You may not realize it, but the government's war on cash has already begun.
And it's happening not just in the United States, but all over the world. In fact, many countries are well ahead of the U.S. in the war on cash.
Several European countries have ceilings on cash transactions - and they keep lowering them.
- In France, the maximum cash transaction dropped from €3,000 to €1,000 ($3,260 to $1,085) on Sept. 1.
- Spain imposed a €2,500 ($2,715) limit on cash transactions in 2012.
- Italy lowered its ceiling on cash transactions from €2,500 to €1,000 ($2,715 to $1,085) in 2011.
The United States has no cash ceiling restrictions (yet), but trying to withdraw as little as $2,000 from your own bank account will put you under government suspicion.
According to the Bank Secrecy Act, banks must file a Suspicious Activity Report for large transactions because it's often a signal of criminal activity, such as money laundering, tax evasion, or identity theft.
Money Morning Capital Wave Strategist Shah Gilani recently had an unpleasant brush with the Bank Secrecy Act himself. A teller refused to cash his check for several thousand dollars unless he "filled out a form."
An Early Glimpse of the Government's War on Cash
Gilani said this is an early warning of the U.S. government's war on cash - capital controls.
"That means you might not be able to get the money you want out of an ATM. You might not be able to cash a check when you have plenty of money in your account. Or worse... your bank could take your deposited cash and convert it to shares of stock in that bank," Gilani said. "In other words, if you think you'll always be able to get your money out of your bank, you're wrong."
It would be easy - and a mistake - to dismiss the war on cash. After all, don't most of us get our paychecks direct deposited into our bank accounts? And don't we pay most of our bills and purchases with credit cards, debit cards, and other forms of electronic payment?
We do, but that only makes the government's war on cash that much easier.
The real issue is why governments want the death of cash.
You're not going to like this...
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What's Behind the Government's War on Cash
When governments impose restrictions on the use of cash, they typically say it's necessary to combat criminal activity.
And while they're not lying, they fail to mention several bigger reasons why they want to slow and eventually eliminate the use of cash.
The first is something Gilani mentioned, which is essentially a "bail-in" of an insolvent bank.
According to the law, your bank deposits - your hard-earned money - can be confiscated to recapitalize your bank if it's failing. That's much easier if you're unable to withdraw your money in cash.
"We know governments can do this. It's been done in Cyprus, in Greece, and Ukraine," Gilani said. "The U.S. government would do it to keep banks solvent, otherwise massive outflows of deposits would cause banks to have to be shut down."
Another reason for the government war on cash is that cash is the hardest form of money to track. Electronic payments leave behind digital records the government can track easily.
The Death of Cash Equals More Government Control
A cashless society gives government more control over the citizenry. Think about how Electronic Benefit Transfer (EBT) cards are used to restrict what welfare recipients can - and cannot - buy.
"It has long been the dream of collectivists and technocratic elites to eliminate the semi-unregulated cash economy and black markets in order to maximize taxation and to fully control markets," says Patrick Henningsen at the Montreal-based Centre for Research on Globalization. "If the cashless society is ushered in, they will have near complete control over the lives of individual people."
But perhaps the biggest reason for the government's war on cash is to make it feasible to impose negative interest rates. For central banks seeking new forms of economic stimulus, negative interest rates would do wonders.
Negative rates would actually make it profitable to borrow money. And holding money in a bank would cost you. Savers would be forced to pay the bank to hold their money instead of the other way around.
The inability to cash out accounts would make spending money as fast as you make it the only practical option. That would help stimulate the inflation the U.S. Federal Reserve so desperately craves.
The public would push back if the government tried to ban cash outright. That's why the death of cash is arriving in stages...
How the War on Cash Will Play Out - and What to Do
Since governments don't want the public to notice what's happening, they've been tightening the restrictions on cash incrementally.
The idea is to discourage cash more by making it increasingly difficult to use.
So you have governments gradually lowering the ceilings on cash transactions. And governments making cash harder to extract from individual bank accounts.
But that's not all.
In the United States, we already have civil forfeiture, in which a state or federal law enforcement officer can seize anyone's cash (or other possessions) on suspicion it was obtained illegally. The owner must prove the possessions were acquired legally to get them back - a long and arduous process.
This is already happening on a huge scale. A Washington Post investigation in 2014 found that since 2001, $2.5 billion had been seized from American citizens, mostly motorists, despite their not being charged with a crime.
Once the use of cash slows enough, the government will feel comfortable banning it outright. After a designated period, all cash will become worthless as legal tender, preventing individuals from using it.
The best defense against the government's war on cash will be digital currencies such as Bitcoin, as well as traditional stores of value like gold and silver. Such investments will rise when more people realize that the era of cash money is nearly over.
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- Center for Research on Globalization: The Cashless Society Is Almost Here - and With Some Very Sinister Implications
- The Washington Post: Stop and Seize
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.