Expect Cash To Be Limited, Then Abolished. Here’s Why …

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by Larry Edelson,

from Money & Markets,

Governments have largely always despised cash. It’s almost impossible to trace, and therefore, tax. And it sustains an underground economy for drug dealers and terrorists.

Never mind that there are plenty of good people in the underground economy. The government doesn’t care. They see a rat in the barn, and governments, as they are, are all too ready to burn down the barn to catch the few rats.

For years now, that’s largely how governments around the world have waged a war on cash. They’ve implemented restrictions on how much you can carry with you. How much cash you have on you that you have to report when you go through customs. How much you can withdraw from the bank at any one point in time. And more.

The thing is, government wars on cash are now on steroids. The reason: The looming sovereign-debt collapse that will soon cascade from Europe, then to Japan, and finally, to the US of A.

As I have said all along, when governments’ backs are up against the wall, they act like caged animals, lashing out at anything and anyone that restricts their ability to stay alive.

Cash is, yes, difficult to track and tax, but it also makes it difficult, if not impossible, for negative interest rates to stimulate the economy.

That’s critical now because deflation is surrounding the globe. In Europe, for instance, the European Central Bank (ECB) has had negative interest rates in effect since June of last year. Currently at -0.2%, if you’re a bank in the eurozone, your “reserves” at the ECB gradually lose value if you don’t lend them out.

The Danish and Swiss national banks have steeper negative interest rates of -0.75%. After a year, 1 million Danish krone or Swiss francs would be worth only DKK/CHF992,500, respectively.

Sounds logical from an economic management point of view, right? After all, if banks aren’t lending, then the right thing to do is to force them to lend by charging them if they don’t.

Problem is, it doesn’t work that way. Instead, the banks are largely turning around and charging their customers who deposit funds with them the same or steeper negative rates. That way, whatever the bank loses at the central bank, it gets it back from you, its depositing customer.

So now we have negative deposit rates for customers in much of Europe. And what is the customers’ reaction to negative interest rates?

Simple — they pull their money out of the banks, in cash, and hoard it, or send it offshore to better lands and opportunities.

Along comes Ken Rogoff and gang. Their answer: Eliminate cash and …

A. Less cash will be withdrawn from banks.

B. Banks will therefore lend more readily. And …

C. Bank runs, if they occur, can be ended immediately — by simply shutting down the system with an “internet-type kill switch.”

Mark my words: Elimination of cash is where the governments of developed economies are headed. Toward fully electronic currencies instead.

If you don’t believe me, then consider the steps that have already been taken that are leading in that very same direction:

In France, cash transactions over 1,000 euros are now illegal. It’s also a crime to send any amount of cash by mail.

In Spain, the limit is 2,500 euros. Break that law and the government will confiscate 25% of your cash.

Italy has banned all cash transactions over 999.99 euros. To pay 1,000 euros or more, you must use a debit card, credit card, a “non-transferrable check,” or pay by bank transfer. Violate the law, and the government will confiscate 40% of the amount paid.

Similar restrictions on cash are in place in Belgium, Bulgaria, Greece, Mexico, Russia, Uruguay and a number of other countries.

Here in the U.S. we don’t (yet) have any restrictions onspending cash. But there are strict reporting rules. If you deposit or withdraw more than $10,000 from a bank or other financial institution (either by cash or electronically), the bank must file a “currency transaction report” with the U.S. Treasury.

In some parts of the country, there are “geographic targeting orders” in place — a fancy term for locations where the government feels there are drug or terrorist activities going on. Instead of the $10,000 limit, it’s a $3,000 limit.

And then there are the “civil forfeiture” laws in place across the country, which gives the police the ability to confiscate any amounts of cash you may have in your pocket or in your car if they suspect you’re a dealer or a terrorist. Problem is, scores of innocent citizens are being stopped and have their cash confiscated.

It’s all going to get a heck of a lot worse for us in the months and years ahead. Bankrupt destitute governments are the cause. They will hunt you and your wealth down like never before.

And the problem is, they are simply too dumb to realize that in the end, they will still collapse, taking you — if you don’t prepare — right along with them.

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