Sunday, 1 January 2017

War on Cash: Government floats AU$100 note removal


http://www.news.com.au/finance/economy/australian-economy/government-floats-100-note-removal/news-story/042220701a8310c39a1a87da4e20de35
http://www.afr.com/news/policy/tax/crackdown-on-cash-economy-targets-100-bills-and-billions-for-budget-20161213-gta77s
https://www.theguardian.com/commentisfree/2016/dec/15/a-crackdown-on-the-cash-economy-is-an-attack-on-the-poor-and-a-reward-for-banks
Why would governments want to limit or even eliminate the use of physical cash and move to digital currency?:
  • Physical cash has the potential to evade taxes through the use of the black economy.
  • Criminal activity use of physical cash is anonymous hence difficult for law enforcement to trace. 
  • Governments and banks can have access to all of citizens transactions, yet this is a huge concern for our privacy. A cashless society removes anonymity of using cash in private transactions, such as gifts, small transfers.
  • If we move from physical cash to digital currency then physical cash in the bank cannot be withdrawn during a financial emergency. A bank run is worst nightmare for a bank with fractional reserve banking during a financial crisis. Central banks, not surprisingly, would therefore like to take away the ability to hold cash outside the banking system, this would ensure that bank runs would be limited.
  • Potential bail-ins during a financial crisis.  Bail-in is the taking of depositors’ cash to bail out banks that became insolvent through the actions of the banks’ management, not the actions of depositors. If citizens are forced to move from cash to digital currency that is held in banks then much easier to enforce controls and steal the depositors money to support the banking system. Since the government enforces the taking, it is officially sanctioned theft, yet theft nonetheless.
  • Potential negative interest rates imposed on digital currency would devalue savings and force people to spend their money or speculate to generate income. As long as people have access to cash, they may be able to avoid negative interest rates, limiting the scope for central banks to cut interest rates much further.
  • Potentially higher bank fees as consumers no longer have choice to store their money as physical cash. If you have cash you would be forced to pay bank fees....Storing physical cash at home under mattress or in a safe is no longer a viable option.
  • Digital currency represent a significant, and ever expanding in scope and size threat of cyber attacks and cyber crime. 

Threat of negative interest rates:
negative_interest_rates

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