immediately after Davos. Here are some of the most noteworthy incidents:
- January 20: Deutsche Bank CEO John Cryan predicted cash won’t exist in 10 years.
- January 22: Norway’s biggest bank, DNB, called for the country to stop using cash.
- January 29: The editorial board of Bloomberg published an article titled “Bring On the Cashless Future.” It called for the elimination of physical cash.
- February 4: The Financial Times ran an op-ed titled “The Benefits of Scrapping Cash.” It advocated the elimination of physical money.
- February 8: Peter Sands, president emeritus of Harvard, issued a paper titled Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes. It advocates removing large bills from circulation to help fight the various made-up wars…the war on crime, the war on drugs, the war on terror…
- February 15: Mario Draghi, head of the European Central Bank (ECB), announced that he has essentially decided to phase out the €500 note. These notes represent around 30% of the physical euro notes in circulation. With the use of physical cash curtailed, J.P. Morgan estimates the ECB could ultimately bring interest rates as low as negative 4.5%.
- February 16: Larry Summers, a Harvard professor and former Treasury secretary, wrote an article in The Washington Post titled “It’s time to kill the $100 bill.” Summers became the latest high-profile “economist” to call for the abolition of cash. Removing the $100 bill from circulation would eliminate the value of 78% of all U.S. currency in circulation.
- February 16: Hasbro, maker of the Monopoly board game, announced that, starting in the fall, the famous game will no longer feature cash. The company is replacing in-game cash with special bank cards players scan on handheld “banking units” to make purchases.
- February 22: The editorial board of The New York Times published an article titled “Getting Rid of Big Currency Notes Could Help Fight Crime.” It called for getting rid of high denomination notes.
The writing is on the wall. The War on Cash is accelerating. And it’s setting the table for negative interest rates in the U.S.
That should not surprise anyone. Janet Yellen, the chair of the Federal Reserve, recently said, “Potentially anything—including negative interest rates—would be on the table.”
It’s time to protect yourself from negative interest rates and the War on Cash…before it’s too late. You don’t want to find yourself unprepared when negative interest rates hit you.
The War on Cash and negative interest rates are obvious signs of desperation. They are huge threats to your financial security.
Central bankers are playing with fire and inviting a currency catastrophe, just like they have done so many times in the past.
The sad truth is most people have no idea what really happens when a currency collapses, let alone how to prepare…
We think everyone should own some physical gold. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.
But if you want to truly save yourself from the consequences of all this stupidity, there's more to do...
How will you protect your savings from the War on Cash and negative interest rates?