Governments and banks around the world are waging a long-term effort to wipe out cash – the folding kind that goes in your wallet.
South Korea aims to eliminate paper money entirely by the year 2020. Sweden has started removing ATMs from rural areas. Norway’s largest bank proposed a ban on cash in 2016. In the US, there is movement to abolish the $50 and $100 bills.
And remember in Greece when the Greeks were lined up at ATM machines to withdraw their daily ration of 60 euros per day (that’s about $70 US dollars at today’s exchange rate)? Many banks ran out of physical currency and shut down their machines.
So, does the voice in your head wonder, “Could that happen here?” Well, it should, because people have far more money in theory than they can get their hands on. Think about it for a minute:
How Much Cash Do You Have?
You have net worth, defined as assets (like your house or investments) minus liabilities (such as your mortgage or auto loan). You have money. How much of that can you convert to cash within a short period? Are we talking digital cash or currency, and how feasible is spending physical currency?
Most of us carry very little currency, relying on credit and debit cards. We rarely write checks, paying bills on line. We largely are a cashless society.
Estimates indicate that the amount of U.S. currency in circulation, while fluctuating, is about $1.3 trillion, roughly 11% of the total U.S. money supply.
And what if I told you that between half and two-thirds of the total value of U.S. currency is held outside of our borders? The lack of cash is no accident, and governments like it that way.
The Battles Against Cash
J.P. Morgan Chase no longer accepts cash from customers making mortgage, auto finance or credit card payments. The bank now prohibits the storage of cash or precious metals bullion in their safe deposit boxes.
In 2010, there were about 280 billion cashless transactions. That number now approaches 500 billion. And you know there are only about 6 billion of us in the world, right?
Regulators prohibit me, as a financial planner and investment representative, from accepting cash in payment for securities purchases. Many custodians will not accept third-party checks.
Tracking Terrorists and Criminals
Congress passed the Bank Secrecy Act of 1970 ostensibly to assist U.S. government agencies in detecting and preventing money laundering. To governments around the world, removing high denominations of bills from circulation makes it harder for terrorist, drug dealers and other criminals.
In fact, Australia, Singapore, Venezuela, the U.S., and the European Central Bank have all eliminated (or have proposed to eliminate) high denomination notes. And it’s estimated that criminals move over $2 trillion per year around the world.
But two things should jump out at you: first, cash is still used for 85% of all transactions worldwide. And second, if the government can follow the money trails of criminals, tax evaders and terrorists, you can also be tracked. In our digital age, your privacy is gone.
Cash Sniffing Dogs?
When you travel, there is no limit to the money that you can take out or bring into the U.S. However, travelers must file a declaration form if they have $10,000 or more in currency or negotiable monetary instruments. If a group of travelers or a family has $10,000 or more, they cannot divvy up the currency to avoid the declaration. Can those dogs in the customs area smell money?
Inflation – The Ultimate Cash Killer
At one time, the U.S. Treasury issued $100,000 bills (which banks used to clear money), as well as $1,000 and $500 denominations. Then the government phased these bills out, and by 1969 they no longer were in circulation. You still can secure $100 bills, and older folks remember when that was big money. People were impressed when you pulled out one of these notes, bearing Benjamin Franklin’s picture.
But that $100 bill you stashed away in 1969 now has the purchasing power of $14.66. That’s another example of the war on cash, something to keep in mind as you prepare for retirement.
Given ongoing inflation, however low, how much will your cash buy in 20 years? It takes $152 today to buy what $100 purchased in 1997.
Could our government do a Greek job on us? Makes you wonder. Maybe a little mad money in hand is not such an outrageous idea.