The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

[Chomsky]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

I think you mean 'litmus test'

[Jay]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

As a well armed liberal, I find myself in unusual company on the issue of cash for guns, but I think it remains a bastion of liberty in an increasingly Big Brother world.

Hah! I used to be an unarmed liberal, now I'm an armed sceptic.

[Fiat Currency]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

... In parallel, expect The Bullhorn to paint gold owners as people associated with criminal elements who, because they can no longer use large quantities of untraceable cash, use gold for illicit transactions. Once gold is associated with criminality, anyone with a serious business reputation will sell quickly to avoid association. The price will plunge. I recommend that everyone pay careful attention. 2010 is not 1933.

Agreed. I've been keeping a watchful eye for a while now. Back in November I had said here ...

... I read several articles where government officials were saying that "only drug dealers used cash now". Recently I've been hearing that "only terrorists hoard gold".

Question - If the USA went this route - do you think it would matter Globally? After all - gold is traded around the world 24x7 and there are billions of people in India, China, Russia etc. who I think might still buy it.

My wife now understands my new metallurgy hobby. I just made my first lighter and pen out of (almost) solid gold

[Jeff]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Maybe I'm getting paranoid, but I just had an odd experience. I'm used to wiring relatively large amounts (up to the low six figures in US$) within the US and abroad. It's never been a problem until yesterday, when a popup window on a very large US bank's online banking service informed me that the intrafamily, intrabank transfer I was making was no longer possible, as the new limit of US$20,000 per 24 hour day had been imposed. (I got a laugh from the added note that as a "Wealth Management" client, I could make a call to my private banker to arrange an "accomodation".

I guess I can understand the limits on cash (though it pisses me off mightily) but why in God's name restrict transfers within a bank between family members?

(Oh and thanbks for the tip, Eric. I bought much of my physical gold in the 90's on your advice, and under divorce court order can't sell for at least three months. Now you tell me to sell?!?)

[gnk]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

In our Internet era there is always the possibility of a leak of legislation in progress, but by the time of a leak it will be too late. It's interesting to note that the last time gold ownership was criminalized in the U.S. in the 1930s it occurred after most private owners had already complied with government requests to turn gold in for dollars. The law was more of a mopping up than a rounding up process. So, the development to watch for this time, the leading edge of the criminalization process if it were to happen again, is in our Internet age arguments from credible private gold owners who support a move to allow only central banks to be legal owners of gold. These editorials will precede any actual legislation, as a kind of lipnes test of the reaction of gold owners. In parallel, expect The Bullhorn to paint gold owners as people associated with criminal elements who, because they can no longer use large quantities of untraceable cash, use gold for illicit transactions. Once gold is associated with criminality, anyone with a serious business reputation will sell quickly to avoid association. The price will plunge. I recommend that everyone pay careful attention. 2010 is not 1933.

Should the US implement such a policy, it will backfire spectacularly. The rest of the world would benefit by snapping up gold at such low prices. Russia, India and China would be thanking the US Gov't for such desperate stupidity.

Keep in mind, the US Gov't taxes gold sales disproportionately higher than most industrialized countries. Whereas the rest of the world seems pro-gold, the US, hosting the world's reserve worthless IOU-based paper currency, is vocally against the "barbarous relic," and for good reason. Know the creature you're dealing with... and what it's motivations are. Many friends of mine in Europe are now saying that the most dangerous country in the world is now the US. Superpowers that attain such global influence don't quietly fade away.

And what of the average American? I have regrettably lost faith in the majority of my countrymen. Hook, line and sinker, they'll fall for it... yup, gold is for "druglords" like Noriega was in Panama... another laughable war... just like in the days running up to the Iraq War the average American can be easily tricked. Numerous times I was called "unpatriotic" by my fellow Americans for questioning the war. I was against "democracy" and pro "tyrant."

I live in Europe now... with my gold.

[doom&gloom]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Should the US implement such a policy, it will backfire spectacularly. The rest of the world would benefit by snapping up gold at such low prices. Russia, India and China would be thanking the US Gov't for such desperate stupidity.

agreed, but the gold would not be sold to anyone else but the USGov or ferried into Canada for safe-keeping.

