The New Danger For Money And Banking:

Paper Versus Plastic


Paper Currency: The Age Of Extinction?

There are many people in the world that have some kind of phobia, and of course at one point or another we are all afraid of something.  Young children are afraid of the dark. This seems to be universal thing regardless of the country or culture.  Some adults are afraid of tight spaces, such an an elevator (a lift for you readers in the UK).  Other adults have a fear of flying, or of heights, or of spiders.  Me? I have a fear of plastic.  Not all plastic mind you, I am not that far gone, at least not yet anyway (although there are many people that would beg to differ, insisting I seek out psychiatric counseling as soon as possible).  What I am most fearful of, in terms of plastic that is, are the small plastic credit cards and debit cards that most of us currently have in our wallets.  As innocuous, convenient to use and portable as these cards may be, they actually hold the key to a new agenda we think may be heading our way.  In other words, a new danger for anyone concerned about their own wealth, money, assets and freedom.  Namely, I am speaking of an agenda to eliminate paper or cash altogether.

But first, let us examine some things you have been hearing about in the news lately regarding paper money itself (we will get to the plastic momentarily).  Up first are these rumblings to eliminate large denominations of paper currency notes.  In the United States we have former US Treasury Secretary, Mr. Lawrence Summers, who opined for the elimination of the US$100 Dollar note and we hear this gentleman now wants to get rid of the US$50 note as well.  In the UK, we have Mr. Peter Sands, former executive of Standard Chartered Bank, who authored a white paper presented at Harvard University titled: Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes.  And we also have Mr. Mario Draghi of the European Central Bank jumping on board this bandwagon as well, opining for doing away with the 500 Euro Note and conceivably some other denominations also.  All of these gentlemen want to make the case that by getting rid of currency notes in higher denominations that this somehow will solve the societal problems of criminal activity, money laundering and tax evasion.  Sounds good, but is it entirely true?  Is there another hidden agenda?

How many of you remember Chicago during the prohibition – depression era?  Mr. Alphonse Capone and his organization quickly comes to mind.  Here was a guy that was involved in criminality, was extremely well known publicly and ironically the only thing they could get him on was failing to pay income taxes on his earnings, tax evasion to be precise.  So, why is it no one called for the elimination of higher valued currency notes then?  Flash forward a few decades later and we had the Kray brothers in London during the 1960's.  Anyone in the UK arguing for getting rid of higher denominated pound notes in the 1970's?  Did you know that there used to be US currency notes in circulation in denominations of US$500, US$1,000 and US$10,000?  These notes were still around in the 1970's and although not that common or plentiful, they were there. 

I distinctly remember as a young boy going grocery shopping with my mother and watching her buy food for the house at the supermarket for about US$80.  Then we had the period of double digit inflation and I remember the grocery shopping bill started to go up, US$100 then US$120 and so on (by the way, Mr. John Williams of Shadowstats calculates the true rate of inflation today in 2016 in US Dollars to be about 10 percent, and rent inflation is now running at about 8 percent in cities such as New York).  The US Department of Agriculture via their 2014 food cost report claims a 2 person household in the US spends about US$700 per month on grocery shopping.  But the point here is not to argue about higher food bills for the average consumer.  Rather, the main point is to ask the question: Is is really true that the average citizen has no use in his or her monthly personal commerce for a US$100 denominated note, or a 100 pound note in the UK, or any of the higher denominated Euro notes?  Is it honestly the case that only criminals use higher denominated notes or even cash for that matter?

Interestingly enough, even though the use of plastic cards for payment has becoming increasingly more popular over the years, one statistic claims that 80% of all transactions in Germany are still conducted in cash whereas in the US, cash use is below 50%.  Getting back to the Germans, polling results indicate that only one third claim they had a credit card back in 2011 and in 2013 supposedly only 18 percent of purchases in Germany involved use of plastic.  In contrast, consumer purchases involving plastic accounted for 50% in France and 60% in the UK.  So, on the whole it would seem the Germans dislike plastic as well (must be in my DNA).  Maybe it is the case that Mario Draghi and Mr. Peter Sands wish to conclude that all Germans are criminals because they prefer cash?  We do not know, but that is basically what they said – no?  Only criminals and tax evaders use cash. That is the argument or premise.

