Guest Post: "The 'War on Cash' Migrates to Switzerland", by Pater Tenebrarum of acting-man.com

27
Thu, Apr 30, 2015 - 11:21am

Written late last week, I thought that this was an excellent summary of negative interest rates and the movement afoot by global banks to eliminate cash and the viability of actual script currency.

But first, I'd like to add some additional thoughts.

Remember, all banks operate on a fractional reserve basis. In the U.S., this currently means that for every $100 a bank takes in as a deposit, it can lend out (create!) $90 of new "money". If you're new to this idea, I strongly urge you to check out Mike Maloney's YouTube channel as he has created a series of educational videos designed to explain this process. One of the best examples is below:

Now there's A LOT of banter out there about this "War on Cash" and how it is a precursor to the elimination of physical paper currency. This would open the door to a new global, digital currency and expanded financial and political tyranny. Maybe. That may very well be where this is all headed. For today, however, I'd like you to keep these points in mind:

  • Banks are in the business of making money. They do this by charging interest and collecting fees. Therefore, anyone or any entity that withdraws paper cash and places it in a safe deposit box is depriving the bank of an income/revenue stream. The bank would much rather charge you a fee for the "safekeeping" of your digital savings. Viewed this way, the new prohibition on storing cash in a safe deposit box is a logical business decision for them.
  • Withdrawing physical script and placing it in a deposit box is also an act of forced deleverage for the bank. Remember, each deposit is multiplied and new money is created through the fractional reserve system. Pulling physical cash from the bank has some of the same impact as paying down a debt. It reduces the digital "float", thereby forcing deleveraging and even creating some deflation. "Deleveraging" and "deflation" are death knells to a system (and any institution) built upon a reliance of ever-increasing supply, leverage and inflation.

So, after considering those two bullets as context, please read this article. Think about where this is headed. Are we going to see more of this "War on Cash" in the weeks ahead or less? In this environment, how in the world can any central bank raise rates, much less "normalize" their balance sheet? And just how valuable is your physical precious metal? I'll help you with that...it gets more valuable by the day!!

TF

"The 'War on Cash' Migrates to Switzerland"

by, Peter Tenebrarum of https://www.acting-man.com

The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.

Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.

This reminded us immediately that we have just come across another small article in the local European press (courtesy of Dan Popescu), in which a Swiss pension fund manager discusses his plight with the SNB’s bizarre negative interest rate policy. In Switzerland this policy has long ago led to negative deposit rates at the commercial banks as well. The difference to other jurisdictions is however that negative interest rates have become so pronounced, that it is by now worth it to simply withdraw one’s cash and put it into an insured vault.

Having realized this, said pension fund manager, after calculating that he would save at least 25,000 CHF per year on every CHF 10 m. deposit by putting the cash into a vault, told his bank that he was about to make a rather big withdrawal very soon. After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it.

Swiss National Bank headquarters

Photo credit: Daniel Rohr

A Legally Murky Situation – but Collectivism Wins Out

What happened next is truly stunning. Surely everybody is aware that Switzerland regularly makes it to the top three on the list of countries with the highest degree of economic freedom. At the same time, it has a central bank whose board members are wedded to Keynesian nostrums similar to those of other central banks. This is no wonder, as nowadays, economists are trained in an academic environment that is dripping with the most vicious statism imaginable. As a result, withdrawing one’s cash is evidently regarded as “interference with the SNB’s monetary policy goals”. Thus SRF reports:

“Since the national bank has introduced negative interest rates, pension funds in the country are in trouble. Banks are passing the negative rates on to them. This results in the saved pension money shrinking, instead of producing a return. A number of pension funds are therefore thinking about keeping their money in an external vault instead of leaving it in bank accounts.

One fund manager showed that for every CHF 10 m. in pension money, his fund would save CHF 25,000 – in spite of the costs involved in vault rent, cash transportation and other expenses.

However, as our research team has found out, there is one bank that refuses to pay out money in such large amounts. The editorial team has gotten hold of a letter from a large Swiss bank in which it tells its customer, a pension fund:

“We are sorry, that within the time period specified, no solution corresponding to your expectations could be found.

