Executive Summary

• Which power groups will determine how the war on cash is waged?
• Is it better to hold cash in savings/checking accounts, or securities accounts?
• What will likely happen with retirement accounts?
• Ways to diversify your cash risk

If you have not yet read Part 1: The War on Cash: Officially Sanctioned Theft available free to all readers, please click here to read it first.

In Part 1, we reviewed the basic elements of the war on cash, and how it benefits banks and governments but not households that don’t already own productive assets.

In Part 2, we’ll review the downside of imposing capital controls and eliminating physical cash, and discuss strategies to protect our financial assets from bail-ins and negative interest rates/fees on cash.

The Role Of Cash In The Informal Economy

In stagnating formal economies burdened by over-regulation, high taxes and financialization, one of the few bright spots for employment and entrepreneurism is the informal or cash economy.  The more stultified and elite-dominated the economy, the larger and more vibrant the informal economy.  In some highly regulated, high-tax European nations, up to 30% of the economic activity is underground/cash.

The elimination of central bank currency will not eliminate the informal economy. Rather, the participants in this sector will adopt non-central bank issued forms of cash—precious metals, coins, other nations’ paper money, perhaps even digital currencies such as bitcoin or its gold-linked cousins (Bitgold, etc.)

Those with little income often do not have bank accounts, as the fees are costly. Eliminating cash will hit the poor who earn money in the informal economy especially hard. Though the poor are essentially powerless in our influence-is-auctioned-to-the-highest-bidder system, this could change once the working poor who benefit from the cash economy are pushed even deeper into poverty by the banning of cash. That might spark political blowback that could cross political lines, as libertarians and leftists alike might rise to the defense of those who depend on cash and the informal economy.

US Dollar Hegemony Is Partly Based On Physical Cash

One of