The Real Agenda – Eliminating ALL Cash

Mr. Sean Farrell, wrote an article appearing in the business section of the Guardian Newspaper on February 8, 2016.  In the article he quotes Mr. Sands as saying: High-denomination notes are arguably an anachronism in a modern economy given the availability and effectiveness of electronic payment alternatives. They play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy.  He goes on to EXPOSE the real agenda by writing: Sands said there was a strong case for scrapping notes worth $50 or more, and that there was even an argument for eliminating notes below that threshold. But governments should start by looking at dropping the highest value notes. 

Yes of course, get rid of it all.  Start off with the higher valued notes first to ease the public into the idea (and use the moral argument one is a crime crusader and all good citizens should want this) and then eventually get rid of it all.  Sure why not?  But it somewhat reminds me of the American issue involving personal or private gun ownership.  If the government outlaws gun ownership completely for private citizens, the only people (or organizations) with the guns will be the criminals and the government, which are often enough one and the same.  Likewise, if individual citizens have no way to protect themselves financially (by being allowed to hold cash privately outside of the banking system), then they have no other options or safeguards for themselves.  Is that the real or intended goal? 

So what can be say about those multicolored plastic credit and debit cards with the hologram credit company logo on them?  Yes, there are very convenient to use.  Yes, they can be in some cases safer to use than cash (if you lost cash you are out of luck, but if you lost the card you can report it lost or stolen, cancel it and get another one).  And technology has advanced to the point whereby applications can be used on a mobile phone to make digital or electronic payments directly from the phone utilizing an existing credit balance, just as one would with a bank debit card.  So, the ease of use aspect certainly is quite apparent.

The issuance of plastic has become so pervasive in the United States that one new debit card is issued in the U.S. every five seconds.  According to some recent statistics, 80 percent of consumer spending in the US is cashless and 100 percent of people between the ages of 18 and 24 report using their debit cards for every day purchases.  For larger purchases such as travel or furniture 14 percent pay with cash whereas 47 percent use a debit card and 39 percent use a credit card.  In the UK, 91 percent of adults have a debit card and 60 percent of the entire UK population has a credit card. About 75 percent of all retail purchases in the UK are done with a debit or credit card and new so called no contact forms of payment has increased by over 300 percent.  And on a global scale, the credit card company Master Card compiled a report in 2013 whereby they claim that 66 percent of all world wide spending is done without cash.  As of statistics for 2015, MasterCard reports 532 million of cards with their brand issued world wide whereas Visa reports over 1 Billion cards issued with the Visa logo globally.  Cashless spending is reported to be highest in Canada, France and Belgium with the percentages of debit or credit card use over 90 percent (as compared to 80 percent in the US).  But is plastic really always safer to use?

As of 2014 statistics, the United States had one of the highest levels of debit card fraud worldwide (among the developed nations) and almost 20 percent of Americans reported or experienced fraud within the last 5 years.  The nations with higher debit card fraud were China (30 percent), India (23 percent) and Mexico (20 percent).  So, the one problem with technology is that it cuts both ways.  While it makes it easier for consumers to utilize a payment medium which has some advantages over the use of cash, it also makes it easier for thieves and criminals to do damage anonymously and digitally or electronically without the victim being the wiser until after the fact.  And it does not just stop there.  Looking at this issue on a broader scale, in terms of personal liberty and personal privacy as the main focus, having all of your personal information out there, including your payment capabilities, provides not only the criminals to do you harm, but the government as well.  Or do you think the government is always competent, staffed by bureaucrats of various sorts that never make mistakes or are always honest and ethical in the execution of their duties.  I am reminded of the issue not too long ago involving the US Internal Revenue Service targeting the so-called Tea Party movement, but I digress.  