Keep in mind, the US Gov't taxes gold sales disproportionately higher than most industrialized countries. Whereas the rest of the world seems pro-gold, the US, hosting the world's reserve worthless IOU-based paper currency, is vocally against the "barbarous relic," and for good reason. Know the creature you're dealing with... and what it's motivations are. Many friends of mine in Europe are now saying that the most dangerous country in the world is now the US. Superpowers that attain such global influence don't quietly fade away.

gold taxes are meaningless IMHO when you can sell the stuff on Craigslist for cash and no one the wiser. Many may not be that smart, but plenty will want (and continue) to own gold against a dollar that is sinking like a stone on the world stage. Gold will be the "last flight out" money for many to leave via boat, private plane, whatever when currency controls get put into effect.

And what of the average American? I have regrettably lost faith in the majority of my countrymen. Hook, line and sinker, they'll fall for it... yup, gold is for "druglords" like Noriega was in Panama... another laughable war... just like in the days running up to the Iraq War the average American can be easily tricked. Numerous times I was called "unpatriotic" by my fellow Americans for questioning the war. I was against "democracy" and pro "tyrant."

I live in Europe now... with my gold.

South America is cheaper you know, and Buenos Aires is just like a nice large EU city!

[Slimprofits]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Visa Europe sponsors... Dr Friedrich Schneider on the €2 trillion Shadow Economy in Europe

Direct download (.pdf)

[dbarberic]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

In our Internet era there is always the possibility of a leak of legislation in progress, but by the time of a leak it will be too late. It's interesting to note that the last time gold ownership was criminalized in the U.S. in the 1930s it occurred after most private owners had already complied with government requests to turn gold in for dollars. The law was more of a mopping up than a rounding up process. So, the development to watch for this time, the leading edge of the criminalization process if it were to happen again, is in our Internet age arguments from credible private gold owners who support a move to allow only central banks to be legal owners of gold. These editorials will precede any actual legislation, as a kind of lipnes test of the reaction of gold owners. In parallel, expect The Bullhorn to paint gold owners as people associated with criminal elements who, because they can no longer use large quantities of untraceable cash, use gold for illicit transactions. Once gold is associated with criminality, anyone with a serious business reputation will sell quickly to avoid association. The price will plunge. I recommend that everyone pay careful attention. 2010 is not 1933.

I personally feel that there is a significant difference in gold holders in 1933 versus today. In 1933 gold coins were in broad circulation as currency among general public. A large percentage of the pubic held and touched gold used as currency in daily commerce. Many kept a coin or two saved at home for a rainy day. Gold coins in broad circulation held by the general public represented a significant pot of wealth that the government needed to devalue in an attempt to jump start the economy.
Today, the primary holders of gold are sophisticated high-income/high-wealth individuals, banks, and investment funds (yes there may be a few other people that have a coin or two, but it’s probably does not represent any significant amount of wealth). The general public has never touched a gold coin or used it as a substitute for Federal Reserve notes. Today there is no real reason to confiscate gold from the general public, because the coinage in significant volume is simply not there. Politically, I’m not sure the government will go after today’s gold holders because they represent the demographic and financial power that provides lobbyists and campaign funding. Lastly, outright targeting of gold is a massive flashing red light to foreign countries (both allies and enemies) that the US is in a dire economic position.
My gut says that the government will target today’s biggest pot of wealth first (pensions, IRAs, and 401Ks) before they target gold. It will be done stealthily by requiring minimum contributions to retirement accounts and forcing purchases of worthless treasury notes and/or annuity products.
I am assuming however that a collapse occurs in a controlled manner over a number of years. If it’s an overnight collapse and you wake up the next morning with gold at $5K, dollar below 50, and oil at $250 then all bets are off. The government is going to do anything and everything to restore public and financial order.

[chr5648]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Visa Europe sponsors... Dr Friedrich Schneider on the €2 trillion Shadow Economy in Europe

Direct download (.pdf)

Obviously this paper has one point of view from VISA as the sponsors. The problems from tax collection maybe true but, many times it is the poor that are taxed, if you've ever been to eastern europe, you'd see this shadow market alot.

I was wondering if anyone had information on any studies done with a situation where money is replaced by another object and the affects of that. Such as, in casinos you are given chips in the belief that you will spend more "money chips' rather than actual money. It may be true with these credit and debit cards, where many times humans psychologically perceive cash differently than the plastic credit/debit card/touch pay/check. Does anyone have any studies on this phenomenon?

