Several recent news articles and essays on sites like Zerohedge.com and LewRockwell.com reveal a persistent pattern of increasing vehemence in the war against economic privacy, especially in the area of having physical cash or digital cash alternatives. We believe SilentVault has the best technology for securing your economic privacy.
Is there a war on cash?
Yes, there is a war on cash. It is a direct descendant of the war on gold and silver which played out in developed markets between roughly 1872 and 1971. If you want more information about its antecedents, consider the Coinage Act of 1873 and Nixon's abrogation of the Bretton Woods agreement. Since the Nixon Shock of 1971, even copper has been removed from the American one cent coin. Most money in the world, including the Special Drawing Rights which make up the core currency of global finance, are now computer generated values rather than actual paper or specie.
Partly in reaction to the events of the time, Nobel prize-winning economist FA Hayek wrote in 1976, and revised through a third edition in 1990, a short book "The Denationalisation of Money." You can get a copy from Amazon, ABEbooks, or a free download at Mises. If you want to understand the theory of competing currencies, why central bank monetary policies persistently fail, and why people suffer as a result of bad money being issued by governments, Hayek's book is a good place to go.
For some people, there are still traditional types of money. People in Somalia, for example, continue to herd sheep, goats, cows, and camels. Judges in their traditional culture assess compensation from criminals for victims in fines denominated in cattle. Many people still accept gold and silver coins as payment. Since the 14th Century when the mulberry-bark paper money of China became non-redeemable, people in traditional cultures in India and Southeast Asia have preferred payment in copper, silver, and gold coins, or in links of pure gold chain jewellery. At other times, both ancient and recent, people have used tulips, cigarettes, chocolate, animal skins, hunks of iron, silks, salt, and many other things as money. For a time in the first part of this century people in Argentina used warehouse receipts for wheat as a type of money.
Nor has the world been short of innovators in this field. Ithaca Hours and LETS are two examples of local currency concepts, of which there are an enormous number today. Beginning in 1996 with e-gold and continuing with many other examples, a host of digital gold currencies used to be available. And since 2009 a great many crypto-currencies, most notably Bitcoin, have been created.
Meanwhile, credit cards and debit cards have been developed, so that money sometimes is represented by a hunk of plastic. More recently, smart phones have replaced credit and debit cards, illustrating that a great deal of what we think of as money is actually accounting records stored in computer. If you take a look at how central banks and the most central of all, the Bank for International Settlements, work, you can see computer entries form the basis for nearly all the money in the world.
In addition to digitally representing money, banks and publicly traded markets have developed digital representations for stocks, bonds, and commodities. In the gold bug world, we often speak of the "paper gold" market, but it is really not very much on paper. It is more of a digital promissory note gold market, with the understanding that major commodities exchanges, such as Comex, don't require sellers to be able to deliver physical gold. Trades are often settled in "cash" which means more of those computer data entries. Instead of "paper gold," we think of it more as a "garbage gold" market.
The purpose of central banks has been to centralise monetary policies. Monetary policies include how much money is in circulation and what interest rates are charged by the central bank to the member banks of that country or region (in the case of the European central bank). One of the interesting facts about banking is that you cannot lend money at interest, nor accept deposits from other people, without a special licence, in most countries. Nor can ordinary mortals sell financial instruments such as stocks, bonds, or commodities, without broker and dealer licences. It remains possible to create entirely private exchanges, but these are not advertised for fear of falling afoul of the regulatory agencies that watch over the financial industry.
For a very great many years, since at least Alan Greenspan became chairman of the Federal Reserve in 1987, it has been a policy of that central bank, and others around the globe, to keep interest rates artificially low in order to stimulate both financial markets and, in some respects, the economy generally. Today, as a result of decades of such policies, and the related booms and busts caused by these policies, most countries stand at "the zero bound" where interest rates paid by central banks to member banks are either zero or very nearly zero. And, today, it is clear that zero percent interest is not sufficiently attractive to stimulate economic growth.
In several European countries and very recently in Japan, interest rates have been reduced below zero. Now, what does a negative interest rate mean?
Well, if a central bank pays 1% interest to member banks who are required to hold "excess reserves" at that central bank, and there are a trillion dollars on reserve, then that central bank pays ten billion dollars in interest, per year. Suppose they take interest rates to zero? Then they pay no interest on those reserves. Suppose they take interest rates to negative 1%? Then they charge $10 billion a year on those same reserves.
Which means that instead of receiving a benefit for holding onto money, the banks are punished for having money on hand. Of course, the central banks still *require* the banks to have reserves on hand, but with negative interest rates, are motivating banks to go out and lend more, or, at least, that's the theory that is promoted by some in the banking cartel. Of course, since holding capital has a higher cost, the banks are motivated to increase fees, charge interest on deposits, and make up for these losses by lending at higher rates.
Those facts mean that banks will lend to other banks in a different way, and smaller banks that have fewer resources within the system will continue to place money on deposit with larger banks so they can arrange wire transfers and other services for their customers. The same is true for credit unions - and eliminating smaller banks and many credit unions may be an objective of those in the banking sector who wish to further consolidate the industry. People with savings accounts and certificates of deposit are likely to see penalties and fees for having money in the banks. With negative interest rates, the more negative, the worse things get. Everyone with money is penalised for having money.
Aha! You can see there are some loopholes. Obviously, if you have $45,000 in your savings account, and your bank tells you it is going to start charging you interest, you can take your money out of the bank. And maybe you do so, and put it with a stock broker, who, because of his bank's policies, has to charge you interest. So you buy stocks, maybe. Or you buy gold or silver. Or, maybe, you simply go get cash from the bank.
