
The Political War on Cash - randomname2
http://www.wsj.com/articles/the-political-war-on-cash-1455754850
======
ryanackley
This is an alarmist piece on negative interest rates.

The real war on cash is driven by consumer convenience, the IRS, and
Anti-(Drug|Terrorism|Vice) government agencies. Government agencies want a
paper trail to catch tax evaders and illicit activity.

Whenever I see a very popular business (usually a bar or restaurant) that
takes "Cash Only". I think to myself "Tax Evader". Which may or may not be
true. Sadly, they are painting a target on their back.

~~~
kardos
While "cash only" could be an indicator of tax evasion, it's also a way to
sidestep credit card fees which can chew up a few percent of your profit
margin.

~~~
dagw
At least here in Sweden I'm seeing more and more places going "card only",
leading me to believe that the cost (and risk) of handling cash must be at
least as high as the cost and risk of handling cards.

~~~
elthran
Yeah, cash has to be counted, delivered to a bank to be deposited, can be
"misplaced" by employees, the old "sorry, I don't have enough change" issue

~~~
caf
Before credit cards became widely used, restaurants used to be common robbery
targets. A whole night's takings in cash is a solid score.

That's no longer the case, because you'd mostly just get a pile of worthless
credit card receipts for your trouble now.

------
rwmj
You can still buy gold (and if they try to ban that, they'd have to ban
jewellery also, so good luck trying that). Gold isn't actually that dense - in
terms of currency it's about as dense as $50 bills[1]. Platinum or palladium
maybe?

[1] Assuming this site: [http://1000000-euro.de/how-much-does-a-million-
dollars-weigh...](http://1000000-euro.de/how-much-does-a-million-dollars-
weigh/index.php#weigh-dollar) is correct.

Edit: Of course I'm confusing density with mass. Anyone want to work out the
volume?

~~~
beagle3
> and if they try to ban that, they'd have to ban jewellery also, so good luck
> trying that

But they did ban gold in the US in 1933 without banning jewellery[0]. The ban
doesn't have to be perfect to be useful to a government.

[0]
[https://en.wikipedia.org/wiki/Executive_Order_6102](https://en.wikipedia.org/wiki/Executive_Order_6102)

------
kushti
Civil disobedience matters. Use cash and cryptocurrencies only.

------
pmontra
Italy's limit has been raised from 999.99 to 2999.99 at the beginning of the
year. It means you couldn't pay 1000 in cash, now it's 3000.

Any banknote larger than 50 Euro is very uncommon here. ATMs don't give them.
Anecdote: I was sure the 200 one is green and when I googled for the 100 note
I discovered that it's the 100 which is green; the 200 is yellow. I remembered
correctly that the 500 is pink.

Doing without the 100 USD bill would be problematic for tourists in those
countries with very minimal credit card penetration and that insist to accept
only pristine very recent bills, the ones that in the West would be looked at
with suspicion. Example: former USSR central Asia countries.

~~~
TazeTSchnitzel
And despite all this, the EU still issues one of the world's largest
banknotes, the €500 note.

~~~
maccard
I've never seen one in the wild, and only ever actually seen one in person
when I. Was in school - they had one to show us what it looks like

~~~
ido
You see them on occasion (but not commonly) in Austria & Germany. I commonly
see 100 euro bills and 200 are not that rare either.

I believe that once when paying the security deposit for an apartment in
Vienna I used a 500 euro bill & it phased no one.

------
GFischer
Having no high denomination bills is also very problematic.

I witnessed it firsthand in Argentina until very recently, and in Venezuela
and other hyper-inflation countries it's still a huge burden.

Spanish-language links:

[http://www.elpais.com.uy/economia/noticias/argentina-
reclama...](http://www.elpais.com.uy/economia/noticias/argentina-reclaman-
billete-mas-que.html)

Translated quote: "Not having higher denomination bills leads to very high
costs in transportation and storage because of the large volumes handled and
because bills don't fit in small safes."

