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Business/Finance See other Business/Finance Articles Title: No More Money No More Money Boris Schlossberg | Wednesday, September 7, 2016 at 4:30 pm I hate cash. I hate coins, bills, writing checks — all of it. I even hate using my debit card with its tedious chip insert, PIN input, etc. If it were up to me, I would pay everyone by Facebook, which now allows you to transfer money seamlessly and instantly from your account to anyone you can message — all for free. To me, no cash means freedom. I can transact anytime, anywhere and have all those digital records nicely summed up for me at the day’s end. But then again, I am a child of the Internet. And the notion of privacy has long been abandoned by me and most of my cohorts. I am very comfortable existing in the virtual world of bits and bytes, and I have no qualms about leaving records of my financial transactions for anyone to see. I understand that my view is far from universal. Many people, including many my own age and even those many years younger, value their privacy. They value the notion of anonymity and the freedom to transact without anyone knowing their buying habits. That’s why bitcoin is so popular as a concept, if not as a currency. To me, no cash means freedom. But this column isn’t about cultural morays, it’s about finance. And this topic took on an interesting twist last week when former Minneapolis Fed President Narayana Kocherlakota penned a column calling for the abolition of cash on policy grounds. Mr. Kocherlakota’s point was that as long as we have cash, central bankers will never succeed in their attempts at quantitative easing. Mr. Kocherlakota noted that in order for QE to truly be effective, central bankers need the freedom to take rates deep into negative territory. However, as long as there is cash, there will be a natural “zero bound” to their efforts that will frustrate all policymakers’ attempts to spur credit creation. His argument holds a great degree of logic. Indeed, one of the surprising aspects of the QE experiment is the counterintuitive result of hoarding rather than spending in countries where negative rates have been implemented. In Switzerland, more and more companies are taking out insurance policies to protect their cash hoards from theft or damage, according to Bloomberg. “Because of the low interest-rate level, we note increasing demand for insurance solutions for the storage of cash,” said Philipp Surholt at Zurich Insurance Group AG, among underwriters reporting a surge in such requests. “We’re seeing demand for coverage for sums ranging from 100 million to 500 million francs.” “The abolition of cash is unlikely to occur any time soon.” Of course, Mr. Kocherlakota’s argument – while intellectually elegant – would face a wave of political protest. Citizens would view a move to pure digital cash as the final appropriation of property by the state. Although in practice there is little difference between paper money and digital cash – both are simply symbolic stores of value – the physical nature of paper provides one last frontier of freedom for the individual. After all, if cash were digital, there would be nothing to prevent the government from emptying your bank account at a moment’s notice. (Yes, I have been binge-watching Homeland over the Labor Day weekend). That’s why, despite Mr. Kocherlakota’s best intentions, the abolition of cash is unlikely to occur anytime soon. And if it did, it would no doubt spur a massive demand for gold – that other store of value that is portable and anonymous. Which is why these days holding gold in your portfolio is not just a matter of investment, but a case of insurance as well. Happy trading, Boris Schlossberg Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: BTP Holdings (#0)
I choose cash whenever possible.
“The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable.” ~ H. L. Mencken
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