More Anti-Cash Propaganda by Bloomberg
Former NYC mayor Bloomberg is probably one of the worst nannycrats who ever strode upon the US political scene. No-one has done more to take the fun out of New York than this man (we have chronicled the efforts of people of his ilk in “America’s Killjoys”). It always amazes us to no end when successful businessmen – once they have made enough money to last them a thousand lifetimes – suddenly discover their penchant for socialism and State control of every nook and cranny of people’s lives.
Ex-NYC mayor Michael Bloomberg, owner of the famous financial data service and professional nannycrat.
Photo via politistick.com
If not for the huge amount of capital our forebears wisely accumulated while the market economy was still relatively unhampered, Bloomberg wouldn’t have been able to amass his fortune – and yet, we strongly suspect that he has never really been a big fan of free market capitalism. His willingness to join the political class is by itself a major “crony indicator”. There is after all a big difference between wishing to serve consumers and wishing to rule over them.
The financial services offered by his company are nevertheless quite valuable – an unrivaled wealth of data is available via Bloomberg terminals and the financial commentary on the Bloomberg web site is often of quite informative as well – as long as it is confined to the neutral reporting of facts that is. It is quite different with the magazine’s editorial line, which is steeped in the statism of the service’s founder.
For instance, central banking and central planning of the economy in general remain routinely unquestioned; Keynesian shibboleths are woven into the narratives as if they represented incontestable truth. It is therefore not a big surprise that the magazine is also editorializing in favor of banning cash. Here is the latest example, with Bloomberg’s editors urging to “Bring on the Cashless Future”.
The Purpose of Trial Balloons in the Media
Launching these frequent trial balloons in the media primarily serves two functions: for one thing, the rubes are to be softened up with a steady stream of propaganda.
Once upon a time, real money was replaced by irredeemable paper money under the cover of “emergency” – overnight, what used to be a warehouse certificate entitling its owners to redeem a specific quantity of gold was simply declared to be money henceforth.
This was expropriation on a truly breathtaking scale. However, it didn’t just happen out of the blue. Years of intense anti-gold and pro-inflation propaganda preceded the actual deed. By the time the theft was finally committed, people had too many other pressing concerns to worry about it – and the snake oil sellers had it easy, as they promised a “painless solution” to the economic woes of the day.
Never let a serious crisis go to waste – the mantra of statists since time immemorial.
This propaganda exercise is repeated today with respect to paper money, which has become the new “standard money” after the gold theft. The public is supposed to get used to the idea that a world without cash would be just great. In article after article it has been tirelessly hammered home over the past few years how utterly “bad” cash currently allegedly is (there are even studies that purport to show how germ-infested and hence dirty and unhealthy paper money is. One wonders who actually pays for such studies – probably they are tax-funded).
The reasons for this push to abolish cash should be obvious: forcing everybody to use digital money will enable total state control over the financial lives of citizens. In the glorious cashless future envisaged by Bloomberg, the expropriation of savings will become a matter of a few keystrokes by faceless bureaucrats. Want to implement the IMF’s proposed 10% wealth tax to “fix” the government’s debt problems overnight? Easy, just press “Ctrl+T” (T stands for theft).
Naturally, the fractionally reserved private banking cartel is largely in favor of abolishing cash as well (the vast majority of extant deposit money consists of uncovered fiduciary media, which means that most banks are de facto insolvent). If here is no cash, no-one will be able to escape the banking system anymore. This fact alone should alarm even the most jaded couch potatoes.
If your bank is about to keel over, as indeed happened on several occasions in 2008 (think Northern Rock or Indy Mac), well, tough titties pilgrims! No bank runs will be possible anymore. Depositors will simply have to join the lines of unsecured creditors. As long as a system-wide bank collapse doesn’t render the FDIC or comparable deposit insurance schemes insolvent as well, one will of course get one’s money back – eventually (“eventually” and “on demand” are obviously two very different concepts).
Run on a Northern Rock branch in Birmingham, 2008. Worried depositors are trying to withdraw their savings from the insolvent mortgage lender before its doors close for good.
Photo credit: Lee Jordan
Lastly, in their relentless drive to implement even more monetary quackery, assorted central planners supported by their claqueurs in the media and their dependents in the mainstream of the economics profession desperately want to overcome the imaginary “problem” of the “zero bound”. Central banks have so far only been able to impose negative penalty interest rates on bank reserves. Commercial banks have very little choice in the matter. QE continually creates new reserves, and these can only be used for interbank lending (a dead market) or to pay, well, for cash withdrawals by bank customers.
Apart from a handful of exceptions (which mainly affect very large deposits) commercial banks have largely refrained from passing these penalty rates on to their customers – they rightly fear that many people will simply withdraw their money and keep it as cash under the mattress. Why would anyone sit idly by and let himself be robbed as long as this alternative exists? Moreover, commercial bankers are of course aware what an utter economic perversion negative interest rates represent.
By now, negative interest rates have been introduced by central banks in countries representing 23% of global economic output. This is lunacy on a truly breathtaking scale.