[Fiat Currency]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

I thought I'd add to this thread ...

Will Gold Be Currency Or Will Cash Be Illegal?

By Daniel R. Amerman, CFA

Overview

Will future gold profits be enjoyed on a tax-free basis because gold has become the new currency and cash isn't taxed when it is spent? Or will governments around the world use the pretext of financial emergency to continue to take ever greater control of their citizens' private lives and make cash itself illegal, requiring all financial transactions to be in electronic form with a "cc" to the government?

Last year I wrote an article titled Hidden Gold Taxes: The Secret Weapon Of Bankrupt Governments about the "elephant in the living room" that most precious metals investors are unaware of. In simple, step by step detail, I showed how the government uses taxes on false inflation "profits" to not only effectively confiscate profits from gold investors, but effectively create an asset tax. So that the higher the rate of inflation, and the higher that precious metals prices soar - the more of the precious metal investor's starting net worth that is confiscated by the government in after-inflation terms.

Among the many responses, nobody has even attempted to disprove the simple but irrefutable math of gold investor wealth confiscation through inflation taxes, but many people dispute the idea that gold profits will be taxable at all. Some are convinced that the future is certain - that after the scoundrels are thrown out, right-thinking people will insist on the use of gold as currency, which means gold investors will reliably be relieved of tax obligations. Others are convinced governmental breakdown and anarchy will make tax considerations irrelevant. As I've seen discussed on internet forums, still other gold investors apparently find my concern about taxes to be the very height of naiveté if not downright laughable, and believe that I'm missing the point of discretely spendable gold and silver coins, which is specifically to avoid paying taxes.

In this article about possible future scenarios, we will briefly look at the history of government actions during global financial crisis, as well as what governments are doing now, and we'll explore whether it is more likely that the future will be tax-free for gold investors, or whether the future may be one of crushing government control on a global scale that makes previous black market strategies obsolete. If we combine history's repeating itself - but with more advanced technology this time around - many precious metals investors may just be making one of the biggest mistakes of their lives if they are not anticipating paying taxes in full at likely higher future tax rates.

The 1930s

In evaluating what may happen in the future, sometimes it helps to look first to the past. Let's take a look at the last time the global marketplace collapsed, leading to a major depression among all of the industrialized nations. Did the forces of government get overthrown by right-thinking individuals? Did gold become currency in response to the terrible economic conditions?

Let's consider Germany, which was enduring a terrible depression along with the rest of the world. The rights of individuals were not elevated – rather Adolph Hitler rose to power in an environment of pure fascism. Political change was indeed the result of depression and a failed global monetary system, but the change was not in the direction most would desire.

Let's also consider the situation of Japan. The Japanese economy was in depression, and it did have a gold-backed currency. In the real world, with actual history, the rights of the individual did not increase in crisis, nor did gold remain currency. Instead, the Japanese government led the way in going off the gold standard for domestic purposes, and they embraced militarism with the invasion of China to follow shortly afterwards. Hardly a supporting point for believing that global depression leads to a decrease in the power of the state and an increase in individual rights.

In the United States, the response to global depression was the election of Franklin Delano Roosevelt. Which was soon followed by the US going off the gold standard domestically, and even going so far as to confiscate gold held for investment purposes at a price that was 41% below its then current value.

There was not a New Age of individual liberties in response to the last depression, but rather an extraordinary increase in federal government power. This change would prove enduring as a federal government which had previously played a lesser role in what was supposed to be a United States of America (not a Federal Government of America) seized broad powers that put it in an unprecedented position of controlling much of the day-to-day life of the nation's citizens. It was in this environment that Social Security was created, as well as the Federal National Mortgage Association, which was the first step along the path to our current federalized mortgage system.
Some people see these changes as having set the progressive foundation for a better and more just nation. Others see the "New Deal" as having set in motion a process that ultimately destroyed the constitutional experiment and individual liberties that had created a great nation. However, for the purposes of this article, let me suggest that whether one views FDR as saint or demon doesn't really matter. The point is that it is quite clear that in the United States, the historical response to political crisis and economic depression was to radically increase the power of the federal government over the day-to-day lives of its citizens.

