Wednesday, November 16, 2016

War on Cash Intensifies: Citibank to Stop Accepting Cash at Some Branches

It's happening in Australia, will the US be next? What to do: Ditch your one hundred dollar bills. -RW

War on Cash Intensifies: Citibank to Stop Accepting Cash at Some Branches

By Simon Black

Less than a week after India’s surprise move to scrap its highest denomination cash notes, another front in the War on Cash has intensified down under in Australia.

Yesterday, banking giant UBS proposed that eliminating Australia’s $100 and $50 bills would be “good for the economy and good for the banks.”

(How convenient that a bank would propose something that’s good for banks!)

This isn’t the first time that the financial establishment has pushed for a cashless society in Australia (or anywhere else).

In September 2015, Australian bank Westpac published its “Cash Free Report”, suggesting that the country would become cashless by 2022.

In July 2016, Australian payments firm Tyro published an enormously self-serving blog post touting the benefits of a cashless society and saying, “it’s only a matter of time.”

Most notably, two days ago, Citibank (yes, THAT Citibank) announced that it was going cashless at some of its Australian branches.

The media and political establishments have chimed in as well.

In February of this year, the Sydney Morning Herald released a series of articles, some of which were written by officials from Australia’s Department of the Treasury, suggesting that eliminating cash will “save billions”, and that  “moving to a cashless society is the next step for the Australian dollar”.

This is how it works.

The government, media, banks, and even academia have formed a single, unified chorus to push this idea out to consumers that “cashless” is good for everyone.

And it’s happening across the planet, from Australia to India to Europe to North America.

They’re partially right.

Going cashless probably will save a lot of money; paper currency is costly to transport in large quantities due to the need for security.

It’s also accurate to suggest that going cashless will be “good for the banks.”

As UBS pointed out yesterday, “de-monetizing” Australia’s $50 and $100 bills would force anyone holding those notes to deposit them back in the banking system.

Bank deposits would rise as a result, and consequently, so would bank profits.

Governments would benefit from a cashless society because all savings would be in the banking system, and they have full regulatory control over the banks.

This means that your politicians would have more control over your savings and fewer obstacles to impose capital controls or engage in Civil Asset Forfeiture.

Even policy wonk academics would have a rare opportunity to take their lousy theories and PhD dissertations for a test drive.

Everyone benefits from a cashless society… except for you.

For individuals, cash still has plenty of important advantages.

Cash is one of the few remaining options for financial privacy that doesn’t create a permanent record of every purchase or transaction you make.

It’s also an easy way to reduce your exposure to risks in the broader financial system.

Think about it-- the banking system is full of institutions that never miss an opportunity to demonstrate they cannot be trusted with our money.

Hardly a month goes by without some major banking scandal; they’re caught colluding on exchange rates, manipulating interest rates, fraudulently establishing fake accounts without customer consent (and then charging us fees on top of that).

It’s disgraceful.

In addition, bank safety is far from certain.

In many banking systems across the world (especially in Europe right now), banks have precariously low levels of capital and are already suffering the effects of negative interest rates.

Even in the United States, banks routinely employ very clever accounting tricks to conceal their true financial condition.

There’s also the fact that, the moment you make a deposit at a bank, it’s no longer your money. It becomes the bank’s money.

And they can do with it as they please, whether it’s freezing you out of your account or making idiotic investments with minimal reserve requirements.

You have no say in the matter.

As a bank depositor, you’re nothing more than an unsecured creditor of a financial institution which may or may not allow you to withdraw your own savings.

If you don’t believe me, take a trip down to your bank and ask to withdraw $25,000. See how quickly they treat you like a criminal terrorist.

Bottom line, conventional banking is not risk-free. And holding cash is one way to reduce that risk.

Cash essentially eliminates the middleman between you and your savings… at least, the portion of your savings that can be easily exchanged for goods and services in the economy.

Cash is a pitiful store of value over the long-term. Precious metals and other real assets are much better alternatives.

But we still can’t walk into Starbucks and pay for a cup of coffee with a quarter-ounce silver coin.

So until that day comes, cash remains an asset that you’ll want to hold.

Just make sure you don’t go overboard. The War on Cash is very real. So if you have more than a couple of months worth of living expenses, you’re taking on unnecessary risk.

Also, keep the denominations low.

As the case with India shows, governments have no compunction about violating the public trust with immediate effect and without warning.

So if you’re in the US, don’t keep a mountain of $100 bills in your safe. Keep 10s, 20s, and 50s.

If you’re in Europe, definitely avoid the 500 and 200 euro notes, opt for 20s and 50s.

Simon Black is Founder of


  1. Pretty terrible line of reasoning Wenzel(and Black) on high denominational notes.

    Here is part of a comment from an article on the War on Cash as to why India's situation is not similar to the U.S.'s or Europe's for several reasons:

    "1) Interest Rates. The benchmark interest rate(repo) was slashed to 6.25% from 6.5%. This is a far cry from a negative nominal interest rate, which would greatly raise the opportunity cost of keeping deposits in banks. And as pointed out in the paper, Gresham’s “Law” as I stated with a currency exchanging at a premium is based on transaction costs rather than exchange rates. So, this is not even close to a real world experiment as some might point out.

    2) Dollar vs Rupee. While the Rupee is the main currency in India, it’s role is significantly different than the dollar in the U.S., or even the Euro in Europe. The dollar is the reserve currency of the world, giving it a special position in world markets as the strongest currency to use both in purchases and investment. This heavily influences the psychology of market participants and the desire to hold cash balances(with similar reasoning for the Euro being used in numerous countries in the Eurozone). In an economic crisis, it is likely that for a time, at least, the dollar will be seen as a safe investment due to this status, whereas it is being seen the Rupee does not have the same confidence of its holders. This would change obviously, if the monetary authorities in the U.S. decided to stimulate the economy with negative interest rates and/or injections of credit into the markets. But this is beside the point. The result we are beginning to witness in India cannot be compared with any level of accuracy to a situation I’ve described.

    3) Inflation. While inflation is considerable at around 4%, it has been steadily falling since 2013 when it was higher than 10%. For the dollar, inflation would have to be heading higher due to either a) inflation expectations and/or b) negative nominal rates. This would be combined with the elimination of the legal tender status of $100 notes.

    In summary, while the situation is similar in the fact of the Indian government eliminating the legal tender status of the two highest denominational bills, it cannot be what you’d call a “real world experiment” due to the factors I’ve stated above."

  2. So, wouldn't this just make a market for other means of exchanging wealth. Maybe eliminating cash would just push people to use silver and gold. If I wanted to do something outside of the system, that's what I'd do.