Betrayal by EFTPOS
From Dan Denning in St Kilda:
–In yesterday’s Daily Reckoning we left off with the idea that a cashless society promotes tyranny. That might seem like an odd subject to begin with today, given the show-stopping 50 basis point cut in the cash rate by the Reserve Bank of Australia (RBA) yesterday. But our job at the Daily Reckoning is to be forward thinking. So let’s move forward and think about the future of money.
–The future begins now. Actually, it began in 2010 when buses in Sweden stopped taking cash to pay fares. To catch a ride today you have to use your mobile phone. With new payment technologies, mobile phones are also becoming wallets. Sweden is now talking about going completely cashless.
–In fact, 97% of all retail transactions in the country are already done electronically. That’s something, when you consider Sweden was the first country in Europe to issue banknotes back in 1661. In the US, electronic transactions account for about 93% of retail sales. We were unable to find the figure for Australia.
–None of this seems like a big deal at first. Going cashless is about convenience and efficiency. No one likes carrying around a pocketful of loose change. The gradual digitalisation of money has led countries to quit minting smaller denomination coins. New Zealand stopped minting one and two cent coins in 1990. Australia followed suit in 1992.
– Björn Ulvaeus — you know one of the B’s in Swedish pop sensation ABBA — says that a cashless society would reduce crime. He cites figures showing that bank robberies in Sweden are down since some banks stopped carrying cash. He’s also motivated by the fact that his son has been robbed three times. He believes eliminating cash from your pockets will leave robbers with nothing to steal.
–There is some debate within the Catholic Church over whether theft is a mortal sin or venial sin. Then again, there’s a good argument to be made that sin is sin no matter what. In either case, we’re betting that people will find a way to rob one another even if there’s no cash. And that’s one of the more obvious issues about moving to a cashless society: security.
–Physical crime might decrease with a cashless society, but that doesn’t mean crime will decrease. It will just get more sophisticated in nature. It will include identity theft. And it will include ways of stealing your money that we haven’t even dreamed of. What’s more, moving to a cashless society increases the chance that the government and bankers can steal your money even more efficiently than ever through debasement of the currency. We’ll return to that in a second.
–There is an argument to be made that moving to a cashless society increases efficiency by reducing transaction costs in an economy. The example banks like to use is processing physical cheques. To clear a cheque a person has to look at it, then enter a certain number of keystrokes at a terminal and then stamp the cheque, which then has to be stored. All of that time and labour, and time is money!
–It’s hard to argue with. The digitalisation of cash transactions corresponds with a huge spike in global trade and commerce. When moving money around the planet is easier, so too is moving around goods and services. Does a cashless society promote more trade and prosperity?
–Well, the absence of cash in the financial world has also led to an explosion in cross-border investment and speculation. Here we’re talking about foreign exchange markets, where many trillions of dollars worth of transactions are conducted every day. And don’t forget the derivatives markets, including interest rate futures, which are also conducted on a cash-free basis. Has this made the world a better, safer, more stable place?
–If anything, reducing the friction in global money flows has made the world more unstable. Money — or its digital equivalent — sloshes around the planet at lightning speed. Is this efficiency? Or does it just accelerate instability?
–In the event, proponents of a cashless society seem to take it for granted that mobile phone networks will always work. What if the network goes down? What if an EMP burst renders all technology with circuit boards useless? What if someone attacks the network? How resilient, redundant, and robust is an economy that uses only electronic cash?
–All these issues — efficiency, reliability, privacy, security — are practical issues about moving to a cashless society. If they were the only issues, you’d think they’d be resolved sooner or later. Once resolved, the world could move on to a glorious cash-free future. But there is one last issue left. Namely, what is money?
–Is money a real thing, a commodity? Or is it an abstraction and a social construct? Normally you wouldn’t have to ask a question like this. You reach in your pocket and trade the paper there for the thing you want. It works without thinking. But it only works if everyone agrees on what money is.