The Present In The United States

Let's fast forward to the current day and age, where this trend towards an increasingly powerful federal government at the expense of its own citizens has now reached the point where in the name of "security", federal government agents stationed at airports around the country have the legal permission to randomly sexually grope grandmothers and other citizens at will. This does not look promising as a trend towards individual liberties.

Let's now consider what has been happening with the reporting of financial transactions to the government. For some time now, in the name of the "Wars" against drugs and terrorism, banks have been required to report to the federal government any transactions involving more than $10,000 in cash, or even any pattern of transactions that may make it look like that is the eventual goal.

There are broad changes to US reporting requirements that were snuck into the health-care reform legislation, that will be making life more difficult for small businesses and entrepreneurs in particular. Form 1099-Misc will become more ubiquitous, giving the government far more information about the flow of money between individuals, even as it imposes new compliance burdens for anyone trying to help the economy recover. The new 1099-K will have to be filed by all payment processors (such as credit cards companies) for any company or individual who receives more than $20,000 annually in at least 200 individual electronic payments. This is the future of electronic cash in the United States, and this is what is already here.

The broadening US reporting requirements reach outside the US as well. Starting in 2013 under HIRE, all US-sourced investment payments leading to financial institutions outside the United States will have to be reported to the US federal government, with pre-emptive 30% withholding taxes collected when the foreign entity doesn't prostate itself before US tax authorities and effectively agree to report to the IRS on the foreign activities of US citizens. In other words, foreign banks, trusts, hedge funds and other entities investing any money in the US face punitive taxation on getting their money back out unless they formally put themselves under US law (effectively) and provide the IRS with detailed information on US citizens.

All of this is in an environment where of course pretty much everything electronic is already seen by the government through its "Carnivore" system at Internet portals, which has the ability to record virtually all information that passes electronically through the Internet in the United States. The government can already track all of our personal financial transactions today if it really wants to - so long as they are electronic. There is, however, a gaping hole in the government's knowledge when it comes to cash transactions. A hole that can be filled.

The Logical Next Step

When we look at history as well as the new laws still going into effect, does it seem preordained that gold will become cash as the government willingly hands back to the people their liberty and control of their individual economic and financial lives? Or is it more plausible that cash itself could become illegal, as a part of ever increasing government control over both the economy and the lives of individual citizens?
This concept of cash becoming illegal might have seemed like some rather radical stuff twenty or thirty years ago, even falling in the realm of science fiction. However, realistically, it describes most of the US economy at this time, as well as other wealthy nations. For the vast majority of transactions that occur throughout the system, it is becoming increasingly rare for them to actually occur with physical cash. Credit cards, debit cards, and electronic fund transfers have become ubiquitous. Even checks don't work like they used to as they are instead instantly converted to electronic drawing rights. So most of the money in most of our lives - and most of the individual transactions for most of the population - is already electronic. It already passes through computers. It already can be tracked electronically by the government.

So what would be more logical than for the government to require that all transactions be electronic, so it can insure 100% reporting compliance? For this illustration, we will say that everything is done with a debit card or credit card, with (zero balance) debit cards available to everyone regardless of credit history. Just wave your card in front of the terminal, this recent technology is already everywhere. For individuals needing to pay each other, just send it on-line (waving smart phones at each other may be the new wallets), or even the poor can go to the much more ubiquitous ATMs that will now allow for direct electronic transfer between accounts. Just wave both parties' cards, and enter the amount. With a report of each and every transfer sent to the government, with both social security numbers for tracking. Every dime taken in, every dime taken out, all available in the government data base by identification number for each person.

Again this is not science fiction, but only a slight extrapolation from where we are in 2011. The poor already receive some of their government redistributions, such as food stamps, in the form of debit cards where spending can only occur in government approved categories. Like many other people, I routinely go a week or more at a time without spending physical cash. As for millions of people carrying their cell phones and smart phones, transmitting their identity and physical location at all times, while being recorded by ever present security cameras - that is already our world, particularly in places like London.

For this illustration / exploration of possible futures, we will assume that there will be a deadline date when all cash must be deposited and converted to electronic form, and after that date - any payment with cash that can't be electronically tracked will be a felony. This would, of course, include any payment made with gold or silver as well, meaning spending a silver coin in a manner that didn't generate an electronic tracking report would be an automatic felony.

