Ban cash, end boom and bust

Posted by gaiagal 5 years, 11 months ago to Economics
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  • Posted by Wonky 5 years, 11 months ago
    I still can't understand how so many people buy into the idea that spending is good for the "economy" - even if it's spending on credit. I remember getting my check from Bush via the IRS and all of the propaganda suggesting that it would be patriotic to go out and spend it. It's so offensive that governments think it is their right/responsibility to "stimulate" economies.
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    • Posted by $ MichaelAarethun 5 years, 11 months ago
      I used mine to pay off a credit card. Step two involved scissors. Step three a trip to the bank to cancel the account. Woooooshhh big weight off my shoulders. then I moved where the loss of buying power was offset by a more user friendly price structure. What need of credit? comment. I hated getting that refund. It represents an overpayment at best with no interest and returned in devalued dollars. Lose Lose Lose. I love the idiots that say I didn't pay taxes I got a refund. Unless it was an Unearned Income Welfare Check in which case we are the idiots.
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    • Posted by davidmcnab 5 years, 11 months ago
      The effective value of any given amount of money is measured by its face value multiplied by its average rate of circulation.

      Example - $1 million dollars flowing through 20 transactions a month is worth twice as much as $10 million dollars flowing through 1 transaction a month.
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      • Posted by $ MichaelAarethun 5 years, 10 months ago
        Value to whom? Certainly not to me.
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        • Posted by davidmcnab 5 years, 10 months ago
          It would certainly be of value to you if you had goods and services on the market, and a higher rate of circulation reflected in higher sales revenue to yourself. :D
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          • Posted by $ MichaelAarethun 5 years, 10 months ago
            Then it's of no value to me at all. Coupled with the failure rate of ATM's and other similar devices and the various fees for using them. Other than Amazon to support your point I'm in a primary cash market area and have yet to lose a card to a machine for something as simple as power failure during as transaction. Back up point the banks don't run the machines it's another company more often than not. Rare you can go inside and say the machine ate my card. Instead it's a three week wait or more. My last card which is causing cancellation of the account is now six and one half months and waiting....Your cashless society is full of holes for any practical use and it breeds a lack of customer service. especially from the issuing banks.Apparently they are training people to work for the government or vice versa. It's not the people in the bank where you do business it's the nameless faceless unaccountable people in South Dakota or where ever. not that the idea doesn't have merit - and make it easier for the government to control you that's a real plus - it is not practical at the present state of technology. And it limits you in where you can go in the world. sort of an electronic iron curtain.
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            • Posted by davidmcnab 5 years, 10 months ago
              WTF are you on about? I'm not advocating for any kind of cashless society. Where the hell did you get that idea from? In fact, I find the idea of eliminating cash an appalling violation of privacy.
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              • Posted by $ MichaelAarethun 5 years, 10 months ago
                In that case my apologies and I''m on your side. But it's still of no value to me and anyone who wants to use my services can pay for it - in cash. Hard currencies preferred - Which doesn't necessarily exclude the US Dollar but I prefer hard currencies. however in re-reading the thread I can see why I was mistaken.
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                • Posted by davidmcnab 5 years, 10 months ago
                  I can well understand any current touchiness around cash. I'm aware there are banks in the USA and Ireland that don't accept deposits or even mortgage payments in paper currency. In some other countries, large stores have self-service checkout areas where most machines are EFTPOS or credit card only, and the queues for accessing the machines which accept cash can get very long. This to me is a soft sleazy approach to trying to wipe out cash.
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                  • Posted by $ MichaelAarethun 5 years, 10 months ago
                    South of the border and with rare exception cash is withdrawn by the ATM. Tellers accept deposits or payments for the most part. Some banks offer a choice of Pesos or Dollars from their machines. If you have an account in the bank the fee for using the ATM is zero.

