As already described in the last edition, the cash situation in Europe is coming to a head. France is toughening the rules on cash transactions as of summer and also Sweden and Greece are getting serious: cash payments will be limited to EUR 70 (i.e. USD 79).
Alarm bells sound as the ECB announces a conference on cash in London. Both the event‘s title „Solution in case of emergency“ as well as the speaker and participants list bode ill. Representatives from the Fed, the Swiss and Danish central banks as well as other Eurozone regulators will hang on the lips of such infamous cash adversaries as Kenneth Rogoff (Harvard) and Willem Buiter (Citygroup). Citizens will have to suffer should these fantasies come true.
A while ago the fight against terror and drugs served as bogeyman, now officials are getting closer to the truth. Mainstream media such as the renowned Neue Zürcher Zeitung (NZZ) cite fears of bank runs as the main driver for the current intensification of the cash ban debate.
According to NZZ, a negative interest rate can only be effective from 5 per cent upwards. This of course would drive people to withdraw massive amounts of cash from their accounts which can only be forestalled by a ban. So it’s official now: the nasty citizens are not the reason for this “regrettable but necessary measure“. Rather, it is a direct result of previous interventions.
Et tu Helvetiae!
It is no surprise that the NZZ should find itself at the forefront of the debate, since the bizarre blossoms of the interventionist policies with regard to the Swiss Franc exchange rate can be clearly seen in Switzerland. That negative interest rates drive people to hoard cash is obvious for everyone. In the meantime, however, even institutional investors such as pension funds attempt to evade penalty rates by storing cash in secure storage once reserved for art and precious metals.
„We receive many requests from Swiss institutional investors. Mostly pension funds and insurers are very interested in storing cash.“ According to Ludwig Karl from Swiss Gold, this is a profitable proposition: „The costs for storing large amounts of cash run to about a third of the negative interest rate“, he told NZZ. Just imagine the James Bond-like scene of huge stacks of cash deep under Swiss soil. And still the lords over our money are pretending all is well.
There are alternatives
However, especially in central Europe it should prove much harder to enforce a cash ban than governments envisage. Well-informed individuals have easy access to real money – STILL! A ban on cash without a parallel ban on real money, that is, gold, would be doomed to fail. And there is one more thing making life hard for interventionists. Many agglomerations in the Eurozone – such as Vienna, Munich, Nuremberg, Berlin – are dangerously close to the Euro’s borders.
Local currencies such as the Hungarian Forint, the Czech Crown and the Polish Zloty could easily help out as ersatz cash. Especially the citizen of Vienna and Berlin are still mentally close to these countries, after all this is where many of them originally hail from. After a few weeks there would be enough cash for a fairly normal run of life. This would not be a first in Europe’s turbulent history.
Negative interest rates, cash ban, gold ban, private cash hoarding, cash hoards under Swiss soil – these are all concepts we would have considered figments of a sci-fi writer’s imagination not long ago. Come what may, it will not be easy: neither for the interventionists and control freaks trying to keep a lid on the consequences of their own doings, nor for the people trying to lead a normal economic life without massive restrictions.
A Europe-wide crisis – brought about by a misconstrued artificial currency – seems inevitable and will cause serious setbacks to our quality of life. Too bad, that even Switzerland, former home of self-determination and real democracy, will not be spared.
Thomas Bachheimer – President the Gold Standard Institute Europe