Raising interest rates? That's so last September. Instead mainstream economists are leaking new prognostications that signal the Fed is quickly adjusting their programs to instead focus on their next round of Quantitative Easing. However, one of the biggest factors holding back the central bank's plans for final annihilation of the dollar and the economy is the fact that after they failed to raise interest rates last month, the Fed's credibility is coming into extreme question. And should the global leader in monetary policy choose to shift gears and scare the markets with more money printing after years of lying on how much the economy was in recovery, it must first ensure that the American people won't rebel, and by this I mean take their consumer ball and go home.
Which brings us to an even more interesting trend that is taking place among mainstream financiers, and that is the elimination or banning of cash.
When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.
In a new piece, Citi's Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates.
Fundamentally, the ELB problem comes down to cash. According to Buiter, the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction?
Cash therefore gives people an easy and effective way of avoiding negative nominal rates.
Buiter's note suggests three ways to address this problem:
- Abolish currency.
- Tax currency.
- Remove the fixed exchange rate between currency and central bank reserves/deposits.
Yes, Buiter's solution to cash's ability to allow people to avoid negative deposit rates is to abolish cash altogether. (Note that he's far from being the first to float this idea. Ken Rogoff has given his endorsement to the idea as well, as have others.) - Bloomberg
But the problem today is, even banning cash is no longer a viable solution. If consumers and depositors have access to their money in some form or fashion, then transitioning that digital currency into a hard asset will negate the bank's purpose in eliminating cash altogether. So to accommodate this in a fully functional scheme, one other piece of the American system must be eliminated.
The reasons behind the concepts of banning cash and banning capital markets is due to the fact that people, both savers and consumers, don’t always participate in markets as central banks and governments desire them to. After 9/11, the very first thing that President George W. Bush asked Americans to do was to go out and keep spending, because it is usually during crises and traumatic events that people pull back from un-necessary spending and instead save their money in case the crisis remains active.
Since 2008, quantitative easing and zero interest rate policies were intended to allow consumers to borrow like there was no tomorrow, and to keep buying the goods the corporate world wanted them to. But as jobs, wages, and price inflation became real road blocks for Americans to follow these desired policies of the establishment, the banks are coming to feel that they may have no choice but to take decision making completely out of the hands of the people, and implement a completely fascist economy where not only is production controlled by the state, but what consumers can and may buy with the money they are allowed to earn is as well. - To the Death Media
That's right, the answer the central banks are moving towards is a fully functional form of Fascism, where not only are the means of production controlled by either corporations or the state, but what consumers and depositors are allowed to do with their money as is controlled by them as well.
Make no mistake, with the soon to be passage of TPP on the horizon, the handing over of the legal mechanisms of the economy are now fully in the hands of the banks and multi-national corporations. And since the regulators will now be working for these two private entities, it will only be a matter of time before all money earned, controlled, or saved in the hands of the populace will be relegated under the dominion of corporate powers, and anything tied to the dollar or globally accepted fiat currencies will be seen as chips from a casino, which are only good for playing on their tables and are otherwise worthless when taken outside the confines of their 'house'.