More and more institutions are trying to make it harder for you to move your money into cash.
Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.
Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. France and Italy have banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000. And on and on.
This is also at work in the US. Louisiana has made it illegal to purchase second hand goods using cash. This is just the beginning. The War on Cash will be spreading in the coming weeks.
The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.
This is true for banks around the world. European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money). If a significant percentage of their depositors took their money out of the bank, the bank would violate its capital limitations at best and implode at worse.
The US financial system isn’t any better. Indeed, the vast majority of it is in digital money. Actual currency is just a little over $1.36 trillion. Bank accounts are $10 trillion. Stocks are $20 trillion and Bonds are $38 trillion.
And at the top of the heap are the derivatives markets, which are over $220 TRILLION.
Notice that less than 1% of the “wealth” in this system is actual physical cash. Now imagine what would happen if investors decided to move their money out of the system and into physical cash.
This is precisely what imploded the money market system during the 2008 crisis.
If you think the banks aren’t terrified of what this market could do to them, consider that JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades. Mind you, this is the same bank that is now refusing to let clients store cash in safe deposit boxes.
This is just the beginning. As anyone can tell you, it’s all but impossible to move large amounts of money into cash in the US. Even the large banks will routinely ask you for 24 hours notice if you need $10,000 or more in cash. These are banks will TRLLLIONS of dollars worth of assets on their books.
This is just the beginning.