–If money is an abstraction it certainly makes it a lot easier to do business. But it also makes it a lot easier for the government to watch your every move. If every transaction is digital, it’s traceable, and can be produced when you’ve been audited by the tax authorities.
–This may sound a little conspiratorial. After all, if you have nothing to hide, why should you worry about the government snooping around your cashless transaction history? But when people phrase the question this way, they assume that the burden of proof that you are not doing something illegal is on you.
–In other words, without arguing it, they have effectively said that the government has the right to know what you do in your private life. Is that a society you want to live in? Is that a free society? Or is that a society where individual liberty is undermined through the digital payments system?
–There is also a practical aspect to our paranoia. Many governments in the Western world are broke or headed that way. Keeping tabs on electronic transactions makes it easier to track down tax dodgers and tax avoiders. Governments that are desperate for any money they can get will welcome the ability to trace, track, and tax every single transaction you make.
–If you’re one of the people that thinks that is a good thing, you should probably stop reading now. You should also probably unsubscribe from the Daily Reckoning. Immediately.
–But really it’s more than just a tax collection issue. It’s an issue about what money is. Governments and central banks use control of the money system to engineer inflation. Inflation grows GDP in nominal terms. But over time, it decreases the value of your savings. And to the extent inflation decreases purchasing power, the money system also decreases the value of your labour. The money you earn for the work that you do is worth less over time. It’s like taking a pay cut without knowing it.
–Theft through inflation of the money supply would be much easier in a cashless society because there would no theoretical limit on how big the money supply could get. When money becomes a digital abstraction, you can create it with a few keystrokes, as the Federal Reserve and European Central Bank have done over the last two years. When money is electronic, the restrictions on its supply are removed.
–We’d argue that a cashless society means money is fully abstract. This has one practical side effect. You will be unable to legally engage in transactions that involve cash. If you do so, you’re a criminal. Nevertheless, you’d expect to see a lively black market emerge in cashless societies.
–But the real effect is that the likelihood of government tyranny is greatly increased as you move to a cashless society. It’s not just that petty bureaucrats and tax collectors and agents of the State are likely to abuse their ability to monitor what you do with your money, although all that is true. The real risk is that a completely cashless society removes any check on the debasement of the currency and thus allows the government to grow even larger and more intrusive in private life.
–If you’re still reading, we assume we haven’t frightened you away with our suspicion of ever-expanding State power. But then, that’s really our point. Control of the money system is what enables the State to grow. Central banks were set up to be lenders of last resort to governments. Most central banks have a monopoly on currency creation. Removing physical currency from circulation cements that monopoly and increases the chance of even more government spending on wars, foreign and domestic.
–The good news is that money is not an abstraction. It is a physical representation of value that you can exchange for something you desire. People know this intuitively. People stop using money when they realise its quantity can be increased arbitrarily, thus reducing the value of their labour and savings.
–People stop using a currency when they realise it has no value because it’s being used as a tool to preserve a certain system. The move to a cashless society is another attempt to preserve the power and the privilege of that system. It’s not about convenience and efficiency. It’s about power and control.
–But it’s bound to fail. For example, can you imagine Judas using BPAY for his betrayal of Jesus? Or EFTPOS? No. That kind of transaction took thirty pieces of silver. Silver is real money, as is gold. Don’t expect that to change any time soon.
Regards,
Dan Denning
for The Daily Reckoning Australia
Related articles
- NEWS FROM THE FUTURE – The End of Cash (makezine.com)
- Who In Their Right Mind Would Want A Cashless Society? (ghacks.net)
The Road to Housing Hell…
From Greg Canavan in Sydney:
– More evidence the Aussie economy is grinding to a halt: Yesterday, the Australian Bureau of Statistics released housing finance and building approvals data. It wasn’t pretty.
