Swedish banks charge you for the privilege of letting them have your money
Is this the wave of the future?:
Central bank policymakers had believed they had run out of room to support their respective economies, with their interest rates held close to the floor.
…Cut rates too deeply, [they thought], and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash…
[But as] central bank rates have turned negative, the rates offered on bank deposits have followed. Yet rather than stuffing cash under mattresses, people have left their money in the bank or spent it.
This is already happening in Sweden.
One of my first thoughts on reading that people are not pulling their money out of the banks was that perhaps the Swedes are just used to the habit of banking and don’t quite know where else to put their money. After all, a few hundred thousand kronor would be hard to stuff under a mattress, and perhaps anxiety-provoking. And it is true that Sweden already has a very high savings rate.
But wait; it actually may become worse. Some folks in charge have gotten the bright idea of giving people no alternative to banking it or investing it:
One solution is to give savers nowhere else to go. This idea was floated by the Bank of England’s chief economist in recent weeks, who made the case that sub-zero rates will be needed in the near future.
Andy Haldane, a member of the Monetary Policy Committee (MPC), the UK’s equivalent of the FOMC suggested that to achieve properly negative rates, the abolition of cash itself might be necessary.
Apparently, that’s one reason why the negative interest policy has been successful in Sweden, which is reported to already be practically cashless. If people aren’t used to cash anymore, they may be willing to pay to avoid using it. Of course, cash has the advantage of usually being untraceable, and people may come to value that aspect of it.
The planners aren’t going to boil that cash frog all at once, though. They’ll do it slowly, carefully:
No politician is likely to prohibit cash entirely, at least not until it has already all but disappeared from day to day life. Concerns about surveillance and the power of the state are likely to grow, as electronic money is completely traceable.
“Cash is useful for small transactions, and until it disappears naturally, I would be loathe to say let’s outlaw it,” says Sir Charles.
“Sir Charles” is Sir Charles Bean, former deputy governor at the Bank of England. One of the first steps will be to outlaw large-denomination notes, which are often used in drug transactions.
If you think of it, cash is a form of liberty, isn’t it?
Precious metals might be an option.
ZRIP has gone on for too long. Part of the reason for it is that it makes the federal budget deficit and debt somewhat manageable. If interest rates were normalized, then the interest on the federal debt would balloon.
ZRIP also pushes people into the high yield bond market. Carl Ichan thinks high yield bonds are over priced.
Cash is indeed a component of liberty.
The IRS tracks ALL cash payments of $10,000 or more. Nominally, because of possible money-laundering by drug dealers. Which gives the IRS license to track all us little people who use cash in order to minimize being tracked by digital money transfers.
And if one writes two $5000 checks for cash? To avoid IRS tracking? IRS has a name for that, and it has license to pounce on citizens for doing that.
A bunch of livestock slaves pretending they are free, while being used as batteries for the System.
And if one writes two $5000 checks for cash? To avoid IRS tracking? IRS has a name for that, and it has license to pounce on citizens for doing that.
Which is why crypto currencies like bit coin have become somewhat popular with underground networks.
I thought the big reason that cash will never disappear is that it makes bribing politicians easier…
And ZRIP is a great method to restore banks’ balance sheets and drive profits.
Pay depositors 1% and then charge credit card customers 10%. Great net interest margin.
Mr. Frank, 1:04 pm — “Precious metals might be an option.”
I’m old enough to remember when owning pure (or 99.999 percent pure or whatever) gold in bullion form was *illegal*.
The powers that be are easily resourceful enough to foreclose any and all reasonable options, once they are sufficiently determined to force the rabble to conform to their will.
It’s time for those folks to get out the tar, feathers, pitchforks, and ropes.
As for me, I already invest in precious metals–brass, lead, and copper!
Rusty
I hope people realize their local SWAT team is being fed information by counter terrorist teams in the US, like the FBI, and will have a SWAT team at your door if you do certain things or are reported to have hostages by your friendly Demoncrat neighbors.
Soon to be reviled, the cash hoarders.
Savers, vile!
…I had driven with Uncle and Aunt to church at Linz. The nearer we approached the more crowded became the usually deserted high road. All kinds of odd-looking individuals met us. One man wearing three hats, one set on top of the other, and at least two coats, excited our amusement … We met people drawing carts piled high with tinned foods of every description … A man and a woman were seated in a ditch by the side of the road and, without the least embarrassment, were changing their very ragged garments for quite new ones. ‘Hurry up’, the woman shouted to us, ‘or there’ll be nothing left!’ We did not understand this remark until we passed the first plundered shops.