Other curious facts: Singapore has a 10.000 dollar bill (U$ 7.500), and
Switzerland has a 1000 CHF bill (U$ 1070).

However, the Singapore bill won't be printed anymore, for the same issues
(money laundering concerns).

[http://www.out-law.com/en/articles/2014/july/singapore-to-
st...](http://www.out-law.com/en/articles/2014/july/singapore-to-stop-
issuing-10000-dollar-notes-to-combat-financial-crime/)

~~~
jpatokal
Random aside, but:

I was once next in line at a bank in Singapore, and I watched the lady in
front of me withdraw around 10 x $10,000 bills in cash. (They're golden yellow
and very distinctive:
[http://www.singaporemint.com/images/facts/port10000.gif](http://www.singaporemint.com/images/facts/port10000.gif))
She counted them carefully, then she put them in her purse and walked away.

Now Singapore's a pretty safe place to be, but how many other people watching
were tempted to follow her and see if they could get their hands on US$75,000,
in cool, untraceable cash at that?

~~~
bryanlarsen
Japan has similar behaviour. For example, it's common practice to pay cash for
new cars. (Or at least it used to be not very long ago).

------
mactitan
I'm not registering to read full article but the other mainstream articles
list curbing terrorism & crime as the main reasons. None mention the
possibility of cash withdrawl in a negative rate environment. (Can anyone
verify?) But I find it hard to believe we'll go negative since it would
destroy the money markets, & possibly pensions.

~~~
iofj
That's starting already:

[http://www.kansascity.com/news/business/article60760061.html](http://www.kansascity.com/news/business/article60760061.html)

Man can you imagine getting a letter like this when you're 75 ? What are these
people to do ?

~~~
quickben
Having worked in a trading company for some time, investing in _anything_ not
backed by a government, especially a retirement money, seems as a bit of a
reckless idea to me.

------
DanielBMarkham
I don't want huge denominations, but assuming inflation over the last 50
years, seems to me that we should have a $500US note.

Yes, I understand if LE had their way we'd be paying with 5-spots, but
convenience has to mean something also. Let's bring back the $500 bill and
then index the entire thing to inflation such that there isn't more than a
dozen or so steps between the smallest and largest monetary units.

I don't think this is a political discussion/argument we need to have
constantly. Fix it once and then leave it alone. I'm also completely opposed
to eliminating all currency and going totally electronic, which sounds like an
even more dystopian state than the current one our betters have created for us
over the last decade or two.

~~~
manuelflara
Considering Europe's experience with high denomination notes, I strongly think
this is a bad idea. In fact, Europe is considering eliminating €200 and €500
notes, since they're mostly used for illegal activities. Example: 75% of the
cash in Spain is in €500 bills[1]. Considering me and most people I've known
have only taken a glimpse at those (and usually, when getting paid under the
table), this roughly means €45B in cash, used for corruption, illegal
enterprises and tax evasion (really, few other practical cases exist for such
high value notes) is flowing through our economy.

[1] [http://www.abc.es/economia/abci-75-por-ciento-efectivo-
circu...](http://www.abc.es/economia/abci-75-por-ciento-efectivo-circula-
espana-billetes-500-euros-201602161819_noticia.html)

~~~
retrogradeorbit
If you look carefully, there's no evidence it's used for "criminal
activities". In fact the article says there is only "growing concern" that
they may be being used for criminal activities. Where is the evidence? They
just know its not moving through the system, so there for it _must_ be
criminals.

A large portion of this I see as people moving their transactions outside of
the banking system. The main reasons are a loss in faith is the financial
system (especially in Europe). The banking system is very expensive, and very
shaky. Just look at Deutsche Bank at the moment. And the Europeans all
remember the situation that unfolded near them in Cyprus.

Over time there will be more and more of the general economic transactions
happening outside of the banking sector as the banking sector seeks to extract
more wealth to pay off their bad debts and improve their solvency with
haircuts, negative interest rates, bank holidays, bail ins, bail outs or
capital controls.