Bank expert Hans Geiger says that this “is most definitely not legal”. The pension fund has a sight account, and has the contractual right to dispose of its money on demand.

(emphasis added)

Indeed, although we all know that fractionally reserved banks literally don’t have the money their customers hold in demand deposits, the contract states clearly that customers may withdraw their funds at any time on demand. The maturity of sight deposits is precisely zero.

So how come the unnamed “large bank” (they should have named it, just to see what happens…) is so bold as to break the law by refusing to pay out funds in a demand deposit? Note here that it is indeed breaking the law, as there is nothing in Swiss legislation that states that banks are allowed to refuse or delay servicing withdrawals from demand deposits upon request.

The answer is that it has probably received a “directive” from the Swiss National Bank. Note here that these directives are not legally binding. SFR further:

“The president of the pension funds association ASIP, Hanspeter Konrad, has been irritated for weeks that pension funds are suffering from negative interest rates. He says: “We simply cannot understand that the banks are butting in here”. Konrad suspects that the National Bank is exerting its influence.

Indeed, the SNB confirms that it doesn’t like to see the hoarding of cash to circumvent its negative interest rate policy. “The National Bank has therefore recommended to the banks to approach withdrawal demands in a restrictive manner.”

Hans Giger, professor emeritus at the University of Zurich, says to this that the question how far the SNB can go is legally complicated. While the SNB is not allowed to influence the contract between a bank and a pension fund, it can however “issue directives to the banks in the collective interest of the Swiss economy”. What banks do with the SNB’s directives is however up to them.

(emphasis added)

In other words, large depositors in Swiss banks have now become victims of collectivism. Collectivism is of course precisely what informs all central planning endeavors. Obviously, property rights count for nothing if the central planners can revoke them at the drop of a hat.

Conclusion

It is undoubtedly a huge red flag when in one of the countries considered to be a member of the “highest economic freedom in the world” club, commercial banks are suddenly refusing their customers access to their cash. This money doesn’t belong to the banks, and it doesn’t belong to the central bank either.

If this can happen in prosperous Switzerland, based on some nebulous notion of the “collective good”, which its unelected central planners can arbitrarily determine and base decisions upon, it can probably happen anywhere. Consider yourself warned. As the modern day fiat money system inevitably cruises toward its final denouement, individual rights will come increasingly under attack as the world’s ruling elites and centrally directed banking cartels begin to batten down the hatches.

Better continue stacking, and keep a pile of this within grabbing distance – after all, it can be purchased at a generous discount these days:

About the Author

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turd [at] tfmetalsreport [dot] com ()

  27 Comments

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Dr. P. Metals
Apr 30, 2015 - 3:57pm

@SS

well, until then, this investing in "sound money" sure is terrible for your "financial health" :( geesh...trying not to look today. JNUG almost back to a buck 90 something again.

SS121
Apr 30, 2015 - 3:36pm

Lovin it!!!

The system and all it's unseen machinations are either being openly exposed or now considered fraudulent at a rapidly increasing pace.

The system's long slow death (time for stacking) will not have a long slow ending.

...and just like that, all that was declared to be real from behind the curtain, will be gone. Not discussed, excused, reasoned about, spun, repackaged, and recycled. GONE.

"Only Silver and Gold are Money", they will all then say.

thedukes
Apr 30, 2015 - 2:27pm

Brotherjohnf belangp busted

<iframe width="640" height="360" src="https://www.youtube.com/embed/iEj91xNnPDk?feature=player_detailpage" frameborder="0" allowfullscreen></iframe>

Dyna mo hum
Apr 30, 2015 - 1:57pm
infometron
Apr 30, 2015 - 12:56pm
canary
Apr 30, 2015 - 12:46pm

I hate those PM raids....

.... but my doggies always love them...enjoying those long, long walks.