Peaceful Linz looked as if it had been visited by an earthquake. Furniture smashed beyond recognition littered the pavements. But not only provision shops, inns, cafes, and drapers’ shops had been looted. Jewellers and watchmakers, too, had been unable to defend their wares. We saw that the inn at which Uncle and Aunt usually stopped after Mass was completely devastated. The old innkeeper caught sight of us and hurried up, almost in tears. He could not open his inn because all the furniture had been smashed and all the provisions stolen; and he strongly advised my uncle to drive home, since the ringleaders of the mob were inciting their followers to ransack the neighbourhood …
My uncle urged on the horse … In the lane which winds to my uncle’s farm … we noticed a troop of about 80 or 100 men and and women. They were bawling and singing and driving in their midst a cart harnessed with a brown horse. Uncle exclaimed: ‘They’re driving away Hansl and our cart!’ Without another word he leapt to the ground, but could only advance slowly with his stiff leg across the field towards the road where he meant to intercept the troop … 107
A lorry load of gendarmes turned up at that moment. A few shots were fired, and the mob dispersed into the hills, the horse and cart left behind.
In the cart I saw three slaughtered pigs. In addition, some pieces of slaughtered cows and pigs and a few dead hens were lying in an untidy heap. ‘My God, my God’, wailed my aunt. ‘What will things be like at home?’ … Two gendarmes accompanied us in order to ascertain the damage. ‘If only they didn’t always destroy everything’, said one of them. ‘As for their being hungry, that’s not surprising’. We were prepared for the worst. The gates of the farmyard were wide open. There was not a sign of the servant girls. A pig seriously injured but still living was lying in its own blood in the yard. The other pigs had run out into the road. The cow-shed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit up the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary the store of grain and fodder were in a state of wild confusion … a rag soaked with petrol was still smouldering to show what these beasts had intended. In the kitchen-living room of which my aunt was so proud not a thing had been left whole. Uncle estimates the damage at 100,000 peace kronen, and no insurance company will pay him any compensation for his loss.
The towns were starving. The countryside had had a bumper harvest, but there it remained because of the farmers’ steadfast refusal to take paper for it at any price. ….
When Money Dies: Germany and paper money after 1910
Cornhead at 1:51 has it right. The banksters are so over leveraged they need to drain the liffle folk for every penny possible without causing open rebellion. Never do business with the international bank cartel. There should be no sense of surprise when governments one day confiscate retirement funds and issue treasury notes in exchange.
Money is often confused // conflated with capital.
There is only one economic sector where money really is capital: Finance// Banking.
Everywhere else money is lubrication — is a trading medium — with a secondary role as a store of value through time.
To be a successful trading medium a currency has to be reasonably divisible, compact, and uniform // fungible. It must not decay in value beyond a certain point which would make mere holding of said currency expensive.
There have been many monies.
1) The actual first metallic money is not yet recognized — as it was so long ago — and no records survive — other than oblique hints from the Bible.
It was copper ‘buttons.’ These fulfilled all of the basic requirements. As Ozi the snowman showed, they really travelled well.
Historically copper was supplanted by silver and electrum. Yet even 2,000 years ago most Roman trade was settled in copper — not silver. Gold was strictly blood money, used for ransoms, bribes, escape funds, and major trade.
The gold bugs have got their narrative all fouled up. Gold was actually too rare to be used as money in ordinary trade. This is still true.
2) The Dutch invented warehouse wealth… particularly bonded warehouses. Paper drafts// receipts backed by commodities in such warehouses became uniform in denomination, and when counter-signed by three top tier merchant-bankers, they circulated just like today’s bank notes.
This liquidity machine powered the infamous Tulip Bulb Craze, the first hyper-bubble in asset prices the West ever knew.
3) When the commodity in bond was gold or silver, note acceptance was even better.
This is how fractional reserve banking got started. The great, and staggering wealth of the first bankers was entirely due to fraud.
At first, deposit receipts // bank notes were backed up 100% by bullion and specie. Then it was realized that as long as confidence was maintained, additional notes could be issued — right out of thin air — and issued as commercial loans — and loans to the sovereign.
THIS was the mechanism that financed the Renaissance. One did not need to dig such staggering amounts of metal out of the ground to lubricate trade.
This money engine morphed into sovereign controlled banks — the central banks. What makes them odd is that they don’t want illiquid assets in their portfolios whatsoever.
4) That role is filled by commercial bankers. They also create money out of thin air — when they issue loans of any kind. But most money is created by way of land and real estate mortgages. For money is destroyed when a loan is paid off. The long duration of mortgage debt makes it by far the primary source of modern money.
The bank notes in your wallet are but a trivial fraction of the money circulating in the system. Most money is recorded on paper ledgers// electronic ledgers. This has been true at least since the Polk era. (1845-1849)
Such money creation inflates the money supply. High inflation means that the commercial bankers are handing out loans willy-nilly.
5) When money is created by sovereign debt issuance, the mechanism is properly termed hyper-inflation.
It is sadly true that ignorant economists the world over conflate these two.
Both inflation and hyper-inflation can occur at any rate. They can also occur simultaneously, and usually do. The commercial bankers spew out loans right along with the deficit spending of the sovereign.
With the current deficits of our government, we’ve been hyper-inflating the currency for years on end. This shows up in the pricing of financial assets — Tulip Bulb pricing, revisited.
6) The death agonies of a fiat currency invariably follows its abuse by the sovereign. This is currently under way – – world wide.
