AdviceIQ

The War on Cash

Governments and banks are waging a long-term effort to wipe out cash, the folding kind that goes in your wallet.

The pictures startle: Greeks lined up at ATM machines this summer to withdraw their daily ration of 60 euros per day, about $68 U.S. at the exchange rate posted lately. Many banks ran out of physical currency and shut down their machines. 

Witnessing the dash for cash in Greece, did the voice in your head wonder, “Could that happen here?”

Brian Barrett writing in Wired magazine, “Greece’s Empty ATMs Show the Surprising Power of Cash—in 2015,” made a thought-provoking statement: “People are realizing that they have far more money in theory than they can get in hand.”

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. Barrett indicates 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 (technically called M2) of $11.9 trillion.

Says he: “The difference seems even more dramatic when you consider 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.

Writing in the July-August 2015 Mises Institute publication, The Austrian, “Why Government Hates Cash,” economics professor Joseph T. Salerno calls it “The War On Cash.” The war is wage with full support of commercial banks and governments.

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.

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. Every year I have to complete a course in anti-money laundering rules, and that is how anti-cash regulations are sold.

Congress passed the Bank Secrecy Act of 1970 ostensibly to assist U.S. government agencies in detecting and preventing money laundering. But of course, if the government can follow the money trails of criminals, tax evaders and terrorists, you, too, can be tracked. In our digital age, privacy is gone, by and large.

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?

On August 1, 2015, Italian customs officials stopped rapper Snoop Dogg for carrying too much undeclared cash, $422,000. Travelers within the European Union are required to declare 10,000 euros or more. News reports said that the authorities impounded half the cash under Italian anti-money laundering codes.

Even if he’s ignorant of this law, Snoop will get his money back minus a fine that magistrates set. Knowing how slow the wheels of justice turn in Italy, the entertainer has in effect made a long-term interest free loan to the Italian government. Que sera, sera.

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.

Professor Salerno points out that the $100 bill you stashed away in 1969 now has the purchasing power of $15.50. That’s another example of the war on cash, something to keep in mind if you potentially are a long liver preparing for retirement.

Given ongoing inflation, however low, how much will your cash cache buy in 20 years? It takes $161 today to buy what $100 purchased in 1994.

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.

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Lewis Walker, CFP, is president of Walker Capital Management, LCC in Peachtree Corners, Ga. Securities and certain advisory services offered through The Strategic Financial Alliance Inc. (SFA). Lewis Walker is a registered representative of The SFA, which is otherwise unaffiliated with Walker Capital Management. 770-441-2603. lewisw@theinvestmentcoach.com.

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