There are, however, already a number of laws in nearly every country that make this attempt to save yourself from punitive negative interest rates very difficult. Banks can, in many countries, refuse to provide you with cash. They can require that you only receive a few thousand dollars at a time, so you would have to go to the bank again and again. Banks have charged fees for taking money at an automatic teller machine (ATM) and as negative interest rates become the way of the world, expect ATM fees to skyrocket.
Into this situation comes the war on cash. Larry Summers, one of the nastiest little rich kids ever in our view, recently proposed, in an editorial eagerly accepted by Jeff Bezos and the Washington Post, that the $100 bill be removed from circulation. Others, in Europe, have called for the elimination of the 500 euro note. In Japan, the stores that sell home safes and vaults have sold out, in recent weeks, and there is a huge demand for the largest bank notes available in Japan. (Part of this situation in Japan relates to recent announcements of negative interest rates; part of it relates to the implementation of the "My Number" policy which forces everyone in Japan to use a slave identity number like the social security number in the USA.) In Cyprus, as recently as 2013, troubled banks were allowed by their government to confiscate deposits from people generally in order to meet some of their obligations during a time when ATMs were shut down and people were not allowed to withdraw all of their funds.
Please don't take our word for it. Go look at around for additional details. The war on cash, which is part of the war on freedom, has been going on for decades. It is coming to a head, because if people and companies can remove their deposits, bankers won't be able to extract money from depositors whenever monetary policies are changed. And, although a great many people are going to be harmed, including elderly people who have been relying on the interest they earn from their savings in banks, the bankers don't care.
The harm to other corporations, especially smaller banks and credit unions, will be enormous. You should expect to see smaller banks going out of business in record numbers allowing for even further consolidation of the banking industry. Alternatives like credit unions may also be eliminated through these negative interest rate policies.
So, what can you do? Actually, there are a lot of good choices, today, that you don't have to try to invent something new or hunt in distant countries, or on other planets, for answers.
One thing that I've seen since 2011 is a small laminated card with a silver dime or silver quarter inside. Any coin store in the United States can provide you with "junk silver" meaning the 90% silver coins of the United States minted prior to and including the year 1964. There are still many millions of these coins available, and while they are still usable in general circulation, they are worth many times their face value because of their silver content. Dime cards and a related invention from 2009, Ron Helwig's Shire Silver and gold wire in a laminated card, represent a reasonable alternative to other forms of cash. If you go to a farmer's market in a smaller community, you can generally find farmers who are quite eager to accept gold and silver as money.
At roughly the same time, 2009 or so, Bitcoin was being developed as a software protocol by Satoshi Nakamoto and others. It was initially disregarded by most people, and only after several years of development did its price increase to the highly attractive $1200+ per bitcoin in December 2013. Because Bitcoin is simply a software protocol, though one that requires considerable "proof of work" to mine into existence, it was immediately possible for other software on similar lines to be developed. For example, where Bitcoin has an upper limit of 21 million Bitcoins, ever, Litecoin has an upper limit of 84 million coins.
Today there are over 630 different "crypto-currencies" and you can go to coinmarketcap.com to learn quite a lot about them. The most widely used is still Bitcoin, which has the largest market cap, the most total transactions, and the largest dollar volume of transactions. You can go to blockchain.info for further details on Bitcoin.
But, as the team here at SilentVault has known and written about for many years, there are difficulties. First, Bitcoin and many other crypto-currencies have a public block chain, so your transactions are not private. Second, that block chain has gigabytes of data, and more every day. Third, many companies that buy and sell Bitcoin attempt to comply with the anti-money-laundering and know-your-customer laws that effectively prevent you from having any economic privacy unless you take a great number of careful steps. And, because of the nature of the mathematics involved, there are upper limits on how many transactions Bitcoin, Litecoin, or the others like them, can actually manage to transact in one hour.
Happily, there are good alternatives. SilentVault allows you to move your Bitcoin, Litecoin, silver, or gold into our SVSpark wallet technology. Our wallets are not new, they have been around for years. The technology is not only designed, it is fully implemented, stress tested, and in active use. SVSpark wallet users don't connect over HTTP, but over a different protocol, XMPP. Strong cryptography and strong log-in techniques protect your wallet contents. Nobody tracks your use, your transactions are not recorded on any central server, there are no records to demand, there is no way to link your IP address to your particular activities, so you have considerable economic privacy.
Transactions in SVSpark are immediate. You don't have to await confirmations after your funds are in your wallet. Payments are irrevocable, once the receiving wallet picks them up. If someone loses control of a wallet, there is no lost payment, since those payments that are not picked up within seven days are returned to the sender. There is a built-in exchange system so people can buy and sell vouchers for gold, silver, Bitcoin, and Litecoin. That exchange, built for the SilentVault enterprise and, thus, called SVX or SilentVault Exchange, has a built-in escrow capability. Similarly, there is a marketplaces aspect of the wallet where businesses can establish store-fronts to offer goods, services, games, or information. SilentVault team members are in contact with prospective currency issuers, merchants, and users and expect to expand the number and types of currencies available.
We believe that because the different types of money available in SilentVault wallets have similar properties of anonymity, immediacy of use, and privacy of ownership, that it is accurate to describe them as cash. So, in the war on cash, we are very much on your side and against the oligarchs, central banks, Keynesians, and government agencies seeking to destroy your wealth.