– Housing finance – the amount of credit provided to the residential housing sector, including refinancing – fell 1.3 per cent in the month of February. Finance provided to owner-occupiers fell a hefty 4 per cent while ‘investor’ finance increased 4.4 per cent. How anyone thinks housing is a good investment is beyond us…a speculation in the hope of rising prices maybe, but an investment?
– Actually, the whole ‘housing is a great investment’ mindset is alive and well in Australia. Today’s Financial Review has a special lift-out on ‘Investing in Residential Property’. There are a couple of classic articles you sure won’t want to miss. For example:
‘For affordability, you can’t beat single bedders’ and…
‘In slow times, shop around and think strategically’
– Timeless advice.
– Anyway, our point is you don’t see these types of advertisements/special reports at the bottom of the market. They’re the type of thing that pops up after a much-loved asset class has a bad year. They tap into the emotion that now must be a good time to buy. Things are slow…it’s a buyer’s market. And if you can’t afford anything useful, you and the family can always get that cheap single bedder.
– Owner-occupiers don’t seem to be buying the hype though. They’re the ones who seem to be doing the sums and working out that renting is actually a cheaper option…and that supposedly ‘dead’ rent money is, in many cases, less than the dead weight of interest on an exorbitant loan.
– In such cases, the only way you can build equity in the asset is by betting on house price appreciation. That’s been a safe bet for decades…but is it for the next few? The law of nature, averages and mean reversion would cast doubt on such a bet.
– Even more worrying for the Aussie economy was the sharp drop in February building approvals. Seasonally adjusted, total dwellings approved dropped 7.8 per cent month-on-month. Over the past year, approvals are down 15.2 per cent.
– Predictably, the release of these dismal figures drew a cry for interest rate cuts…and fast. Today’s Fin Review quotes the Australian Chamber of Commerce and Industry as saying:
‘The time has come for Australia’s central bank to move decisively to cut rates by a full half a per cent, and for the retail banks to immediately pass it on. There needs to be a significant and unambiguous signal to support activity and lift confidence across the next quarter.’
– And how has low and lower interest rates worked out for the US, Japan, the UK or Europe? The simple fact is, when debt levels become extreme (household debt in Australia is over 100 per cent of GDP) lower interest rates reflect economic malaise, not strength. The evidence is everywhere to see.
– We’ll come back to that point in a moment. First, let’s look at the much more likely reason why Australia is in a home building slump:
– Taxes.
– They are completely out of control. Over in the property section of the Fin Review, a report by the Centre for International Economics, commissioned by the Housing Industry Association, shows that taxes make up between 36 per cent and 44 per cent of the price of a new home. Seriously.
– So there you go. House prices are not unaffordable because interest rates are too high. They are unaffordable because you have leeches at every level of government trying to get their share of blood from the homeowner.
– The article cites an example of a young Sydney-based couple with a $612,000 house and a 10 per cent deposit. In such an example, the tax component of the purchase price would consume half their mortgage repayments.
– The study points out that nearly all the burden of the taxes fall on the homebuyer. Land bankers, developers and builders only absorbed between 2 per cent and 6 per cent of the tax burden.
– There are a few reasons why governments will likely do very little about this massive rort. Firstly, the property gravy train provides them with too much money. A separate report released yesterday revealed the property industry provided the Victorian State government $5.4 billion in taxes in 2009/10. That’s nearly 40 per cent of the State’s total tax revenue.
– And if governments seriously attempted to reform the property tax system, you would see prices drop. Falling house prices and winning elections don’t usually mix.
– The bottom line is that due to political greed and ineptitude (that includes Labor and Liberal governments at State and Federal level) our housing system is a total mess. And the whole property sector is complicit too. No one cared while easy credit pushed house prices higher, financing exorbitant fees and taxes. But now the industry is in a rut, the fee grabbers are getting testy.
– Not that the finance industry is any different. The whole superannuation industry is filled with ticket clippers. But taxes, fees and commissions on super are not quite as exorbitant. And while super is important, we’re not talking about the essential service of shelter here.