It starts to run chronic deficits ( hyper-inflating the currency ) until it becomes addicted to deficits.
Like any junkie, history shows that sovereigns take the addiction all the way to the limit.
In the final stages commercial lending collapses. Money is no longer made by issuing loans of any kind.
Even the sovereign stops creating money — as it shifts over to mere bank note printing.
This has been under way for some time, even now, with Quantitative Easing. This euphemism obscures the fact that fellows that previously held US Treasury notes have been CASHED OUT. The debt has been monetized. It’s not sitting in wheelbarrows. It’s sitting upon electronic ledgers.
Popular ignorance of this situation is well nigh universal.
In a very, very, loopy, round about way, the Federal Reserve Bank is cancelling the governments debt — and replacing it with circulating money.
As history shows, gaming the public breaks down — into the icy waters below — with almost no notice.
Yellen’s blather about keeping interest rates flat — forever — means that she’s actively destroying the time value of the dollar.
7) Currency revulsion follows once the market apprehends that the sovereign will not defend the value of the currency.
This nexus, this flip, can not be predicted. It’s a mass psychological transition.
Barry and Janet are playing with matches atop an oil dump.
Cody Jarrett they’ll be.
At least initially, the safety of keeping your money in a bank will have some appeal. If it is known that large numbers of people have cash – or precious metals – at home, break-ins will increase. And you are not always home.
The problem, as folks have likely guessed, is that the ratcheting continues. They charge a little bit more for protecting your money. Break-ins increase and authorites get stricter on enforcing the laws on what you can do to protect it yourself. All quite slowly, and all for your own good.
Those who have been through periods of societal breakdown (as in Latin America at times) say that your best protection is a network of people you can trust. Trust will be the most valuable commodity.
What Has Government Done To Our Money by Rothbard advocates getting government out of the money business altogether.
He makes it simple for folks like me by starting with barter and working his way up.
The free market will create the most efficient form of money (probably gold, silver and other precious metals).
When money is again a commodity rather than a government promise, the inevitable political manipulations are removed to the benefit of every one except the politicians and their buddies.
Rothbard deals with the objections thoroughly.
But of course he cannot deal with the fact that there is no political advantage or prospect of getting government out of money, just the prospect of betterment for mankind.
G6loq – we forget rather quickly, don’t we? But then the estates of the privileged who commit these insanities are never the ones that are plundered – at first.
RobC Says:
September 29th, 2015 at 1:48 pm
I thought the big reason that cash will never disappear is that it makes bribing politicians easier…
No one does that anymore; they just donate to their PACs and Foundations.
blert Says:
September 29th, 2015 at 4:15 pm
excellent history lesson.
Tonawanda Says:
September 29th, 2015 at 4:53 pm
What Has Government Done To Our Money by Rothbard advocates getting government out of the money business altogether.
…
Look at Greece: barter and electronic pseudo-currencies rampant.
One thing that led to the unparalleled progress and prosperity of the West was an honest and dependable banking system.
Oh well, it was nice while it lasted.
Sovereign bond rates are at the lowest level in the history of bonds. Going back hundreds of years to old Dutch bonds.
“If you think of it, cash is a form of liberty, isn’t it?”
True and also that precious metals are a hedge against government paper. But ammunition (and the will to use it), widely dispersed amongst the citizenry is the ultimate currency of liberty.
Crypto currencies are more secure for trade than gold or precious metals. Gold or precious metals hoarding is to fight off inflation and fiat currencies.
For example, it doesn’t matter if you hoard 3 billion in British pounds. The Brits just print up more pounds and suddenly your 3 billion has been wealth redistributed without you noticing.
As for keeping stuff in banks, ever wonder why certain rich people and business keep their funds in Switzerland or off shore accounts?
Ever wonder why? And it’s not merely due to tax issues.
This is nothing more than tyranny–a power grab to control the people. I hope it’ll be seen as such.
Y: “Gold or precious metals hoarding is to fight off inflation and fiat currencies.”
Not hoarding; money = a one to one relationship between currency and the gold/precious metals. That is the common sense way to eliminate inflation and a lot of other government caused problems/disasters.
A piece of paper entitling me to an ounce of gold is a contract.
Who honors a contract is one of those ongoing things the free market sorts out. It is not the government.
Not hoarding; money = a one to one relationship between currency and the gold/precious metals. That is the common sense way to eliminate inflation and a lot of other government caused problems/disasters.
Are you talking about Libya’s so called future gold back currency?
The US hasn’t had a gold backed currency since FDr confiscated all of the personal owned gold. You’re not going to be able to redistribute that, without people grabbing half of it in transit.
A piece of paper entitling me to an ounce of gold is a contract.
That doesn’t mean anything. A promise by the banks that they have the gold on hand for you, isn’t real. It looks more secure than fiat currency, but it is just another form of fiat currency.
Only physically owning the gold would guarantee 1 to 1 conversion, but since that is impractical most people cannot do it. They don’t have the secured vaults to keep the precious metals safe, for one thing, and not everyone can use Switzerland to keep their stuff safe.