We have written previously about the so-called Panama Papers situation and some people would interpret our comments as a defense or excuse for illegal activity.  Likewise, considering these arguments regarding the use of cash as a medium for exchange encourage or help facilitate criminal activity, there will be those people that want to argue our point of view is about defending criminality.  Not so, and this is not our agenda.  Rather, our concern is and always has been for the freedom, privacy and liberty of the individual.  Criminals have existed for as long as mankind has been roaming the planet, and they have existed despite or regardless of the types of governments and mediums of exchange that have been used.  The benefit and danger today is that modern technologies do indeed allow for faster and better ways to conduct business and our own personal affairs as well.  BUT, it also allows for LESS privacy and thus LESS security also when you consider how exposed you really are and how much of your private information and payment capabilities are digital (and in the hands of someone other than yourself).  When all of your personal information and finances are somewhere in a database, be it for private or for government use, for those that might have a negative agenda of some kind towards you personally, the implications are enormous.  And if they take away the last vestiges of privacy, be it cash for commerce or anything else, then your freedom is truly gone.  Governments and their respective academic or economist shills wish to inform you that they want to do all these things for your own protection.  Have they and can they really protect each and every one of you simply because they taken away your freedoms, your liberty and your ability to maintain some degree of privacy with your personal affairs?

Interestingly enough and in contrast, there are a number of emerging or developing nations whereby this new paradigm of cash elimination and other central bank shenanigans are not even up for discussion because they cannot be done, politically or otherwise.  For example, do you know what one of the biggest challenges has been for the banks in the Dominican Republic over the last few years?  Convincing employees of private companies to sign up for direct deposit.  Many Dominicans still want the company pay check on pay day and they want to wait in line at the bank and exchange the pay check for cash in their hands from the bank teller.  In short, many still do not trust the technology or the government for that matter.  One might think such persons to be ignorant and unsophisticated, but you know what?  It is because of these so-called unsophisticated individuals that these kinds of policies cannot be implemented.  Mistrust, ignorance and even poverty (most poor people and the working class function with cash and do not have bank accounts because they cannot come up with the minimum opening account balance requirement) are bulwarks and positive attributes when it comes to protections of personal liberty in this case.  It sounds odd and ironic, but those nations with the largest populations of the unsophisticated and the working poor actually are going to be the safest places going forward to do your banking and have the ability to own cash (the recent hacks involving SWIFT and the Bangladesh Central Bank aside – or is this another argument about technology that proves our point?).       

Make no mistake about it.  All of this has nothing to do with illegal activity, chasing drug dealers, the economy or global warming.  It does however have everything to do with centralized economic and political control.  Stated another way, this is in reality a conflict or argument about central planning and all encompassing political control versus economic and political liberty.  So far we have now had 8 years of government fiscal or economic black magic in Europe, North America and Japan (and in Japan's case much longer than 8 years).  Various kinds of economic activities and market manipulations supposedly done to assuage an economic crisis that in part came about because government regulators did not do their job in the first place.  Now in 2016, are we any better off for it?  And the latest bit of government directed economic engineering involves some new ideas that have no economic benefit to the individual or the economy, but rather is a stealth form of bail in for the banking industry (I am speaking of negative interest).  So, just be aware, and decide for yourself under what kind of political and economic situation you prefer.  And also realize despite arguments and desire to the contrary, not all nations are going to be on board with the so-called new world order which we would opine is more accurately described as disorder.  More distinctly, think very hard about the issue of paper versus plastic because it involves much more than what you might think.  Oh, and paper is better than plastic for the environment :-)

John Schroder is the author of this article and his firm, Ascot Advisory Services, has been assisting clients for 17 years in The Dominican Republic with residency applications, citizenship applications, banking and investment accounts, and other legal services (real estate contracts and title transfer, company formation services)


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