It’s proving harder than its proponents thought to get rid of cash and herd people into the banking system. From Don Quijones at wolfstreet.com:
People view paying in cash “as a fundamental freedom, which should not be disproportionately restricted.”
The European Commission, in its official war on cash, admitted that physical cash is perhaps not quite the source of all evil that many EU institutions, including the Commission itself, had made it out to be. And it has abandoned its war on cash.
In a report to the European Parliament and Council on the viability of EU-wide cash payment restrictions, the Commission made three crucial observations.
1. Cash restrictions would have little effect on terrorist financing
Cash plays a major role in many terrorist activities, “offering anonymity and facilitating the ability to conceal not only illegal activities, but also ancillary legal transactions that could otherwise be tracked by law enforcement agencies,” the report points out. But according to the findings of a detailed analysis of recent terrorist attacks, restrictions on payments in cash would have had little impact on the capacity to prepare these attacks, especially given the “observed trend of the decreasing costs of terrorist attacks.”
The amounts of individual transactions are often even lower, and would therefore not have been impacted by restrictions. What’s more, many common transactions made in the preparation of recent terrorist attacks were done using traceable means (credit and debit cards, bank transfers, etc.) without raising any red flags.
2. Cash restrictions could be useful in combating money laundering but are of limited help against tax fraud.
The report notes that cash limits could be a useful tool in the fight against money laundering, of which cash transactions are normally the starting point. Despite the steady growth in non-cash payment methods and the changing face of criminality (i.e., the rise in cybercrime, online fraud and illicit online market places), criminal activities continue to generate profits in the form of large amounts of cash.
The fact that EU Member States have vastly different rules on cash limitations makes it easier for criminals to launder the proceeds of their operations as it allows them “to circumvent controls in their country of origin by investing in cash intensive businesses in another EU Member State with no or a lower control of cash expenditures.”
To continue reading: The EU Backs Off its War on Cash. Here’s Why
MUNICH – In May 1998, irrevocable conversion rates for the currencies that would be merged into the euro were implemented. In a sense, this makes the single currency just over 20 years old. The first decade of its life had the feeling of a party, particularly in Southern Europe; but the second decade brought the inevitable hangover. Now, as we enter the third decade, the prevailing mood seems to be one of increasing political radicalization.
The original party was a cornucopia of cheap credit, which capital markets happily issued to the countries of Southern Europe under the protection of the euro. For a while, these countries finally had enough money to increase public-sector salaries and pensions, as well as spur private consumption and investment.
But the credit flooding into these countries created inflationary bubbles, which burst when the 2008 financial crisis in the United States spread to Europe. As capital markets refused to extend further credit, Southern Europe’s previously halfway-competitive but now overpriced economies soon ran into serious trouble.
The Southern Europeans’ response was to start printing what they could no longer borrow. Aided by the European Central Bank – which loosened its collateral policy for refinancing credits and increased its tolerance for emergency liquidity assistance and credits under the Agreement on Net Financial Assets – they drew hundreds of billions of euros out of the monetary system through so-called Target overdrafts. And from 2010 onward, they were the recipients of EU fiscal rescue packages.
But, because financial markets viewed these rescue packages as insufficient, the ECB, in 2012, issued a promise to cover unlimited member-state government bonds under its “outright monetary transactions” program, turning them into de facto euro bonds. Finally, in 2015, the ECB launched its quantitative-easing program, whereby member states’ central banks bought €2.4 billion ($2.8 billion) worth of securities, including €2 billion of government bonds. Accordingly, the eurozone’s monetary base grew dramatically, from €1.2 trillion to over €3 trillion.
To continue reading: Twilight of the Euro?