QUESTION:
Hi Marty,
if they eliminate cash – how would that affect 3rd world countries?
Wouldn’t that add a huge dose of salt on that part of the wounded world?
Also would we be back to Silver as the payment that the Tax man does not get?
Ala Hunt brothers who bought it when Gold was illegal to own?
best
D in Australia
ANSWER: I do not see how it will be possible to eliminate physical money, for it would require Third World economies to adopt modern technology. That doesn’t mean the major nations will not attempt such a scheme. Europe is looking at this because the banking system is infected with euro debt of member states as reserves lacking a single reserve status instrument. The failed structure of the euro has undermined the European banking system. The USA is not in that type of position. Europe sees eliminating cash as preventing a bank run, in addition to enhanced taxation.
I personally remain skeptical that such a cashless society will work, for unless the entire world moved in that direction, some black market will emerge to allow capital to escape even if they impose capital controls.
Keep in mind, however, that this could be the very fundamental behind the potential Phase Transition in the U.S. equity market. This will have nothing to do with earnings; it will have more to do with capital preservation. If Europe eliminate cash in a desperate move to prevent a banking collapse, smart European money will move to dollars for I seriously doubt the USA would eliminate cash given the wide use of dollars outside the USA and it is not being marketed to the general population on a major scale here just yet. So if Europe goes cashless, the dollar should rise sharply.
Denmark is proposing moving cashless bu 2016. Yet even they realize that they cannot eliminate all cash transactions. What about medical? If you do not have a bank account you just die?
At the end of such a move as trying to eliminate all cash, there will be calls for a global currency summit and revision. We simply have to go through the pain to reach any reform. Rather than fix the screwed up way governments run their fiscal management, it is we the people who must surrender more rights so they do not have to run things according to the principles of economic reality.