Oh, this final transition to 100% electronic (and 100% monitored) money will surely be presented as being in the interest of the nation and of all right-thinking people – make no mistake about it. It will be presented as an essential element in the War against Drugs. The drug dealers will have no way to take money in, or to spend money, when using cash itself becomes a felony offense. Indeed, what will be the point of armed robbery when all you can do is transfer the money into your account with the government watching? Why burglarize for resale, when every dime you take in is reported? This will finally mean winning the War against Drugs, protecting our youth and Winning The War against Crime in general.

Or so it will be presented.

It will be presented as a core element in the War against Tax Evasion By The Rich, as future austerity programs become nasty and the public is looking for scapegoats. To be clear, the government is unlikely to go after the truly powerful and extraordinarily politically connected people who are responsible for this mess, let's not be naive here. (This is after all an article about plausible possible futures, not pure fantasy.) However, with future austerity measures, everything from Social Security to Head Start, to programs that aid the homeless and the mentally ill, to public support for libraries and the arts, will be under assault and either slashed or discontinued altogether.

Millions of people are going to see their view of the world under assault, they will be looking for people to blame - and culprits will be offered up to them. It will be the fault of those greedy entrepreneurs abusing the system by hiding income in a way that a respectable-salaried corporate or government employee just can't do. Or how about those rich old people all over the country trying to dodge taxes they could so easily pay, by bartering their gold coins? Fairness for all will require 100% electronic money, as all politically correct-minded people will agree.

Or so it will be presented.

It will also be an essential component of the War against Terrorism. Terrorists need guns, bullets and chemicals, as well as the ability to pay for food and housing. They need connections once they are "in country", to tap into the financial resources they will need to pay for their terror. Going to 100% electronic money means shining a spotlight into all the dark corners, and you cannot be a Patriot and oppose this most reasonable evolutionary step in the War for the Homeland.

Or so it will be presented.

It will be an extraordinary loss of individual privacy and liberty in the US and the many other nations that either lead or follow. It will not be any one of these factors by itself, but the combined result of the War on Drugs, the War on Crime, the War On Tax Evasion and the War on Terror. And because of the enormous technological advances of recent decades, something that would have been paranoid science-fiction in the 1970s, can now be easily accomplished. Our future could make George Orwell's "1984" look like a naïve utopian fantasy in comparison to what modern technology permits a state when it comes to controlling its own citizenry.

If you are currently entrenched in power, there is a nice little "fringe benefit", in that every step which you take to ensure that no foreign terrorists can fight against you, is equally effective at keeping your own citizens from attempting to reclaim the liberty they will have lost at that point. For some nations, this will be a "fringe benefit" that may be far from accidental.

What do you personally think is more likely given the deeply flawed world in which we live? Do you think the federal government will hand power back to its own people (whether it's the United States or other nations around the world)? Or do you think it is more likely that the unscrupulous people in power whose actions created this situation in the first place will use this as the pretext to seize still more power, and make it significantly more difficult for dissenting forces to challenge them?

This is truly a global question as we are seeing right now in Europe. The economic failures in Greece and Ireland may cascade quickly to Portugal, Spain and beyond. Some people believe that these failures will reach the point where they can no longer be contained and this will lead to the collapse of the European Union. They assume that because the politicians betrayed the economic interests of their own citizens, these politicians will be removed from power and maybe a different kind of experiment will be attempted so that the interests of the citizens are served.

Unfortunately, however, what we are seeing to date is just the reverse. Political leaders who are dedicated to a centralized European government that is far more powerful than the current European Union are using the crisis to try to increase the political power of the European Union government. The rationale is that the euro is fatally flawed because the voters in individual nations may elect leaders who act irresponsibly and take actions that risk the wealth and economy of all of Europe. Therefore it is in the interests of the citizens of the European Union for increased central power to be held by the European Union, so that individual nations can be brought into line and all Europeans can be protected from the irresponsible actions of their individual (elected) national governments.

Or so it will be (and is) presented.

