Should cash be abolished? - The Daily Reckoning

Should cash be abolished?

Sep 2, 2015

- By Bill Bonner

Bill Bonner
Gualfin, Argentina

Dear Diary,

Yes, September is here. As expected, market volatility is increasing. The Zombie War is intensifying. And investors are getting scared. Yesterday, the Dow fell 469 points.


    U.S. stocks joined a worldwide selloff, after equities' worst month in more than three years, amid continuing concerns that China's slowdown will weigh on the global economy.

    The Standard & Poor's 500 Index slid 2.5 percent to 1,922.19 at 2:58 p.m. in New York, following the benchmark's biggest monthly slide since May 2012. It's a sour start to September, historically the worst month of the year with the equity gauge falling 1.1 percent on average going back to 1927, according to data compiled by Bloomberg. The Dow Jones Industrial Average sank 405.31 points, or 2.5 percent, to 16,122.72. The Nasdaq Composite Index lost 2.4 percent.

    "The problem is, as much as China is the catalyst for this, it's also that we're seeing weakness in fundamentals here," said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. "A lot of company earnings were hurt by China in the second quarter and it's only gotten worse. People are losing confidence with the whole situation there breaking down, not just in the stock market but in data as well."
Yes, people are losing confidence. They're probably losing confidence in corporate managers, for instance. Who wants to own stock in companies run by numbskulls who buy their own shares at record prices just before a major sell-off?

  The "Crash Score" Report  
  Is there a way to predict a stock price crash? A way you could've seen the collapse of Satyam...

BEFORE it actually happened!

Well, our research team has just released our Latest Special Report that reveals a way to calculate the "Crash Score".

A simple calculation that allows you to find out, and avoid investing in, high-risk stocks which are likely to crash in near future.

In fact, it also contains a list of 20 stocks which rank high on this Crash Score right now!

So, don't delay and Click here to instantly download your FREE copy of The "Crash Score" Report...


Or maybe they're wondering how much of the world's $200 trillion in debt can possibly be paid back?

Or maybe they're beginning to puzzle out how scammy and fraudulent the Fed's policies really are.

But out! Reeling from the jabs of the last two weeks, expect a strong counterattack from the zombies and their allies.

Some Fed governor will come forth - maybe even Janet Yellen herself - and tell us not to worry about a return to 'normalcy' anytime soon. We're way too far into the weird to get anywhere near normal now.

And surely Wall Street shills will be in the news explaining how markets become unreasonably fearful from time to time. They will tell investors that it is time to hunt for 'bargains.' Dow 25,000! Why not?

And they may be right. There's bound to be an inflationary blow-off waiting somewhere ahead. Stocks will soar. But not before they crash.

In the meantime, watch your rear. There's a serious counter-attack coming. It will be an attack on our supply lines. The cronies and the feds will attempt to cut off our finances and our line of retreat, trapping us between the anvil of the market's deflation and the hammer of the feds' inflation. There will be no escape, no way out.

As we reported yesterday, the Financial Times last week ran an article calling for the abolition of cash. It was entitled "The case for retiring another 'barbarous relic,' claiming that cash causes "a lot of distortion in the economic system." Can you believe it? Cash causes economic distortions! The FT:

    "The existence of cash - a bearer instrument with a zero interest rate - limits central banks' ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory...
Of course, it also repeated the familiar claims that cash also is what finances terrorism, tax evasion, and the black market. Making cash illegal, it says, would "make life easier for a government set on squeezing the informal economy out of existence."

You see where this is going, don't you, dear reader? If the feds are able to ban cash, they will have you completely under their control. You will invest when they want you to invest. You will buy when and what they want you to buy.

You will be forced to keep your money in a bank, a bank controlled, of course, by the feds. You will say that you have 'cash in the bank,' but it won't be true. All you will have is a credit against the bank.

As it is now, the bank will have some real cash, but not nearly enough to satisfy the claims against it. If this new attack succeeds, by law, it will have no cash at all. You will be completely surrounded. If the feds want to force you to spend...or invest...your money, they will simply impose a 'negative interest rate,' which is nothing more than a tax. In Cyprus, they whacked large accounts with a 50% tax simply because the banks didn't have enough money. In Argentina, they closed the banks. When they re-opened, dollar holdings had been converted to pesos, with a 66% loss!

As stocks decline, you can expect more and more people to want to hold cash. If stocks go down 10%, cash has, relatively speaking, gone up 10%. People will want it. But if this encirclement maneuver works, you will be unable to go to real cash. All you will have is a claim against the most insolvent debtors in the whole economy.

In 2008-09, almost every major bank was on the edge of bankruptcy. But if they succeed in cutting us off from cash, that will never happen again. Because the banks will just whack us all - with the full approval of the Fed, the cronies in Congress, and zombies everywhere.

Already, several of our readers have reported that they have had trouble getting cash from their own accounts. Banks stall. They impose withdrawal limits. They want you to come in person, etc. etc.

Right now, being unable to get cash promptly is merely a nuisance. But just wait. It won't be long before new initiatives are announced to 'stimulate' demand. Perhaps negative interest rates will do it. Maybe a general tax credit. But sooner or later, the hammer of inflation will come down hard. Then, your inability to get cash will be more than a will be a deathblow. You will be locked into a bank account with a bankrupt institution. And the feds and their bank cronies will tell you when and how you can have access to your own money. The feds will announce a 'bank holiday.' Maybe transfers to gold sellers or foreign currency accounts will be made illegal. Or maybe it will just take time - while your money loses value rapidly - to get your money out.

If this new campaign succeeds, it will be almost impossible to protect yourself. In effect, you will need the feds' permission to buy a pack of cigarettes.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Recent Articles

Our Newest "Fixer-Upper" July 20, 2018
Bill Bonner talks in detail about US president been accused of treason, biggest debt default in China, the problem of growing inflation and the trade war.
How to Build Affordable Homes in India July 19, 2018
Rajiv Talwar, the CEO of DLF, makes a few interesting points in a recent interview.
Deep State Turns on Trump July 19, 2018
In the last half-century, no president has ever seriously challenged the Deep State. Bill discusses the repercussions of same in today's issue...
A Sense of Melancholy July 18, 2018

Equitymaster requests your view! Post a comment on "Should cash be abolished?". Click here!