                    Typically one draws out their cross border transfer in pesos (fees from 17.4 to 68.4 pesos starting in the banks - two that low - and ending with the local version of 7-11, hotels etc. then deposits in the local account. There is/are daily limits at both ends. Another way is a limited use of paper checks maximum ten per day at $10,000 per check US monday through Friday for the real ricos. (rich folks). i imagine the home accounts in the US are watched and checked for deposits or something provable in tax paid funds. For those of us who went from middle class to lower class upon retirement and then went south to regain middle class status it's an OK system. Other than Bank Americas sleezy approach to wiping out your balance one way or the other and lack of customer service. Best two are Wells Fargo and IF you are retired military or US Government Anderson Federal Credit Union or AFCUdotcommo I spelled some of it wrong some right which charges zero for funds sent to you in other countries. there may be others.the main thing is never use machines which swallow your card completely for the transaction. Takes four to six weeks to get a new one and in some countries even longer. See Eye Banco is my recommendation of choice.just south of the border. For the rest of the world due diligence is a mighty good idea. Take more than one card to be on the safe side and have a way to hook up and transfer funds if you lose one.

                    Now the last thing anyone presenting an electronic deduction to their accounts to Bank America will be honored and if you do'n't have sufficient funds they charge their account holder and then start adding huge weekly fees.

                    Completely untrustworthy.
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      • Posted by CircuitGuy 5 years, 11 months ago
        Value produced = velocity of money * amt of money. It takes means of production to produce value, though. If there's unused productive capacity, one simple solution is to increase the velocity of money. But what if people don't want the goods/services those means of production are geared up to produce? Then we'd be better off retooling those means of production (i.e. investing) than spending.

        I'm sort of in the muddled middle in that I accept the Keynsian argument of priming the pump when there's unused productive capacity, BUT I think it's wrong and simplistic to dick with monetary and fiscal policy to respond to every little blip in the economy.
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        • Posted by Wonky 5 years, 11 months ago
          I might be missing the point here... How does anyone other than the government benefit from the "velocity of money"? More taxable transactions are good for the government, but a well placed a long term capital investment in productive tooling decreases the velocity of that money while increasing productivity. What am I missing in the equation?
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          • Posted by CircuitGuy 5 years, 11 months ago
            We benefit from the increased production. People trade money when people produce something they want, so the more times it trades hands the better. This would be true if there were no gov't or taxes and we traded gold and silver coins. The more value we make for one another, the faster those coins move about.
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            • Posted by Wonky 5 years, 11 months ago
              My only economic rule is not to consume more than I produce. According to http://www.usdebtclock.org/ (if I'm interpreting it correctly), the average citizen's personal debt is $52,796 for a total of almost $17 trillion.

              Spending on credit benefits those from whom you borrow the money that you didn't produce in order to consume what you didn't produce, and also causes you to sacrifice a portion of your future productivity in future interest payments to the lender.

              The value of money is destroyed when you consume more than you produce because eventually you will go bankrupt and your debts will be passed on to more responsible consumers.

              What is the flaw in my reasoning?
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              • Posted by khalling 5 years, 11 months ago
                under your plan, most start-ups would never have gotten off the ground. Borrowing is risky, but big ideas , which are disruptive would die if no one ever had that as part of their business plan
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                • Posted by Wonky 5 years, 11 months ago
                  I didn't think of borrowing with a plan to utilize the funds to eventually produce more than enough to pay off what you borrowed as consumption.

                  I think of consumption in this context as taking that 18 month same-as-cash Home Depot credit card offer to install new hardwood floors when you already have $30k in credit card debt and no savings or easily liquefiable investments - not because you want to sell the house for a greater profit, but just because you "want" hardwood floors.

                  If I want hardwood floors just for the sake of having them, I'd have the cash, but still use the same-as-cash deal so that I could leave the cash invested for as long as possible and pay off the card before any interest accumulated.

                  I don't think consumer debt is bad in and of itself - in fact, I love to open credit cards with bonus cash-back offers ($300 back after the first $1000 charged), spend the money required to get the bonus cash (on things I would have bought anyway), pay off the cards & close the accounts. I made $2500 last year without paying a penny in interest doing exactly that (I didn't pay income taxes on it either).

                  Chase has a "Slate" card available that has no balance transfer fee and 0% for a period. I opened one of those, transferred the entire available balance to an Amex card with a 0 balance, requested the refund from Amex, invested the money, and paid off & closed the Chase card before the intro period was over. Effectively 0% interest to invest on margin.

                  I also keep an Amex that gives 3% back on all purchases from grocery stores & pay the balance every month.