Unnecessarily Concentrating Risk

If you think the future is solely about money and gold, let me suggest that it is likely that you're going to turn out to be badly mistaken. Oh, it's not that those issues aren't vital, particularly in all of our individual day-to-day lives, but the stakes for what is happening far exceed money by itself or investments by themselves. There is an extraordinarily complex battle that has already begun, and it is becoming increasingly official with "QE2" and the results of the Seoul Summit, as well as the many other factors that are changing all around us. Indeed, just this week Guido Mantega, the finance minister of Brazil, declared that a global currency war already exists, with US and China being the worst offenders, that Brazil was preparing countermoves, and that global trade war could be the result. The results of this war could be devastating for investors and retirees around the world, as covered in my article Bullets In The Back: How Boomers & Retirees Will Become Stimulus, Bailout & Currency War Casualties.

http://danielamerman.com/articles/Bullets.htm

We are seeing the beginning stages of a battle among power factions inside of a number of major nations (rioting on the streets of Athens, London, Paris and Rome are cases in point), and the outcome is both unknown, and at this point, unknowable. We're looking at a global political battle between nations, global economic warfare between nations, the redistribution of power and wealth within nations, and possibly even military conflicts as well.

Let me suggest that for someone to take everything that they have built over the course of their life and to concentrate all of their wealth on just one strategy, based on their absolute conviction that they know the future (the solid stability of gold as currency) - then that person is unnecessarily concentrating their risk. If a person puts everything he or she has into one popular strategy, and is correct about the value of the dollar collapsing, and is also correct about gold soaring, but it turns out that gold itself does not become currency (which is distinctly different from a gold-backed currency) and tax rates grow ever higher, then that person risks the loss of most of what they have, as shown in Hidden Gold Taxes: The Secret Weapon Of Bankrupt Governments.

http://danielamerman.com/articles/GoldTaxes1.htm

Unprecedented Diversification

When looking at this world of extraordinary complexity and unfairness, I find the best solution may be to return to a world of fairness and simplicity. I think back to the days when I was a Boy Scout and my motto was "Be Prepared".

When the future is uncertain, then the best strategy that you can possibly have on an individual level is to be prepared for multiple possible futures. To craft a strategy where you look at likely possibilities, and regardless of which possibility occurs, even if you don't necessarily gain great wealth, at the very least you are not completely wiped out by putting all of your eggs in one basket, into one strategy.

I like gold a lot as an investment during a time when the US government is openly monetizing, as in openly turning to direct monetary creation to fund extraordinary budget deficits. I won't pretend to know for sure what the future holds, whether gold will be currency or whether cash will be illegal. This article is intended to illustrate, educate and provoke. That said, an important point is that I don't think anybody else knows for sure either.

In my opinion, the solution is to enter into a set of strategies with multiple components, with those components shifting at different points in time, with the different stages in crisis (as explained in my Gold Out-Of-The-Box DVDs). We should be comfortable that we have found individual solutions that give us a fighting chance, whether the future is one that we hope to see, or is a future that terrifies us. Ideally, with multi-component strategies, even if the government sees and taxes you on every single penny of your gold profits, you'll still come out ahead, potentially even strongly ahead of where you are right now.

And if gold itself does become currency on a tax-free basis, then you do much, much better with these same strategies - because when none of your profits are consumed by covering taxes, everything can go into multiplying wealth. It comes down to a goal of deliberately attempting to create a win-win situation. A situation where your wealth is protected, regardless of whether you're paying taxes on your gold investments, or you aren't. If the future is in doubt in any way, and the stakes are everything you and your family have – why risk it all if you don't have to?.

[Fiat Currency]

Canadian Mint introducing digital cash

eCash ... you just knew this was coming ...

http://news.nationalpost.com/2012/04...canadian-mint/

Dropping the penny was just the beginning as the Canadian Mint seeks digital future

By Tristin Hopper and John Greenwood

With the penny gone and the triumph of plastic over paper bills only months away, the research and development department of the Royal Canadian Mint has proposed going one step further: the death of hard currency altogether.

Last week, the Mint announced the release of MintChip, a completely digital currency. “Money, as we know it, is fine for today, but tomorrow is a different story,” says an introductory MintChip video. “MintChip is better than cash, since you can use it online.”