It seems obvious to us that forcing people to keep their money on deposit with fractionally reserved banks is incompatible with property rights. This particular problem is rarely mentioned or discussed, but it strikes us as quite a crucial one. Those who regard property rights as a privilege granted by the State are presumably not worried by such objections, but everybody else should be.
The second main reason for launching such trial balloons in the press is that they serve to gauge the mood of the citizenry. Are people ready to surrender yet more of their freedoms, or will there be an outcry?
If you look at the reader comments below the Bloomberg editorial, you will notice that the idea of abolishing cash continues to meet with intense resistance. Although people in developed countries do tend to use electronic payment methods most of the time, the fact that they know they can withdraw their money in the form of cash is evidently still quite important to them. Most people appear to realize that the aim of abolishing cash is to enable total control, and ultimately theft. After all, the fairly recent cases of Greece and Cyprus have demonstrated what can happen to depositors that make the mistake of trusting the promises of politicians.
So far, the reaction to such trial balloon articles is telling the movers and shakers that the time for actually pressing on with the ban has not yet arrived. A bigger crisis will be needed, and the propaganda effort will have to be intensified.
In the meantime, cash bans are already introduced through the backdoor, by means of salami tactics: under the pretext of fighting terrorism and/or tax evasion, several countries have already imposed severe restrictions on cash use. Such restrictions exist e.g. in Greece, France, Spain, and Italy and involve ridiculously low limits (ranging from €1,000 to 1,500). In the US, civil forfeiture regulations are making anyone holding a large amount of cash potentially vulnerable to outright theft without due process – with the State’s takings by now eclipsing those of burglars.
Asset forfeiture takings in the US are by now eclipsing theft by less professional criminals – click to enlarge.
A List of Tired Old Canards in a new Package
The Bloomberg editorial begins by craftily telling readers that “we” are allegedly unsatisfied with cash because it is “dirty”, “dangerous”, “unwieldy”, “antiquated” and terribly “analog”. Evidence for this consumer dissatisfaction allegedly abounds. And most importantly, the move to fully digital money apparently has the imprimatur of governments and central banks now, which “want in on the action” (surprise!):
“Cash had a pretty good run for 4,000 years or so. These days, though, notes and coins increasingly seem declasse: They’re dirty and dangerous, unwieldy and expensive, antiquated and so very analog.
Sensing this dissatisfaction, entrepreneurs have introduced hundreds of digital currencies in the past few years, of which bitcoin is only the most famous. Now governments want in: The People’s Bank of China says it intends to issue a digital currency of its own. Central banks in Ecuador, the Philippines, the U.K. and Canada are mulling similar ideas.”
Naturally, if notes and coins are really so “dirty and dangerous”, something will have to be done! But didn’t Bloomberg just mention that the free market is already offering a great many alternatives to cash? What more is needed? Shouldn’t it be enough that consumers are able to choose freely what means of payment they want to use? Well, no – always keep in mind that such liberties are only provisionally granted by the State.
Dirty, dangerous and “terribly analog” – don’t touch!
Here is another little remark craftily woven into the narrative by Bloomberg’s editors: up until recently, defenders of cash have inter alia always pointed to the fact that poor (and often “unbanked”) citizens simply need cash and would be at a grave disadvantage without it. Not so, says Bloomberg:
“Much depends on the details, of course. But this is a welcome trend. In theory, digital legal tender could combine the inventiveness of private virtual currencies with the stability of a government mint.
Most obviously, such a system would make moving money easier. Properly designed, a digital fiat currency could move seamlessly across otherwise incompatible payment networks, making transactions faster and cheaper. It would be of particular use to the poor, who could pay bills or accept payments online without need of a bank account, or make remittances without getting gouged.”
(emphasis added)
We would note that making “transactions cheaper and faster” is already technically feasible and in fact, they already are very cheap and fast, so this is clearly a pseudo-argument. The question remains though: why would anyone need the clutches of government in this digital pie? And what does any of this have to do with the alleged need to abolish cash?
The editorial now comes to the core of the issue – the real reasons behind the drive to ban cash. Once again readers are told that forcibly taking away the choice of using cash from the citizenry will have nothing but advantages!
“For governments and their taxpayers, potential advantages abound. Issuing digital currency would be cheaper than printing bills and minting coins. It could improve statistical indicators, such as inflation and gross domestic product. Traceable transactions could help inhibit terrorist financing, money laundering, fraud, tax evasion and corruption.”
(emphasis added)
The utterly negligible cost of printing currency should be the least concern on the minds of taxpayers. Meanwhile, macroeconomic statistics are collected for two reasons only: to enable more government meddling in the economy and to make the results of this meddling look better than they are. Apart from the meddlers, any potential improvement of such statistics is at best of interest to economic historians.
