Paper Gold

I re-read my piece on “The War On Cash” and realized it was, at best, confusing because it omitted an important point.

That is, that unlike bank deposits, physical cash cannot be subjected to negative interest rates – for the simple reason that it has no interest rate or ability to apply one. This, if the central bank wants to apply a Negative Interest Rate Policy, a.k.a NIRP, it must eliminate the ability for people to flee the banking system in favor of physical cash, the much maligned paper money.

Therefore, physical cash must be eliminated as much as possible by making it inconvenient to hold as a store of value, typically by withdrawing large bills from circulation, or by forcing transactions over a certain size to be conducted through electronic means, i.e. banks.

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