– So we have a major structural problem in house prices. And rather than do anything themselves, governments will call on the RBA and banks to lower interest rates to make houses ‘more affordable’.
– Meanwhile, those who suffer from lower interest rates – savers or those relying on income to live – get screwed. We’re not at the stage of the US just yet, but we’re heading there. If you want to know the effect of prolonged low interest rates, just take a look across the vast Pacific Ocean.
– John Hussman‘s latest essay provides the details. It’s as good a description you’ll read about why central banking is essentially evil. As the saying goes, ‘the road to hell is paved with good intentions’.
If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession “ended” in June 2009, total non-farm payrolls in the U.S. have grown by 2.32 million jobs (establishment survey, or 2.03 million using Household survey figures). However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 3.04 million jobs.
In contrast, employment among workers under age 55 has actually contracted by nearly one million jobs, regardless of which survey you use. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.
..while the civilian labor force participation rate has declined significantly for virtually every class of worker since mid-2009, the participation rate for workers over the age of 65 has hit new highs.
Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation.
Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles – one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.
In short, what we’ve observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety.
Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. Meanwhile, broad labor force participation continues to fall as discouraged workers leave the labor force entirely, which is the primary reason the unemployment rate has declined. All of this reflects not health, but despair, and helps to explain why real disposable income has grown by only 0.3% over the past year.
Regards,
Greg Canavan
for The Daily Reckoning Australia
Illegal Insider Trading
Author: Michael Enfield
Most people do not realize that insider trading can be both legal and illegal. With legal insider trading, people inside a corporation trade their company’s stocks and report the trades to the U.S. Securities and Exchange Commission, or SEC. With illegal insider trading, people use secret, nonpublic information to make securities trades.
With the Restoring America To Financial Stability Act of 2010, the U.S. government is taking a harsh stand against securities fraud and insider trading in order to help restore the economy as well as America’s faith in the stock market. Thus, the SEC encourages individuals to bring forth information that they may have regarding illegal insider trading. If this information leads to a successful court case, you can receive a portion of the amount awarded to the U.S. government. This is called qui tam law.
A qui tam attorney can help you determine if your information can help the SEC pursue illegal insider trading. However, there are some general things to watch out for when you suspect illegal insider trading. Some recent securities fraud cases brought by the SEC include:
- Corporate executives and employees who used secret insider information to make trades with their company’s stock
- Corporate directors and workers who traded their corporation’s securities without properly reporting the trades to the SEC
- Friends, associates, and family members who traded a corporation’s stock based on sensitive information they received from someone at the company
- Employees of financial institutions such as banks or brokerage firms who traded stock based on information they received through providing necessary services to a corporation
- Government employees who used their positions to trade securities with nonpublic tips
Insider trading is unfair, and it can illegally lower the value of your stock as well as the securities owned by millions of other victims. If you are aware of any illegal insider trading, you should not hesitate to act as a “whistleblower” so that you can protect your rights and the rights of other law-abiding citizens.
To discuss your information and rights to protection as a whistleblower, you should only entrust your case to a reliable, experienced qui tam lawyer. Contact a respected Qui Tam attorney from Tycko & Zavareei, LLP, today to learn more about your legal options.
Article Source: http://www.articlesbase.com/national-state-local-articles/illegal-insider-trading-3090159.html
Why Gold and Silver?
Why Gold and Silver? Explained by Mike Maloney
This is almost certainly THE BEST documentary on currencies, financial history, and gold and silver that I’ve ever seen… I highly advise that you watch it immediately, and share it with every person you know…
This is the full version of the movie, which features extra parts not yet seen on YouTube: Currency creation, the Federal Reserve, fractional reserve banking, how central banks steal our wealth, runaway deficits, the second wave of mortgage resets, Mike’s prediction of short term deflation THEN hyperinflation, New Media, Ron Paul, and the Constitution.
