Thursday, May 21, 2015

The Continuing War on Cash

Peter Grant has more on the war on cash, specifically pointing out how little of the total money supply is actually cash. ($1.36 trillion in cash versus $220 trillion in derivatives trading). He quotes the following from Zero Hedge concerning the fear underlying the desire to restrict or control cash:
Put another way, actual physical money or cash (as in bills or coins you can hold in your hand) comprises less than 1% of the “money” in the financial system.

As far as the Central Banks are concerned, this is a good thing because if investors/depositors were ever to try and convert even a small portion of this “wealth” into actual physical bills, the system would implode (there simply is not enough actual cash).

. . .

In this scenario, when the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds ... When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.
He goes on to discuss keeping some cash at hand (i.e., not in a bank) and goods for trade or barter.

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