                  These are all just tactics in my personal crusade against the financial institutions that want me to be trapped paying 21% interest because I don't produce enough to pay for what I consume.
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                  • Posted by plusaf 5 years, 10 months ago
                    In the business/corporate world, borrowing money enables business investment and expansion when the cost of the loan is less than the expected gain from the reinvestment or expansion.

                    If the management is wrong in their assumptions or execution, yep... they can and do go down the tubes.

                    As for personal credit for 'immediate gratification,' yep, that's proven to be the downfall of many individuals who don't understand some basic concepts of money and savings.

                    So my wife and I use our points-collecting Visa cards for virtually all 'cash purchases,' which average $3000-5000 per month. And it's paid off automatically every month out of our checking account, which is a flow-through conduit for our IRA withdrawals and Social Security checks.

                    About sixty years ago, my mom drilled into my head the concept of "avoid all debt" and it's worked beautifully for me. And still, a home equity line of credit loan bought our newest car and we can afford the interest payments on the loan plus extra pay-down on principle.

                    Bank Savings?! Back some time in the 1950s or 1960s, mom moved all her cash out of our local NJ bank where it was earning about 1%/yr and sent it to a Southern California bank that paid about 2.5%. Buy Local, when it's to your own detriment?! Don't be silly!

                    Most folks born in the past 20-30 years have no concept of money, economics or savings.

                    oh, ps... When markets are distorted by Anything that makes a commodity too inexpensive, Demand grows higher than a balanced market would achieve.

                    Think about that when someone says that student loans for college have 'created unbearable debt' for the graduates. There IS a connection there for folks bright enough to see it, or have it taught to them by parents or educators.
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                    • Posted by Wonky 5 years, 10 months ago
                      This is the kind of news I like to hear:

                      http://abcnews.go.com/Business/wireStory...

                      In theory, all that extra saving can translate into borrowing in the "business/corporate world".
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                      • Posted by plusaf 5 years, 10 months ago
                        What can I say? Here's what I posted on that page as one of the very few (so far) comments...
                        ------------------
                        "And not long ago, the fact that college loan burdens were making savings and survival impossible? Maybe some of them figured out that loans are NOT the best way to save?

                        Thanks, ABC, for a no-win scenario.

                        Look, gang, if there's no GRAPH that shows both sides of the coin (pun intended) Versus Time... Versus GDP, years, average home price or Anything Else, you can never see if any of the disaster reporting is worth reading.

                        Thanks, ABC, for .... nothing much."
                        ------------
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              • Posted by CircuitGuy 5 years, 11 months ago
                "My only economic rule is not to consume more than I produce. According to http://www.usdebtclock.org/ (if I'm interpreting it correctly), the average citizen's personal debt is $52,796 for a total of almost $17 trillion. "
                Yes. Staggering and true.

                "Spending on credit benefits those from whom you borrow the money"
                Yes.

                "The value of money is destroyed when you consume more than you produce because eventually you will go bankrupt and your debts will be passed on to more responsible consumers. "
                Yes, if I understand correctly. If the borrowing continues at this rate, the gov't struggles to service the debt, and the national bank is tempted to expand the money supply and pay back the debt in post-inflation dollars. That has not happened yet, but it's a real risk. My guess is when rates rise, the gov't will put a band-aid on the problem with spending cuts and increased taxes that keep the budget balanced. The Fed will allow some inflation, but it won't allow inflation to spike too quickly or to exceed 8%. I find it frustrating we have to wait for such an unpleasant scenario to solve the problem.
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            • Posted by $ MichaelAarethun 5 years, 10 months ago
              So does the pea under the walnut shells. Each time it moves it's devalued by a series of embedded taxes or Value Subtracted Tax. The sick part is Pelosillyni wants to add another one called - don't start laughing she said it I didn't - a value added tax. Must be what she's growing o that grape farm in Napa County. however to leave tongue in cheek humor behind. Each step of the way not only adds but as Circuit Guy stated ''if there were no gov't or taxes.'' And only replacement of the very fascist income tax for a preferably end user consumption tax controlled by the spender will do that. Along with a thirty plus percent decrease in the size of government''
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    • Posted by Herb7734 5 years, 11 months ago
      The best way to "stimulate" the economy is to let it alone. You are right to be offended and they (the govt) appears to be too stupid to understand the basic laws of economics.
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      Posted by CircuitGuy 5 years, 11 months ago
      "all of the propaganda suggesting that it would be patriotic to go out and spend it. "
      I don't get either. You're either going to spend it, save it, or invest it. Saving and investing are similar, but investing involves greater risk and return. So there are basically two choices, spend now or invest for later. If you spend now it, some business gets money for using their productive capacity. If you save/invest it, some business gets that money to build more productive capacity. There's no reason one is better than the other.
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      • Posted by jdg 5 years, 11 months ago
        That was true before the Federal Reserve. Now the Fed encourages banks to deposit their "excess" cash with it instead of lending. This is one of several reasons the depression that began in 2008 is still going on.
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  • Posted by SaltyDog 5 years, 11 months ago
    What a great idea! Every last cent that we earn and save must be kept in a government bank! And if by chance some corrupt, third rate ward heeled from Chicago (the world's northernmost banana republic) should get elected to high office, that couldn't be used to control or intimidate the general populace or dare I say, political opponent, could it? What could possibly go wrong?
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  • Posted by PeterAsher 5 years, 11 months ago
    "Faced with seeing their money slowly confiscated, people are more likely to spend it on goods and services"