MintChip stores value in a physical chip, and transfers money between chips using heavily encrypted “value messages.” The system has no centralized database. “They’re calling it anonymous … their intention is that it’s no more associated with who you are than [traditional] currency,” said Jacqueline Chilton with Glenbrook Partners, a California-based payment consultant.

Of course, Ms. Chilton noted there is still the possibility for MintChip-specific apps to covertly record transactions. And, just like physical currency, if “you drop it, it’s gone,” she said.

MintChip can handle any amount of money, but the Mint envisions it as a way to digitize small transactions, like bus fare, a song download or a stick of gum.

“The emerging digital economy must be able to accommodate small-value transactions, such as micro transactions (under $10) and nano-transactions (under $1),” said the Mint.

On April 5, the Mint launched the “MintChip challenge” to encourage software developers to come up with creative applications for the technology. The winners, to be selected by a judge’s panel including Mint CEO Ian Bennett and Google’s vice-president of payments, will be awarded the tongue-in-cheek prize of $50,000 in gold, one of the world’s oldest forms of currency.

MintChip’s technology — and even its name — is modelled closely on Bitcoin, an electronic cash system launched in 2009. The currency became the darling of hipsters, libertarians and criminals, all of whom liked the idea of using cash not controlled by a government or central bank. In the words of one Bitcoin enthusiast, the service “is not run by people with hot sexual appetites for hotel maids. It is not run by corporations.”

Nevertheless, Bitcoin is prone to wild fluctuations in value, particularly after last June when hackers successfully brought down the world’s largest BitCoin exchange.

On the eve of MintChip’s launch, Marc Brûlé, the Mint’s chief financial officer, went on record denouncing Bitcoin as being constantly on the verge of collapse. “Bitcoin may work for the small group of people that believe in its value, but that could change very suddenly,” he told Reuters. Mr. Brûlé had just returned from a speaking engagement at Digital Money Forum, a U.K.-based gathering of electronic cash developers and consultants capped off with a few rounds of debit-card Monopoly.

The entrance of a government player into the frontier of electronic cash is surprising, particularly for Canada, which is notorious for lagging in the currency department.

“Canadians continue to use an outdated payment system not necessarily because they prefer it, but because no viable alternative has been priced and promoted in a way that makes it attractive to use,” said a December federal task force report lambasting the Canadian Payment System.

Devoid of innovation, the system is in danger of being left behind by the European Union and developing countries, reads the report, which was commissioned by Finance Minister Jim Flaherty.

Plastic bills, which the Bank of Canada introduced only five months ago, has been in Australian circulation for nearly 25 years. In Sweden, arguably the world’s most cashless economy, public transit and even some banks have completely phased out coins and bills.

In a recent post, Bitcoin Magazine writer Vitalik Buterin called MintChip “a sign of things to come.” Nevertheless, he questioned MintChip’s security, noting that “unhackable” chips had been hacked in the past with electron microscopes, needles and acid. “Such systems are nothing new, and time has shown them, like all other forms of digital rights management, to be far too insecure to build an economy around,” wrote Mr. Buterin.

“The Mint isn’t saying they’re creating a substitute for cash tomorrow — but something that can be used as such in pieces overtime,” said Ms. Chilton. “It probably isn’t for our grandparents, it might not even be for us, it might be for our children.”

[lektrode]

Re: Canadian Mint introducing digital cash

eCash ... you just knew this was coming ...

http://news.nationalpost.com/2012/04...canadian-mint/

maybe huh?
the plastic money biz sure seems like its firing on all 8....

[cobben]

Re: Canadian Mint introducing digital cash

[QUOTE=Fiat Currency;225880]eCash ... you just knew this was coming ...

Great idea if properly implemented, now how is a anonymous(?) digital currency run by the current monetary authority different from cash?
No difference that I can see off-hand, can still be used just like cash, e.g. at the farmers' market, in black market transactions, as a temporary store of wealth, etc., but a much more flexible and primarily much cheaper system to run for the authorities.

The risk for counterfeiting must be compared with current coin counterfeiting problems, which at least in the UK are rather enormous.

[Roughneck]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

You have a government with a structural deficit of 1.5T dollars a year. They will turn over every rock for more revenue. The underground cash economy is a big potential source of revenue. The technology for a cashless economy exists already. Heck, they have coke machines that take credit cards. It's only a matter of time.

