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More And More Countries Are Moving To Ban Cash Transactions

October 26, 2015

More and more institutions are trying to make it harder for you to move your money into cash.

Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.

Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. France and Italy have banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000. And on and on.

This is also at work in the US. Louisiana has made it illegal to purchase second hand goods using cash. This is just the beginning. The War on Cash will be spreading in the coming weeks.

The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.

This is true for banks around the world. European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).  If a significant percentage of their depositors took their money out of the bank, the bank would violate its capital limitations at best and implode at worse.

The US financial system isn’t any better. Indeed, the vast majority of it is in digital money. Actual currency is just a little over $1.36 trillion. Bank accounts are $10 trillion. Stocks are $20 trillion and Bonds are $38 trillion.

And at the top of the heap are the derivatives markets, which are over $220 TRILLION.

Notice that less than 1% of the “wealth” in this system is actual physical cash. Now imagine what would happen if investors decided to move their money out of the system and into physical cash.

This is precisely what imploded the money market system during the 2008 crisis.

If you think the banks aren’t terrified of what this market could do to them, consider that JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades. Mind you, this is the same bank that is now refusing to let clients store cash in safe deposit boxes.

This is just the beginning. As anyone can tell you, it’s all but impossible to move large amounts of money into cash in the US. Even the large banks will routinely ask you for 24 hours notice if you need $10,000 or more in cash. These are banks will TRLLLIONS of dollars worth of assets on their books.

This is just the beginning.

Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings.

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Phoenix Capital Research

http://www.phoenixcapitalmarketing.com/cash.html

Graham Summers is Chief Market Strategist for Phoenix Capital Research, an independent investment research firm based in the Washington DC-metro area with clients in 56 countries around the world.

Graham’s clients include over 20,000 retail investors as well as strategists at some of the largest financial institutions in the world (Morgan Stanley, Merrill Lynch, Royal Bank of Scotland, UBS, and Raymond James to name a few). His views on business and investing has been featured in RollingStone magazine, The New York Post, CNN Money, Crain’s New York Business, the National Review, Thomson Reuters, the Glenn Beck Show and more.


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