Spanish Citizens Discover the War on Cash; Americans Should be Concerned
In Europe, at least, the war on cash has begun. How long before it reaches North America?
The Spanish government, in fact, plans to issue a law—by decree rather than parliamentary vote—that will limit cash transactions. The legislators say that the new law targets fraud but, in fact, the centerpiece of this law is that it limits cash transactions to no more than €1,000. (Source: “El Gobierno limitará el pago en efectivo a 1.000 euros,” El Mundo, November 30, 2016.)
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The war on cash is spreading like wildfire. It’s coming to Spain in the guise of a scheme to discourage tax evasion, but Scandinavia, Denmark, and Sweden have been hogging the headlines with their own fights against physical money. The two countries have been conducting a sort of experiment with a “no-cash” economy, recruiting their own citizens as guinea pigs.
The authorities will be satisfied only when the war on cash results in its total elimination. In fact, should anyone doubt this goal, consider that the Spanish government has imposed gradual limits on cash transactions. The new €1,000 limit comes in the wake of a previous €2,500 limit. It won’t be long before that limit tightens again.
The disappearing cash phenomenon that shall emerge is to force people to hold their money in banks. This allows governments and their financial sponsors to maintain control over all movements of money. Presumably, governments insisting on the use of limits on cash transactions will strengthen mechanisms to guarantee deposits.
Still, it’s absurd that the State could possibly guarantee all the bank deposits of a country. Any state intent on reducing the use of cash, thereby forcing people to rely on banks, will have to offer some kind of assurance, after all.
War on Cash Laws Come Disguised with Honorable Goals, But…
The Spanish decree, which might as well be called the “War on Cash” law, came with a side order of typical debate points masqueraded with hypocrisy. The Council of Ministers said that the new law might be delayed. The council also found it necessary to stress that the cash limits will “deter and curb fraud.” By this, the government probably wants to target small business owners, who don’t declare sales and services taxes (VAT), and those who work in the underground economy in general. (Source: Ibid.)
The government has assured the public that the measures are part of its anti-fraud plan, and that they merely want to improve tax collection. If this is achieved, the government says it won’t have to raise taxes. But, just as Americans would react if Washington started to impose similar restrictions on the use of cash, many Spanish citizens don’t like the law and are reacting.
Many Spanish citizens have insisted that the Treasury recover—as soon as possible—the money that it has forfeited with a tax amnesty. They argue that the Ministry of Finance should urge the Tax Agency to target those citizens first, before taking any additional measures.
It is obvious that the government is going on the hunt for revenue to fund deficits and more. The attack does not target only tax havens, but the cash that regular people keep in safes and safety deposit boxes. The war on cash is literally a war on the proverbial money under the mattress.
India remains the largest producer and consumer of paper money after China. Coincidentally, they are also the largest consumers of gold.
The main, often overlooked, benefit of paying cash is the absence of intermediaries. A person pays another party through a shared currency, without any intermediary having a chance to stand in the way. In a society without cash, however, nothing will stop the banks or other financial intermediaries by retaining small commissions for each transaction.
Such intermediaries, in turn, would be able to use—and potentially abuse—the huge piles of data collected through the payment habits of their customers. Information of this type is of great interest and value to marketing departments of various financial institutions, insurance companies, governments, intelligence agencies, and many other organizations.
Cash also limits central banks’ ability to pursue what is probably the largest financial fraud in the modern era, namely the policy of negative interest rates. As long as there is physical cash, there will be no way to avoid the fact that investors will do what is logical, or withdraw money from their bank accounts and deposit it where the erosive effects of negative rates cannot reach them.
Beware the war on cash.