The canard that traceable transactions will inhibit “terrorist financing, money laundering, fraud, tax evasion and corruption” is of course just a convenient pretext for the real goal: total control and the complete destruction of financial privacy. The only phrase still missing is “think of the children!”. We are quite sure that criminals will have little problem finding alternative media of exchange to use in their activities. Besides, we recall that the authorities have just recently accused a large bank of being one of the biggest drug money launderers on the planet – which they could not properly prosecute for fear of destabilizing the financial system!
This is followed up by real reason number two – namely the goal of making Soviet-style central economic planning easier:
“The most far-reaching effect might be on monetary policy. For much of the past decade, central banks in the rich world have been hampered by what economists call the zero lower bound, or the inability to impose significantly negative interest rates. Persistent low demand and high unemployment may sometimes require interest rates to be pushed below zero — but why keep money in a deposit whose value keeps shrinking when you can hold cash instead? With rates near zero, that conundrum has led policy makers to novel and unpredictable methods of stimulating the economy, such as large-scale bond-buying.
A digital legal tender could resolve this problem. Suppose the central bank charged the banks that deal with it a fee for accepting paper currency. In that way, it could set an exchange rate between electronic and paper money — and by raising the fee, it would cause paper money to depreciate against the electronic standard. This would eliminate the incentive to hold cash rather than digital money, allowing the central bank to push the interest rate below zero and thereby boost consumption and investment. It would be a big step toward doing without cash altogether.
(emphasis added)
Readers may recognize the idea of “depreciating the value of paper money” – famous monetary crank Silvio Gesell has originally come up with it. Once again readers are presented with articles of faith that Bloomberg’s editors seem to think require no further explanation or justification. For one thing there is the idea that the imposition of negative interest rates by central banks is perfectly normal and worthy of support – when in reality it is utter lunacy.
German money crank Silvio Gesell originally came up with the idea of depreciating cash automatically in order to force people to spend it on consumption. Keynes incidentally expressed admiration for Gesell and similar quacks. It seems to have escaped all of them that without saving and investment, there will actually be nothing to consume.
Photo via sozialoekonomie.info
Secondly, there is the associated notion that central planners have to “boost consumption” against the wishes of actors in the economy – as if one could actually consume oneself to prosperity! Putting the cart before the horse in this manner only works in the primitive Keynesian circular model of the economy. In the real world it will set us firmly on the road to ruin and impoverishment.
The form of investment artificially suppressed interest rates are primarily boosting is malinvestment, which is a waste of scarce resources. Zero or negative rates cannot “boost investment” at all. They will simply lead directly to capital consumption, without the detour of capital malinvestment. This is bound to become crystal clear once negative rates are imposed beyond the realm of central bank deposit facilities.
How to boost prosperity the Keynesian way.
Cartoon by: Jon Kudelka
Bloomberg then informs its readers that governments simply need to tell a few lies in order to make the rubes more eager to accept the planned cash-less regime. After listing a few of the concerns people “might” have (such as the small matter of total Orwellian state control), Bloomberg dispenses the following advice to counter such objections:
“Governments must be alert to these problems — because the key to getting people to adopt such a system is trust. A rule that a person’s transaction history could be accessed only with a court order, for instance, might alleviate privacy concerns. Harmonizing international regulations could encourage companies to keep experimenting. And an effective campaign to explain the new tender would be indispensable. If policy makers are wise and attend to all that, they just might convince the public of a surprising truth about cash: They’re better off without it.
(emphasis added)
Yes, those government promises will really be reliable this time! Honest injun! Once it says on a piece of paper that “access to your transaction history will be restricted” there will be no more privacy concerns!
Convincing people that they will actually be better off without cash seems an impossible task. As the comment section shows, Bloomberg has apparently vastly overestimated the gullibility and naivete of its readers. In any case, we would suggest that while people won’t be better off without cash, they will definitely be better off without “policymakers” – especially “wise” ones.
Conclusion
As you can see, they have been working on their propaganda a bit, even if the result is not much to write home about. The same hoary canards continue to be presented, but in a slightly different manner. The emphasis is now on a laughably clumsy attempt to convince people that it would be to their “advantage” if their choices were restricted by force, which makes one wonder what the authors have been thinking. Once cash is prohibited, you’ll be better off serf! Can’t you see that? It’s ridiculous.
Fortunately the serfs are indeed unable to see the light just yet. In fact, they are reacting the way people in the Soviet Union tended to react to Pravda editorials praising life in the planned economy under the dictatorship of the somewhat more equal comrades. The whole effort is simply too transparent and that is bound to remain its Achilles heel for a while yet.
Lastly, we would suggest that if cash were indeed banned, there would likely be unintended consequences (from the perspective of the planners that is). The market will simply fall back on alternatives. People may either begin to use currencies issued by countries that haven’t enacted a cash ban, or they may simply re-monetize gold and silver.
In the long run the proponents of statism are actually fighting a rear-guard battle. The anachronistic nation state and its accoutrements are on their way out, their supporters just haven’t realized it yet. Until statism finally disappears in the dustbin of history (we will probably not see it in our lifetime, but one can always hope), the beneficiaries of the statist model are unfortunately still apt to inflict a lot of damage.
Charts by: WSJ, Washington Post