[Fiat Currency]

Re: The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Soon legal tender won't even be legal. They are going to force us all on e-fiat, since they control all the electronic gateways in & out of the money system/supply.

I will not even be surprised to see the €500 note taken out of circulation.

Draconian Cash Controls Are Coming To France

French Prime Minister Jean-Marc Ayrault himself presided over Monday’s meeting of the National Anti-Fraud Committee—“a first for a head of government,” he said at the press conference afterward, to hammer home just how important this was. But he wasn’t worried about run-of-the-mill fraud that might fleece some old lady of her life savings. He was worried about people not paying their taxes.

He is desperate. In its just released annual report, France’s state auditor, the Cour des Comptes, told the government that it was dreaming. Its forecast of 0.8% growth for 2013 was way high. Try 0.3%. And forget about the budget deficit target of 3% of GDP, which had been based on that illusory 0.8% growth. And even if growth came in at 0.8%, the deficit would stillbe above that all-important 3%.

To get to the deficit target, the government had raised a slew of taxes to extract another €32 billion this year from households and businesses that are already gasping for air. Now “absolute priority” must be on bringing down spending, admonished Didier Migaud, First President of the Cour des Comptes, when he presented the report.

But spending cuts—whether corporate welfare projects or social programs—would be highly unpopular. Hence, the government’s emphasis on fighting tax fraud. Some estimates put tax fraud in the range of €60 to €80 billion per year, others at half that. Either way, a free gift. If the government could just get its hands on that money.

So Ayrault trotted out his national plan, a 20-page document that outlined his all-out effort to go after any kind of behavior that could possibly deprive the government of those sorely needed euros. A seamless fit for France’s principle: squeeze hapless “fiscal residents” like lemons to get their last drop of juice—fiscal residents, because citizens or foreigners who live in France only part of the year and pay taxes in some other country escape income taxes in France.

Stuffed into that 20-page national plan is a draconian tool: prohibiting cash payments of over €1,000 per purchase. The current threshold is €3,000. It’s urgent. He wants to get the process started soon so that “a decree and legislative measures” can be finished by the end of 2013.

Two crisp 500-euro bills and a single coin: voilà, an illegal transaction. OK, most cash transactions fall below that limit. But used cars, for example, might not. Between individuals, a cash transaction protects the seller. Otherwise, a trustworthy girl buys your car, signs the documents, hands you a check or initiates an electronic payment, and drives off. By the time you realize that the check bounced or that the electronic transfer didn’t go through, the car is on its way to Russia.

But the limit would only apply to fiscal residents. In a nod toward the wealthy and not so wealthy that the government has driven into fiscal exile, Ayrault included an exception: people, citizens or not, who are fiscal residents of a country other than France would be able to pay €10,000 in cash per purchase, down from the current €15,000 limit.

It will doubtlessly be called the “Depardieu exception.” Iconic actor Gérard Depardieu sought to establish a residence across the border in Belgium to escape the oppressive taxes at home [“Trench Warfare” Or “Civil War” Over Confiscatory Taxes In France]. Then suddenly, he obtained a Russian passport, a “defection” that caused a whirlwind of anger, derision, support, and laughs. But Russia does have a flat 13% income tax.

People like him, when they’re in France, will still be able to pay for high-end girls in cash. The rest must use another payment method, anything from smartphones to checks. But they leave indelible electronic skid marks. Companies that process the payments retain personal and transaction details that form a seamless record over time. And copies of these details are handed to the government, either upon request or automatically.

With this law, the French government will be able to tighten the vise on its people one more turn, restricting their freedom of choice (how to pay), wiping out any privacy in those transactions, and imposing another layer of government control. Once people have gotten used to the €1,000 limit—based on the great principle of incrementalism with which restrictions of freedom come to pass in democracies—the vise will be tightened further, until the government can document every purchase made by “fiscal residents.”

The preannouncement came Thursday evening: PSA Peugeot Citroën, France’s largest automaker, would have a write-down of €4.7 billion. On top of a hefty operating loss. It would be a colossal an all-time record. Rumors spread immediately that PSA would need a bailout. The second in four months. Read.... French Socialist Nightmare: ‘The State Cannot Do Everything’