Your Cash Ain’t Nothin’ But Trash "Credit News 24"

These days some governments, academics, bankers, and tech innovators say cash is a relic. They say cash is destined for the trash bin.

A lot of people are frightened by the progress they’re making banning it, repackaging its bits into bytes, and even replacing it with cryptocurrencies that reside entirely in cyberspace.

If you’re stashing cash, you need to know what the arguments against it are all about and what’s going to replace it.

Here’s what you should do with your stash before it’s trash…

The War on Cash

It started years ago.

The United States once had $100,000, $10,000, $5,000 and $1,000 bills. The Treasury stopped printing these big denomination notes in 1946, and the Federal Reserve recalled the last of them in 1969.

Now, there’s talk about doing away with $100 bills.

The European Central Bank announced in May of last year that its 500-euro note would be gone by the end of 2018.

In a surprise announcement last November, India’s Prime Minister Narendra Modi said the country’s 1000-rupee banknotes (worth about $15.32) would cease being legal tender but could be redeemed at banks and post offices until December 30, 2016. Modi also did away with the country’s existing 500-rupee notes (worth $7.66), announcing they would also no longer be legal tender, but would eventually be replaced with new notes.

The problem with cash is it’s not traceable.

While governments say it’s a matter of national security, that free-flowing cash is feeding terrorist groups, financing the drug trade, that all kinds of illegal activities are cash-driven, and that cash can be counterfeited, the primary reason for the war on cash is taxation.

The reason Prime Minister Modi killed the 1000-rupee and 500-rupee notes is together they account for 86.4% of the value of all rupee bills in circulation. By forcing the population to exchange expiring notes for new notes, authorities can ask where the money came from, if a tax has been paid on it, and if depositors can prove it. If they can’t, the tax will be taken from it, and a fine totaling as much as 200% of the tax owed will be levied and taken.

The shadow cash economy is believed to be 20% of India’s entire GDP, and only around 20 million individuals and families, amounting to 1.6% of India’s population, paying any income tax (data as of 2013, the most recent available).

Breaking the back of corruption where bribes are paid in cash, and being able to collect income and transaction taxes could only be accomplished by attacking the old cash economy.

Soon, It’ll Be Time to Cash Out

Cash accounts for less than 1% of all legal private and business transactions in the U.S. The rest is conducted on plastic, by checks, and via electronic credits and debits, which is fine with the U.S. government, banks, and the Federal Reserve. They’re in control of all the payment, settlement, and transaction monitoring systems.

Still, that’s not enough.

As of April 2015, Chase Bank (a subsidiary of JPMorgan Chase and Co.) won’t accept cash payments on credit card bills, mortgages, equity lines, auto loans, and safe deposit boxes. Debtors have to deposit cash into an account to pay their obligations electronically or by check.

As far as safe deposit boxes, it’s not yet illegal yet to stash cash in them, but there are laws that make it illegal to take cash out of circulation.

The war on cash across Europe is heating up even faster than in the U.S.

France banned cash payment on any transactions valued at 1,000 euros or more, Spain’s maximum is 2500 euros, and Uruguay’s cutoff is now $5,000.

It’s the same story. Cash funds illegal activities, and terrorism and can’t be taxed if it can’t be traced.

Moving entirely to electronic transaction and payment platforms is the stated goal of some governments, some central banks, and some academics.

Besides the digital systems that have been in place for decades, a new threat to cash has taken root.

Cryptocurrencies are springing up almost everywhere.

As much as a threat to cash as they are, they’re an even bigger threat to governments and central banks who own and completely control money and credit systems used by hundreds of millions and billions of their citizens.

In due course, the experimentation with currency systems not owned or controlled by governments (or, in America’s case, by the Federal Reserve System), will be limited if not outlawed.

The technology on which they rely, blockchain and open source ledgers, however, are here to stay and could be adopted by central banks who could easily issue new currencies based on new technologies, but they’d own and control the technology and the cryptocurrency.

It makes sense, whether we like it or not. I don’t like it, but electronic payment and transaction platforms and cryptocurrencies effectively replace cash.

It’s happening already.

Sooner rather than later, we will all need to deposit our cash somewhere or buy hard assets, because one day your cash won’t be nothin’ but trash.

Courtesy Shah Gilani, Wall Street Insights & Indictments (More by Shah here)