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Citi Economist Says It Might Be Time To Abolish Cash

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http://www.bloomberg.com/news/articles/2015-04-10/citi-economist-says-it-might-be-time-to-abolish-cash

The world's central banks have a problem.

When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.

In a new piece, Citi's Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates.

Fundamentally, the ELB problem comes down to cash. According to Buiter, the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction?

Cash therefore gives people an easy and effective way of avoiding negative nominal rates.

Buiter's note suggests three ways to address this problem:

  1. Abolish currency.
  2. Tax currency.
  3. Remove the fixed exchange rate between currency and central bank reserves/deposits.

Yes, Buiter's solution to cash's ability to allow people to avoid negative deposit rates is to abolish cash altogether. (Note that he's far from being the first to float this idea. Ken Rogoff has given his endorsement to the idea as well, as have others.)

They really want to screw the people, I'll bet if they abolish currency people will invent their own outside the system.

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The bankers want open theft, rather than the just thinly disguised theft via fiat money and fictional living costs which that have rained down on the system to make a few of their ilk rich.

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The world is ready for a 3rd party silver or gold currency provider. A group of businesses should just go for it and say they'll take precious metals at the till.

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The world is ready for a 3rd party silver or gold currency provider. A group of businesses should just go for it and say they'll take precious metals at the till.

Bang on, statements like Buiter's are a good reason to hold a little physical gold!

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Buiter's been banging this drum for years.

From May 2009: Negative interest rates: when are they coming to a central bank near you?

(FT blog post, so not sure if non-subscribers have direct access)

Goes into detail as to how zero bound can be removed by either 1) abolishing currency, 2) taxing currency and stamping it, or 3) unbundling currency from the unit of account.

In other words this latest piece is just a rehash of the above.

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I am sure there are institutions that have a vested interest in only having digital money....lots of money to be made from that, and lots of savings to be had, cash is expensive.....big pressures coming from many different quarters......beginning to look like not if, but when...very easy to notice there are already fixtures being but into place to achieve this goal, slowly but surely... imo. Not a good thing for the common man, but will they fall hook line and sinker into the trap that is being laid. ;)

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It would take ten minutes before people started trading in something else, Like any organized criminal gang banks and gov just want a cut of any "action", It is impossible to abolish cash or its equivalent for small local trade. I can think of many times I use cash and prefer to use cash.

No amount of charging vat on second hand clothes at a carboot is ever gong to fill the void they call an economy.

Like I said before though the state and the banks will do anything to protect themselves so they will try and take from any corner of the economy they can now. Through fines for nonsense laws, licenses for stupid shit and even bigger fines for not having the licenses. Maybe make it so you need a licenses to sell stuff at a car boot, outlaw cash and hit you with a massive fine if you sell an old lawnmower on gumtree and didnt tell them.

This is always the behavior of any collapsing system. It squeeze time and as things falter more and more they squeeze ever harder.

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You don't need to abolish cash at all.

You just need to prevent asset managers, banks, hedge funds etc withdrawing humungous wads of it to hoard.

For the rest of the populus it's trivial.

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The proposal seems to expose the lie about deflation being bad for the average person.

Bankers running out of ways to make people's lives miserable through the cash/fiat based system and looking for another way to divide and rule, manipulate and to help to self serve themselves with most of the world's resources etc.

Edited by billybong

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The world is ready for a 3rd party silver or gold currency provider. A group of businesses should just go for it and say they'll take precious metals at the till.

it's happening already. convenient bars of gold easily divisible,intended for spontaneously arising, self liquidating real bills that will be cleared for gold(marked to market) within 91 days.

http://professorfekete.com/articles/AEFSpontaneousRemonetizationOfGold.pdf

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I am sure there are institutions that have a vested interest in only having digital money....lots of money to be made from that, and lots of savings to be had, cash is expensive.....big pressures coming from many different quarters......beginning to look like not if, but when...very easy to notice there are already fixtures being but into place to achieve this goal, slowly but surely... imo. Not a good thing for the common man, but will they fall hook line and sinker into the trap that is being laid. ;)

Or will all the cashless systems go the way of self service checkouts? :lol: The main people I see trying to use them seem to be the younger "phone always in face, can`t communicate normally" generation, and they just look silly, like an extra from the re-make of Fahrenheit 451 :lol:

I am making a point of using cash more and more, even giving supermarkets loads of 1p`s and 2p`s when paying for milk etc. just because I am sick of the big banks having their shifty paws into every transaction we make.

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they will never abolish cash. The black market is all cash and equivalents, the money laundering business is massive.

They would have to ban it, stop printing it, and get people to believe that it is pretty worthless (shouldn`t be too hard?) then it would thrive in countries where they didn`t have the electronic infrastructure and peter out here? Would be pretty pointless for a big criminal to launder a load of cash if high end stores in London and NY were phoning the cops any time cash was produced? But to be honest that is SF I think, there would be revolution now if they tried that.

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It would take ten minutes before people started trading in something else, Like any organized criminal gang banks and gov just want a cut of any "action", It is impossible to abolish cash or its equivalent for small local trade. I can think of many times I use cash and prefer to use cash.

No amount of charging vat on second hand clothes at a carboot is ever gong to fill the void they call an economy.

Like I said before though the state and the banks will do anything to protect themselves so they will try and take from any corner of the economy they can now. Through fines for nonsense laws, licenses for stupid shit and even bigger fines for not having the licenses. Maybe make it so you need a licenses to sell stuff at a car boot, outlaw cash and hit you with a massive fine if you sell an old lawnmower on gumtree and didnt tell them.

This is always the behavior of any collapsing system. It squeeze time and as things falter more and more they squeeze ever harder.

I certainly hope this is the death throes of a dying system!

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