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How the War on Cash will lead to a Rebirth of Hard Money

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You may have heard about the world's central banks' War on Cash. The War on Cash is the promotion of a system of exclusively electronic transfers where paper money or coins not even exist. The central bank could increase or reduce people's bank balances as they see fit, central governments could tax transactions as they occur, and illegal activities (that aren't state approved) could be prevented. Furthermore, in an all-electronic system, enemies of the state could theoretically be frozen out of the entire world economy.

Fortunately for humankind, the War on Cash is a pipe dream, like the War on Drugs, the War on Terror, or any other war on a concept. Physical money cannot be killed, and just like drug cartels or terrorist groups, trying to kill cash will only make it stronger. The world's black market, it turns out, is larger than the economy of all but the richest few countries, and all those flying the black market's pirate flag will need a means of exchange. Whatever this currency ends up being, it will not be controlled by government employees, and it will likely resemble ancient means of exchange: precious metal coins.

Up until now, the US dollar was the most easily exchanged currency by criminals since it was almost universally known and circulated and could be moved electronically or physically. ATMs spat it out at the touch of a button. However, if central banks go to a total command and control model of electronic currency, the black market will have to find something besides government issued scrip. 

If the US black market, estimated at around $600 billion annually, had a velocity of money of around 3 (each dollar gets spent three times a year), it would need around 6000 tons of gold in circulation at present-day prices. The huge volume of circulating hard money would soon extend beyond classic black market activities since prostitutes and drug smugglers would inevitably use their money to buy a TV on Craigslist or pay their landscaper. Eventually, the black market money would end up everywhere, especially in the informal economy of wedding photographers, Motown cover bands and bartenders.

By forcing a large enough segment of the economy to operate outside of the central bankers' scam, a larger and larger part of the population will participate in the alternative currency. The benefits of hard money are easy to understand in a world with an obviously thieving central bank, and with maybe one in ten workers exclusively deriving their income from a black market source one could easily see a tipping point being reached and the government scrip going into crisis.

In a kind of live-by-the-sword irony, if central bankers overstep their boundaries and try to control every aspect of a person's individual finances, they may discover their power beginning to evaporate. Banks, trying to offer negative interest rates, are discovering just this. Individual depositors are finding the deal offered by the central banks is increasingly raw, and that their savings might just be safer inside a mattress or sock drawer. If government cash is eliminated entirely, an alternative will necessarily appear in wide circulation to handle the black market, and will be accepted by a large enough group of people to pose an existential threat to the purely electronic currencies.

Richard is an engineer by day, and a political activist by night, fighting would-be totalitarians and government busybodies everywhere.