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September
08
2017

The Sneaky Way Big Banks Could Penalize Cash and Implement NIRP
Birch Gold Group

It’s no secret that the government and big banks don’t like cash. It’s cumbersome, it’s anonymous, and it’s hard to track.

Most conventional forms of digital transactions, on the other hand, can be tracked at all times. They are not anonymous. And it’s hard to avoid income taxes on digital dollar-based transactions.

The problem for governments to eliminate cash is that Americans will resist any effort to do so. They will also resist any effort to impose negative interest rates. So how can both of these goals be accomplished at the same time? One economist has a plan…

How to Eliminate Cash

Negative interest rates are already in effect in Europe. Here’s what that means: If you put money into a bank account, the bank will charge you interest on your deposits.

Naturally, a negative interest rate policy encourages savers to move their money out of banks and into cash. After all, if money in a bank account incurs an interest charge, and cash incurs no interest or fees, then smart people will move into cash as much as possible.

But banks and governments don’t like this. Cash is the enemy. So what can they do to force people to “choose” to keep their money in a negative interest-bearing bank account?

Economist and Carnegie Mellon University professor Marvin Goodfriend has an answer.

First of all, Goodfriend suggests abolishing paper money altogether. But, he says “the public is likely to resist the abolition of paper currency.” (Duh.)

Second of all, Goodfriend proposes limiting cash in larger denominations so it’s harder to carry and pay for things with cash.

But neither eliminating cash nor reducing large denomination bills is likely to gain much traction with the public, so Goodfriend has come up with a third option that some might describe as “evil” and possibly even “diabolical”…

Introducing an “Exchange Rate” for Cash

Goodfriend’s new idea for reducing the appeal of cash in a negative-interest rate environment is called “flexible market-determined deposit price of paper currency.”

That’s a confusing name, so here is a better explanation for what it actually means:

In plain English, this means the “money” in your bank account and the “money” in your purse or wallet would be like two different kinds of currency. There would be an exchange rate between the two, just as there is an exchange rate between dollars and euros.

The Fed could set this exchange rate at whatever level it wanted and would not be obligated to “defend” that rate at any particular level.

What this means is if you go to the bank and withdraw $1,000, the bank might only give you $980 in cash because of the “exchange rate” between your bank account and cash. Or if you deposit $1,000 in cash, the bank might only credit your bank account $980 because of the same “exchange rate” between your cash and the bank account balance.

In short, it’s a way to impose negative interest rates on physical cash.

Think of this as “interest on cash” because that’s exactly what it would be: a fee charged on anybody who dares to not submit to negative interest rates. Speaking of which…

“Exchange Rates” on Cash Would Pave the Way for NIRP

By imposing exchange rates on transactions between banks and cash, it would “level the playing field” and make negative interest rates possible.

If cash and bank balances incur similar costs, then why bother trying to switch between the two? Answer: You wouldn’t.

Now here’s the REALLY scary part…

Goodfriend is on President Trump’s short list to fill one of the open Federal Reserve board of governors seats.

While Goodfriend hasn’t been officially nominated yet, we already have a good idea of what he’ll try to do if he does end up getting one of the seats. (See analysis above.)

Now forgive me if I point out the obvious…

If banks impose negative interest rates on deposits… and newly created “exchange rates” impose a de facto fee on cash… then precious metals like gold and silver will suddenly become much more attractive, yes?

Don’t wait for the official proclamation that Goodfriend is the newest member of the Federal Reserve’s board of governors… if you haven’t already protected your savings, now is the time to do so.

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