It's an extremely dangerous option to try, though, as it could lead to people
losing faith with the system even more and shows how desperate they are.
Things might be worse behind the scenes than they look on the surface.

~~~
tim333
As an investor in Spain I've seen a lot of it used for not very legal
activities. They used to have something called 'B money' on probably most
property sales where you paid one amount say 170,000 euro officially and maybe
20,000 in cash B money so as to avoid the government stamp duty on the sale
price. It was kind of tolerated and legally a bit grey. It would be more
hassle to do if you had to count out 200 bank notes rather than 20. There also
used to be a lot of property bought for cash with drug money which was of
course illegal but went on a fair bit.

~~~
DanielBMarkham
There's "illegal" and then there's "shady"

We see a lot of that in the states. You'll buy a car for $1500. Both of you
call the "official" price $500. The seller pays less sales tax. You pay less
property tax.

Yes, illegal. But drug-running it's not.

It's one thing to want to make things tough on drug dealers or terrorists.
It's something else entirely to want to be able to observe and control every
instance of money moving through the economy. We have to ask ourselves what
the real goal is here. Or maybe a better question is: where are we going to
end up?

I know in the states we've seen a lot of drastic action around organized
crime, mobs, and drugs. We had the RICO statute, then various laws around
money movement. All passed because of severe and dangerous threats. But now?
All of that heavy firepower we passed to prevent severe threats is applied to
the average citizen. The effects are not pleasant to observe.

------
transfire
All cash transactions will now have to be done in coin. Have a weighty day.

------
retrogradeorbit
In the unfolding of this agenda, when they invariably claim only criminals use
these notes, remember what they mean by "criminal". It is anyone who holds
wealth outside of the mainstream financial system where they, the government
and banks, could confiscate it with negative interest rates.

Negative interest rates will never "work" without also having _capital
controls_.

~~~
alkonaut
Not sure how negative interest rates confiscate money? The value of money is
hollowed by inflation, and central banks use negative interest rates as a tool
to try to _increase_ inflation. If there is zero or near-zero inflation
(People will always argue about what inflation is and what the level is, but
for the sake of discussion assume it's a very low positive number) -- what is
the problem with a central bank having an interest rate of, say, -0.25%?

Note that I'm talking about monetary policy now, that is central bank interest
rates. Not commercial bank savings rates. The latter are typically either zero
or slightly positive even if the central banks rate is negative.

~~~
retrogradeorbit
The net effect of negative interest rates is to transfer wealth from savers to
debtors. This would reduce the amount of total debt that's crushing the
economy, _theoretically_ leading to growth. But would do so by confiscating
wealth from savers either indirectly through inflation, or directly through
depositor fees combined with capital controls. Effectively it will reward all
those who have taken on too much debt and punish all those who have been
prudent and saved. A very perverse incentive indeed.

In a negative interest rate environment inflation is not going to be a very
low positive number. It is going to be much higher. That's half the aim. To
inflate away the debt and pay it off with cheaper money. Instead of banks
needing to pay the central bank to borrow money, the central bank is going to
pay them to take it. And they have the power to coin. Inflation is going to be
dramatically higher.

In my opinion, what should be done now is to let the market crash. The long
term cause of the crisis has been the constant effort to stop the business
cycle from occurring. Instead of having lots of little, regular, mini
'crashes' that would reallocate capital to solid businesses and erase bad
debt, we have been propping up and preventing (to the best of the central
banks ability) any markets' natural attempts to rebalance.

So we've had this enormous, multi-decade boom. 2008 was a chance to correct,
and that was not allowed to happen. So now the bust we have will be ferocious
and terrible, far worse than 2008 would have been. But there is nothing we can
do. We should have taken our economic medicine years ago, and prevented these
insane bankers from doing this for their own personal gain.

Central banks were established to 1) ensure a stable currency and 2) to be a
lender of last resort. Since when did propping up the stock market become part
of their purview? Or ensuring asset prices continue to rise?

