Quickies: If You Shoot At The King...

     ...be sure you kill him:

     On Monday the European Central Bank President emphatically disclosed that he is strongly considering phasing out the 500 euro note.

     Yesterday, former US Treasury Secretary Larry Summers published an op-ed in the Washington Post about getting rid of the $100 bill.

     Prominent economists and banks have joined the refrain and called for an end to cash in recent months.

     The reasoning is almost always the same: cash is something that only criminals, terrorists, and tax cheats use.

     In his op-ed, Summers refers to a new Harvard research paper entitled: “Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes”.

     That title pretty much sums up the conventional thinking. And the paper goes on to propose abolishing, among others, 500 euro and $100 bills.

     The authors claim that “without being able to use high denomination notes, those engaged in illicit activities – the ‘bad guys’ of our title – would face higher costs and greater risks of detection. Eliminating high denomination notes would disrupt their ‘business models’.”

     This is an exceedingly frightening prospect. Moreover, if the proponents had the brains God gave a flea, they’d be the most frightened of all:

• Cash – physical items that serve as a medium of exchange – is the medium of the “underground economy,” which supports roughly 30% of all economic activity in the First World and probably a larger fraction in the “developing countries.”
• Banknotes – here in the U.S., Federal Reserve Notes – are cash but not money. They’re merely currency: a proxy for real money, which must have value independent of any diktat by the State.
• The disappearance of banknotes, whether partial or complete, would accelerate the reinvention of real money: an item valued for its intrinsic properties, not merely because others are compelled to accept it.
• The point of eliminating cash isn’t to squelch “criminal activity,” but to eliminate financial privacy and to enable the imposition of negative interest rate policies, such as Japan and several European countries already suffer.
• The banking system, which is founded on fractional reserve policy, would collapse as people reinvented real money and sought alternatives to the banks.

     Nothing is quite as stupidly shortsighted as a greedy statist – and no policy is greedier or more statist than one that says “you can only have your money if, when, and as we say so.”

     Buy gold, silver, and copper while you can. Don’t wait for the axe to fall.