    No, people are likely to work and produce less. Great way to permanently tank the economy into oblivion.

    A common denominator of bad ideas is thinking that when you change the rules that people will still play the same game.

    This idea is so devoid of economic functional awareness that it could be a submission for in article in The Onion.
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  • Posted by Zero 5 years, 11 months ago
    The Euro-Socialist trust in government is just unfathomable to me.

    How can anyone hearing this not blanch from either fear or rage!
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  • Posted by CircuitGuy 5 years, 11 months ago
    Banning cash is a terrible idea, IMHO. It's fine to give people more choices, but it's wrong to say you cannot use some medium of exchange.

    If find US paper money to be very effective in terms of how broadly it's accepted and how little it costs to hold, around 3% a year. I would be very sorry to see it go. People should be free to use whatever media of exchange they want.
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  • Posted by freedomforall 5 years, 11 months ago
    "Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with "

    anyone who disagrees with them.
    Complete control of everyone's liquid assets is a control level that would make Hitler and Stalin green with envy.
    If the current dictator arbitrarily decides that Christians or Jews or gun owners are just too troublesome, the dictator just electronically kills their access to funds and they die of starvation, or of disease because they can't get the drug needed to save them. If they contact the authorities for help (as the propaganda advises) the fedgov just puts them in freight cars and take them to the nearest convenient furnace for disposal.
    No muss, no fuss. Genocide made easy.
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  • Posted by johnpe1 5 years, 11 months ago
    ... and if the government did not control the money
    supply, the booms and busts would be brief and
    responsive to the market. . no negative interest
    rates on savings would occur, unless your savings
    was buggy whips. . but that's just the market,
    growing. . catch a ride on the wave!!! -- j
    .
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  • Posted by $ allosaur 5 years, 11 months ago
    Lately old dino has been been squirreling away more cash than ever before.
    It may all burn up in a fire or get blown away by a tornado, but I've come to believe it is far more likely that Big Brother (as well as the more skilled criminal hackers) may pillage my accounts electronically.
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  • Posted by Lucky 5 years, 11 months ago
    At last, an admission from a collectivist that Keynesian economics does not work.

    Another thought, this article is from the UK Telegraph. The UK economy is doing relatively well.
    No one has explained it. I propose this- it is the big number of migrants from India etc.
    The Islamists do not help of course, many are on welfare.
    But the others include many go-getters. They know how to evade and avoid the licenses, the minimum wage, the useless and myriad environmental and safety rules. This group follows the same traditions of migrant Jews and Chinese in small family run businesses, many become successful and big, They manage to maintain sensitivity to the market and strict cost control.
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  • Posted by eddieh 5 years, 11 months ago
    A year ago or so I read an article that mentioned that a "shadow economy" was helping to keep America afloat. It was referring to cash transactions such as baby sitting , house painting, collecting metals etc. The claim was that the IRS losing billions of in revenue. The only reason to eliminate cash is the same reason to call in gold.
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