“ Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

— Benjamin Franklin

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It seems that nearly every day we have a new technology designed to eliminate cash payments: digital wallets, virtual currencies, money transfer apps. The electronic payment industry is constantly looking for ways to replace cash and the Federal Reserve actually encourages innovations in how we pay for things.1 It’s no wonder that central banks are jumping on the bandwagon by experimenting with digital currencies.2

The former chief economist for the International Monetary Fund is now leading the charge to move the United States to a completely cashless society. Harvard Professor Kenneth S. Rogoff argues that “paper currency has become a major impediment to the smooth functioning of the global financial system….”3

At one time, Professor Rogoff would be considered an outlier but no longer. The champions of a cashless society include billionaire Bill Gates, former treasury secretary Lawrence

Summers, Citigroup Chief Economist Willem Buiter and the former president of the Federal Reserve Bank of Minneapolis, Professor Narayana Kocherlakota.4

Even former Fed Chair Ben Bernanke believes Professor Rogoff’s arguments for a digital currency are “compelling and wide-ranging.”5

When cashless society proponents first argued for a move towards a cashless society, they suggested we begin with the elimination of the $100 bill to help combat

crime and terrorism.6 Today, they are far more transparent about their real motives.

Professor Kocherlakota argues a cashless society is required to ensure the government can impose negative interest rates on every citizen who holds cash:

[T]wo government mechanisms prevent real interest rates from getting too negative. The first is cash: As long as people can hold currency, which loses its value only at the rate of inflation, they won’t buy safe assets that yield even less. The second is the central bank’s promise to keep the inflation rate low and stable… In other words, governments — by issuing cash and managing inflation — put a floor on how low interest rates can go and how high asset prices can rise…

The right answer is to abolish currency and move completely to electronic cash, an idea suggested at various times by Marvin Goodfriend of Carnegie-Mellon University, Miles Kimball of the University of Colorado and Andrew Haldane of the Bank of England. Because electronic cash can have any yield, interest rates would be able to go as far into negative territory as the market required. Some groups of people, particularly retirees and soon-to-be-retirees, might react with horror to such an idea. That’s to be expected.7

1“Will cash become extinct?” Bankrate.com, 2/25/14. 2“Central banks explore blockchain to create digital currencies,” Financial Times, 11/1/16.3“Imagining A Cashless World,” The New Yorker, 10/10/16.4“ It’s time to kill the $100 bill,” Washington Post, 2/16/16; “India Wants a Cashless Society.

But There’s a High Cost,” Slate, 11/28/16; “Want a Free Market? Abolish Cash,” Bloomberg, 9/1/16.5“This Harvard Economist Is Trying to Kill Cash,” Bloomberg, 9/7/16. 6“Getting Rid of Big Currency Could Help Fight Crime,” New York Times, 2/22/16.7“Want a Free Market? Abolish Cash,” Bloomberg, 9/1/16, emphasis added.

The bottom line is a digital currency allows our government to use negative interest rates to effectively tax us on every digital dollar we own. And because the currency is digital, we can’t simply keep our money at home or outside of the banking system to avoid the tax or government scrutiny.8

India — A Cautionary TaleThe move towards a cashless society is not limited to the United States. Australia, the United Kingdom, the European Central Bank are all considering eliminating large denomination bills. Sweden, Denmark, Norway and Belgium are already on their way towards a cashless society — in Belgium, 93 percent of all consumer transactions are now digital.9

The most recent country to move towards a digital currency, India, has shown us how dangerous this move can be. On November 8, 2016, India’s Prime Minister, Narendra Modi, announced that 500 (about $7.40) and 1,000 rupee (about $14.80) notes would be banned effective midnight. This amounted to the “demonetization,” or removal of the legal tender status of currency, for approximately 85% of all of India’s cash.11

The demonetization of so much currency threw the country into chaos affecting millions of Indians. People were forced to line up for hours at banks and ATMs only to find there was no cash to be had. Workers stayed home because they couldn’t pay for gas or transportation, more than nine million trucks were abandoned

when drivers ran out of cash, and a new barter economy arose.12

India’s economic catastrophe also led to a new “gold rush” as Indians scrambled to buy gold, trading in bags of cash for gold which had doubled in price. 13

A Cashless Society is a Move Towards Economic TotalitarianismThe threat posed by a cashless society is not limited to our pocketbook. As Scott A. Shay, chairman of Signature Bank explained, a cashless society is a threat to our basic freedoms and survival:

Imagine a future in which soon, a government staff member could suspect an individual of some misconduct, or perhaps deem that person’s politics or speech unacceptable. It would take just a few keystrokes to order all financial institutions to decline any withdrawal or payment from that individual and to transfer any deposits or payments of that person to the government, or at least freeze any access to funds. Perhaps this would need to be reviewed by a secret court that would approve 99.7 percent of all requests, but would provide a veneer of due process. It is fair to think that the targeted individual might starve to death. This could be insured by cutting off access to the payment system of anyone suspected of helping the targeted individual.14

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As this graph demonstrates, a number of European countries already limit how much cash its residents may spend to purchase goods.