The Oil Price: Warning of War?
When you’re just not sure what any of it means anymore, there’s always the price action. That’s the basic theory behind Murray’s trading method at Slipstream Trader. He takes his customary mid-week look at markets today with a video update. Click stock market update to watch it now.
One of the markets we meant to look at briefly yesterday was the oil market. It is preparing for war. But its preparations were disrupted yesterday by a trading “glitch”. Dow Jones newswires reports that, “Crude futures settled higher overnight in a chaotic trading session as a failure of CME Group’s Globex electronic oil-trading platform shut out scores of traders and forced all trading onto the New York Mercantile Exchange floor.”
That’s kind of strange. The interruption of electronic trading didn’t make much difference to the closing price for the March futures contract. It closed at just about US$100. But it would have been something to see all those traders run from their green screens and rush to the pit to make trades the old-fashioned way.
It’s amazing there hasn’t been a deliberate hack or attack on electronic markets yet, by the way. It will happen eventually. Either a whole index will be attacked, or maybe just a single share held to ransom. You might even argue that high frequency trading and algorithms are a kind of legal share price hacking.
In any event, let’s assume that prices are legitimate and look at one of them in particular, Brent Crude Oil. We wrote yesterday that the oil market is preparing for war. By that, we meant that the price of Brent crude has broken out of a channel where it was making lower highs and lower lows. Have a look at the chart below.
To be fair, our method of chart analysis is not nearly as thorough as Murray’s. But we’re looking at the chart to see how it squares with our macro-view. This chart is a bit of a riddle. You can see at least three different ideas embedded in it.
The first idea is that oil prices can crash. That may seem too obvious to point out. But how many people thought oil would fall from $140/barrel in mid-2008 to less than $40 by the end of the year? Not too many, your editor included. Today’s high oil prices should be viewed with 2008 in mind.
The second idea: oil may be a lousy inflation hedge. The investment industry has propagated the idea that exposure to oil is one way to hedge a falling US dollar. Since oil is priced in dollars this makes sense. When you have more dollars chasing oil, prices rise.
The chart suggests that oil prices may be the product of inflation more than a hedge against it. There’s certainly a fair bit of volatility in the oil price. If you wanted a hedge against inflation that would let you sleep well at night, oil wouldn’t be it.
The third idea we get from the chart is that the recovery since the crash-low of 2009 doesn’t have much conviction. You have some people buying oil as a dollar crash hedge. You have some people buying it on pure supply/demand dynamics. And you have some people buying it because they think there’s going to be a shooting war in the Middle East.
The very latest price action, in which the oil price breaks out of the little trend channel we’ve drawn over it, is the last thing we’d bring to your attention. Is this directly related to the possibility that Israel could attack Iran? Are traders building in the war premium to the oil price?
This is a tricky one. Various pundits have been warning of/advocating for an Israeli strike on Iran. Yet the more we think about it, the less likely we imagine this will ever happen. No one really wants it to happen. It’s disaster for all parties involved. Only the zealots and the ideologues believe it is inevitable.
You’d think that as long as the adults in the room were calling the shots, there won’t be a war with Iran. But the margin is just as important in geopolitics as it is in economics. A small group of dedicated people can “tip” the rest of the crowd into irrational behaviour. The result is a kind of economic and cultural suicide that ends a period of prosperity.
Could that happen now? It might be the natural evolution of the financial crisis into a political and military crisis. Maybe this is how complex systems decay and disintegrate. They have enough life in them to be dangerous, especially with individual human beings at the head of them.
The Western world has been so safe, comfortable, and prosperous for most people in the last 20 years that it’s almost unimaginable we could be seriously inconvenienced. It’s even more unimaginable that Great Powers like China, the US, and Europe would permit a war to break out smack dab in the middle of the world’s largest oil reserves. But collective plunges into insanity and war happen pretty regularly in human history.
Regards,
Dan Denning
for The Daily Reckoning Australia