If we don't take the medicine now with an economic down turn, then the problem
will just grow bigger, and the next time it will be far, far worse. Just as
now it is far worse than 2008. We are effectively screwing our children's
prospects for our own greedy self interest. You can only kick the can down the
road for so long. With each kick it becomes heavier. Its now a boulder.
Eventually we'll break our metaphorical foot on it, trying to kick it.

------
guard-of-terra
You can't ban $100 bills because huge number of those circulate in countries
all around the world, most of them poor. Some families' fortunes consist of a
few such bills in countries of Africa or Central Asia.

What's your plan here?

~~~
PixelB
The main issue here is actually the 500 euro note, not the $100 bill. The idea
is that such notes fund a great deal of terrorist activities overseas, and I
sort of agree that we shouldn't have such large denominations.

I would even be okay with getting rid of the $100 bill. Let's face it, people
who deal in VERY large amounts of cash $100,000+ are not good people. Drug
dealers or politicians (same thing in my opinion) don't use $20 bills as
amounts that high get very cumbersome. If you find yourself in a situation
with so many $20 bills that you physically can't carry them around, I have
literally zero sympathy for you.

Slippery slope? Maybe, but as it stands I have no issue.

~~~
michaelmrose
Do you imagine that one iota of crime would be prevented by making drug lords
pack an extra suitcase full of money? If not they why bother.

~~~
lmm
Yes. Carrying an extra suitcase is inconvenient, makes you more stressed and
so more prone to making mistakes (or means you have to pay an extra lackey to
carry it). None of this makes crime impossible but it raises the cost, which
for some people will shift the balance in favour of legitimate business
instead.

------
timwaagh
would hate to see the death of cash. it would pretty much mean the entire
black market would have nowhere to go. meaning a lot of people would be
without an income. of course governments want this, but should they?
[http://freakonomics.com/2011/11/01/the-black-market-is-
the-s...](http://freakonomics.com/2011/11/01/the-black-market-is-the-second-
largest-economy-in-the-world/)

~~~
jrs235
Black Markets will find another exchange medium (they already exist) such as
laundry detergent.

[http://nymag.com/news/features/tide-detergent-
drugs-2013-1/](http://nymag.com/news/features/tide-detergent-drugs-2013-1/)

Edit: Article more in line with current discussion:

[https://www.aei.org/publication/markets-in-everything-
tide-l...](https://www.aei.org/publication/markets-in-everything-tide-laundry-
soap-as-street-currency/)

------
arca_vorago
in this surveillance society, cash is a threat because its still anonymous.
Bitcoin is not anonymous!

------
zuo
one has to subscribe to see the whole article

------
restalis
Non-paywalled version: [http://www.wsj.com/articles/the-political-war-on-
cash-145575...](http://www.wsj.com/articles/the-political-war-on-
cash-1455754850)

~~~
restalis
To down-voters: for me the article posted did appeared pay-walled and I might
not have been the only one to encounter it that way! Why the down-vote?

~~~
matheweis
Your link doesn't work.

I didn't down vote, because it looks like WSJ is catching onto the game. Going
to Google in the usual way doesn't work either.

~~~
restalis
Oh, I see what you mean, WSJ now opens pay-walled for me too, so it become a
worthless help from my part.

------
Etheryte
This article is ridiculously biased. The actual reason the EU reps want to
phase out the 500€ bill is that according to the latest data, over 90% of
those bills are used for criminal activity. Can't look up references well as
I'm on the phone, but you read that right: only 10% of the bills are used by
regular people. All the rest of it is used by crime syndicates because the
larger the bill, the easier it is to move illegal money.

~~~
kardos
Eliminating the 500 EUR would leave the 200 EUR in circulation. Assuming the
criminals shift to using that, they'll see a modest 2.5x increase in volume to
transport. Somehow I doubt that would be a show stopper.

~~~
efaref
Clearly we should replace Euro notes with Rai Stones[1] :)

[1]
[https://en.wikipedia.org/wiki/Rai_stones](https://en.wikipedia.org/wiki/Rai_stones)