Belgium €3,00010

Italy €2,999,99

Spain €2,500

Greece €1,500

Portugal €1,000

France €1,000

8“India’s Demonetization Could Be The First Cash Domino To Fall, Forbes," 12/1/169“ Imagining A Cashless World,” supra. See also, “Australia Should Scrap Big-Denomination Bank Notes,

UBS Says,” Bloomberg, 11/13/16.10“European Consumer Centre Germany.” Cash Payment Limitations. N.p., n.d. Web. 03 Jan. 2017.11“Can India really become a cashless society?” BBC, 11/25/16.12“ India Wants a Cashless Society. But There’s a High Cost,” supra; “The Strange Consequences of India’s

Unprecedented Banknote Ban,” Bloomberg, 11/29/16.13“The Strange Consequences of India’s Unprecedented Banknote Ban,” supra.14“Cashless society: A huge threat to our freedom,” CNBC, 12/12/13.

Europe's Limits on Cash Payments

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Further, the desire to destroy cash and impose negative interest rates ultimately will lead to “Economic Totalitarianism” according to experts such as economist Martin Armstrong:

This idea of eliminating cash first floated as the normal trial balloon to see how the people would take it. Kenneth Rogoff of Harvard University, and Willem Buiter, the chief economist at Citigroup, first launched the concept. Their claims have been widely hailed and their papers are now the foundation for the new age of Economic Totalitarianism that confronts us. Rogoff and Buiter have laid the groundwork for the end of much of our freedom, and one day will be considered the new Marx with hindsight… Considerations of their arguments have shown how governments can seize all economic power and destroy cash in the process of eliminating all rights. Physical paper money provides the check against negative interest rates, for if they become too great, people will simply withdraw their funds and hoard cash. Furthermore, paper currency allows for bank runs. Eliminate paper currency and what you end up with is the elimination of the ability to demand to withdraw funds from a bank.15

In a negative interest environment, we choose to penalize savers like our millennials saving for a new home, the entrepreneur saving for a new business venture, and our retirees who saved for their golden years. And we reward borrowers, including our own fiscally irresponsible government, who rely upon debt to fuel their short-term interests.16 This war of cash will not end well: “History has proven time and time again that all governments, whether city-states, countries, or empires, eventually debase their currencies to worthlessness and the world economic system lapses into chaos.”17

Gold — The “Honest” Currency Why did Indians line up to trade their cash for gold at double the price? Because gold, in contrast to fiat currencies, is the one “honest” currency that governments can’t digitize or print:

What governments have been unable to do though is to effectively ‘demonetize’ the money previously chosen by the market — namely gold … In the course of the 20th century alone, we have seen such a wide range of government depreda-tions with respect to money, that one has to be extraordinarily naïve to believe repeat performances are no longer possible.

What has happened in India should be seen as a clear warning. State-issued cash currency may not be affected by bank insolvencies and ‘bail-ins’, but it is by no means safe. By contrast, gold simply cannot be devalued by government decree.18

Not only is physical gold a hedge against an unchecked government, physical gold also plays a critical role in diversifying a portfolio or IRA because it is a recognized safe haven asset generally uncorrelated to other assets and free of counterparty risk.19 Gold usually moves differently and may counter the factors which affect financial assets, thereby potentially helping to reduce portfolio volatility.20 Further, when the unforeseen happens, including the rise or fall of governments or economies, gold is the international currency that people are prepared to accept.21

With the world marching towards the death of cash, it’s more important than ever for investors to ensure they are protected by the one currency which has survived centuries of political and economic collapse and dislocation: gold.

To learn how you can acquire the only hard currency that cannot be printed, hacked or digitally stolen, call Goldline today to see how easy it is to buy physical gold.

800-742-8420 www.goldline.com

15“ The New Age of Economic Totalitarianism & the London Meeting to End Currency,” Armstrong Economics, 5/3/15, original emphasis.

16“Why our looming cashless society will come at a devastating cost,” Herald Sun, 8/1/16.17“The 45-Year Record of Bullion Prices,” Kitco, 5/3/1618“India’s Currency Debacle: ‘Consider It A Warning,’” Zero Hedge, 11/22/16, original emphasis. 19“A 15% Gold Allocation? This Wealth Builder Says ‘Yes.’” Kitco News, 9/16/16.20 U.S. Mint, “American Eagle Gold Bullion Coins,” 2010.21“Misguided policies and economic risk,” WGC Gold Investor Vol. 1 June 2016.