Key Economic Events Week of 7/6

7/6 9:45 ET Markit Service PMI
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7/7 10:00 ET Job openings
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Goldencross
Apr 30, 2015 - 12:37pm

Andrew Maguire

once more a HFT gifted buying opportunity.Easy COT pickings rinsing hot money at the 50.Good riddance.

Safety Dan
Apr 30, 2015 - 12:31pm

The Financial Markets Now

The Financial Markets Now Control Everything

Posted on April 30, 2015 by Charles Hugh Smith

The entire economic and political structure is now dependent in one way or another on the continued expansion of financial markets.

The financial markets don’t just dominate the economy–they now control everything. In 1999, the BBC broadcast a 4-part documentary by Adam Curtis, The Mayfair Set ( Episode 1: “Who Pays Wins” 58 minutes), that explored the way financial markets have come to dominate not just the economy but the political process and society.

In effect, politicians now look to the markets for policy guidance, and any market turbulence now causes governments to quickly amend their policies to “rescue” the all-important markets from instability.

This is a global trend that has gathered momentum since the program was broadcast in 1999, as The Global Financial Meltdown of 2008-09 greatly reinforced the dominance of markets.

It’s not just banks that have become too big to fail; the markets themselves are now too influential and big to fail.

Curtis focuses considerable attention on the way in which seemingly “good” financial entities such as pension funds actively enabled the “bad” corporate raiders of the 1980s by purchasing the high-yield junk bonds the raiders used to finance their asset-stripping ventures.

This increasing dependence of “good” entities on players making risky bets and manipulating markets has created perverse incentives to keep the financial bubble-blowing going with government backstops and changing the rules to mask systemic leverage and risk.

The government must prop up markets, not just to insure the cash keeps flowing into political campaign coffers, but to save pension funds and the “wealth effect” that is now the sole driver of “growth” (expanding consumption) other than debt.

To maintain the illusion of growth and rising wealth, the financial markets must continually reach greater extremes: extremes of debt, leverage, obscurity and valuations. These extremes destabilize markets, first beneath the surface and then all too visibly.

The technological advances of the past decade have enabled a host of financial schemes that together have the potential to destabilize the markets globally.Technology enables high-frequency (HFT) traders to only suffer one losing day per year, complex reverse-repo swaps/trades, huge derivative bets and shadow banking, where all the risks generated by these activities can pool up outside the view and control of regulators.

The entire economic and political structure is now dependent in one way or another on the continued expansion of financial markets.

This spells the end of the electoral-political control of the economy, as politicians of all stripes quickly abandon all their ideologies and policies and rush to “save” the markets from any turmoil, because that turmoil could destabilize not just the financial markets but the economy, pensions and ultimately the government’s ability to finance its own profligate borrowing and spending.

Safety Dan
Apr 30, 2015 - 12:27pm

S&P repeating 2000 and 2007

S&P repeating 2000 and 2007 pattern right now?

Posted by Chris Kimble on 04/30/2015 at 7:30 am; This entry is filed under S&P 500.

CLICK ON CHART TO ENLARGE

In 2000 and 2007 the S&P created bullish ascending triangle patterns, which two-thirds of the time suggest higher prices are ahead. The key to this pattern is support holding. Both times multi-year support failed to hold and you know the rest of the story.

Now the S&P appears to be creating the same pattern again, at 161% Fibonacci extension resistance.

In 2000 & 2007, what the S&P did at support was very important!

Swift Boat Vet
Apr 30, 2015 - 12:17pm

EXCELLENT

First?

Swifty

P.S. Obviously not first ---- far from it. I've got to learn not to read the whole post and watch videos before posting

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7/10 8:30 ET PPI for June

Key Economic Events Week of 6/29

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Key Economic Events Week of 6/8

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Key Economic Events Week of 5/18

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Key Economic Events Week of 4/27

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4/29 2:30 ET CGP presser
4/30 8:30 ET Pers Inc and Cons Spend
4/30 9:45 ET Chicago PMI
5/1 9:45 ET Markit Manu PMI
5/1 10:00 ET ISM Manu PMI

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