The next stage in the War On The Working Class to begin soon

In recent years our financial leaders have admitted that a) deregulation of financial markets was a mistake, b) neoliberal austerity policies do more harm than good, c) inequality leads to slower economic growth, and d) central bank easy money policies worsened inequality.

Essentially the central banks admitted that virtually every policy that they've forced on societies has been destructive, self-defeating, and the harm was primarily directed at the poor and working class. Since the 2008 crash, the harm that the bankers are inflicting on society has been magnified through Quantitative Easing (QE).

Indeed, it is time to start calling QE what it is: a hidden tax on the wealth of middle-class savers and pensioners which, on the one hand, the government can use to finance the deficits associated with a large, modern welfare state and, on the other, redistribute wealth to the top 5% of households.

“It is hardly a stretch to conclude that QE exacerbated America’s already severe income disparities.”
- economist Stephen Roach

However, if you thought these multiple mea culpa's would change central bank policies, think again. A better way to think of it is a banker telling you that they had to "destroy an economy in order to save it." It's unfortunate, but necessary to enrich the wealthy at the expense of the poor.

Just like when we bailed out the crooked bankers in 2008-2009 after they robbed the working class blind. We couldn't make the rich people responsible for the disaster suffer. The consequence of that decision is a massive increase in inequality.

if you really want to grasp what’s been happening, consider that, between 2009 and 2017, the number of billionaires whose combined wealth was greater than that of the world’s poorest 50 percent fell from 380 to just eight. And by the way, despite claims by the president that every other country is screwing America, the US leads the pack when it comes to the growth of inequality. As Inequality.org notes, it has “much greater shares of national wealth and income going to the richest 1 percent than any other country.”

That, in part, is due to an institution many in the United States normally pay little attention to: the US central bank, the Federal Reserve.

We are now arriving at the end of another business/credit cycle.
Translation: a recession is near.
In a healthy and somewhat fair economy, a recession works to cleans the economy of inefficient businesses and bad debts. Those that made bad decisions would suffer.
We don't have a healthy and fair economy, and those that made bad decisions will be protected.

You see, the Federal Reserve is going to combat the effects of too much accumulated debt caused by too many years of artificially low interest rates, that the Federal Reserve intentionally made happen, which encouraged companies and wealthy people to borrow too much money.

The real reason the world is in this predicament is the failure to deal with unsustainable debt levels.

Debt can only be reduced in one of four ways: through strong growth, inflation, currency devaluation (where the borrowing is from foreigners) or default....

Growth and inflation are weak. Devaluation is difficult if every nation tries to reduce the value of its currency at the same time.

Debt defaults on the scale required would destroy a large portion of the world's savings, not to mention affect the solvency of the financial system, triggering a collapse of economic activity. That's why policymakers resist write-downs of trillions of dollars' worth of debt that cannot be paid back.

All of these decisions are hard because someone must lose.
Will it be the wealthy bankers that made the bad loans who lose?
Will it be the wealthy capitalist that made the bad investments?
Will it be the wealthy people who borrowed too much money?
Or will the pain be spread out through the economy and society in general? (i.e. what usually happens)

NO! The bankers discovered another option in 2008.

So, central banks must instead covertly use negative rates to reduce excessive debt levels by transferring wealth from savers to borrowers through the slow confiscation of capital.

What negative rates are telling us is that the global economic system cannot generate sufficient income to service, let alone repay, current debt levels. The latter are so high that even current, artificially depressed rates only allow them to be barely managed.

The fact remains that someone has to pay the price of the financial excesses of the last few decades.
With low and negative rates, that "someone" will be savers.

The savers are NOT the people who borrowed too much, who made the bad investments, or who made the bad loans.
But they are wealthy, right?
No.
The savers who will pay are the middle class, working class, and the poor.

The problem begins with the fact that interest rates are already historically low, and will go negative in the next recession.

The problem with imposing negative interest on savers, as explained in the UK Telegraph, is that “there’s a limit, what economists called the ‘zero lower bound’. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.”

Again, to the ordinary observer, this would seem to signal that negative interest rates won’t work and the approach needs to be abandoned. But not to our undaunted central bankers, who have chosen instead to plug this hole in their leaky theory by moving to eliminate cash as an option. If your only choice is to keep your money in a digital account in a bank and spend it with a bank card or credit card or checks, negative interest can be imposed with impunity. This is already happening in Sweden, and other countries are close behind.

In Denmark people are forced to save even more money because of negative interest rates (NIRP). It's not a coincidence that you only see NIRP in nations close to being cashless societies.
NIRP doesn't cause working class people to spend more money. It just functions as a hidden tax is all.

Consumers today already have very little discretionary money. Imposing negative interest without first adding new money into the economy means they will have even less money to spend. This would be more likely to prompt them to save their scarce funds than to go on a shopping spree.

So how do I know that NIRP and a cashless society punishes the working class instead of the wealthy? Just look at what happened in India and who got hurt when they banned cash.

it was an obvious failure if you judge it by its declared objective of fighting corruption, terrorism funding and tax dodging.

Almost all the demonetised banknotes were deposited in banks and thus re-inserted into the legal economy. It was a failure also if judged by the secondary goal of promoting financial inclusion. Rather than helping the poor by giving them access to modern means of savings and payment options, demonetisation disproportionately hurt the poor, as they were robbed of the free means of payment that they used to have at their disposal: cash and which was working well for them.

Those well integrated into a social web of support found ways to cope. Those at the margin of society, like migrant workers, suffered tremendously from being temporarily excluded from participation in the monetary economy.

So eliminating cash was a disaster for working people, but wealthy people, who know how to move money around, felt very different.
Billionaire Bill Gates: “It is certainly our goal to make full digitalisation happen in the next three years in the large developing countries. We have worked directly with the central bank there (India) over the last three years.”
PayPal’s CEO Dan Schulman: “Financial inclusion is a buzz word for bringing people into the system.”
Former Clinton economist Joseph Stiglitz: “..the benefits outweigh the cost...I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cybersecurity, but it would certainly have big advantages.”

So the wealthy like low interest rates and QE, that drives up the prices of stocks and bonds, at the cost of destroying a bank savings account.

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Azazello's picture

No cashless society for me, please.

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We wanted decent healthcare, a living wage and free college.
The Democrats gave us Biden and war instead.

@Azazello link

All money holding would be pushed into the banking system, where paper trails could be maintained on virtually every dime and dollar any citizen in the country spent on anything at any time. Big Brother would be able to watch all your transactions with anyone, around the clock. Rogoff sees this as desirable, from a different perspective, in that it would assist the government in preventing illegal transactions of all sorts. The cashless society would serve the ends of a more coerced society in which nothing outside of the approved orbit of government could easily be undertaken.
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@gjohnsit is not acceptable, good luck trying to buy, hell, anything whatsoever after your account gets locked.

Also, how do you give someone, down on their luck and on the street, something from your pocket unless the person has a e-account?

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Orwell: Where's the omelette?

travelerxxx's picture

@jim p

Also, how do you give someone, down on their luck and on the street, something from your pocket unless the person has a e-account?

You don't. I guess since the nation is stuck in reverse gear, we can go all the way back to the Great Depression. I remember my grandparents (who I grew up with and were adults through the Great Depression) saying that most couldn't afford to give money to people, but one thing they could do was "hire" them to do some task and pay them with food.

Maybe we're headed to something like that. We need to check out what they're doing in India for this. It's not like they no longer have beggars just because TPTB screwed with the cash situation.

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gulfgal98's picture

@Azazello Just ask India where the cashless society has been devastating to the poor and those living in rural economies.

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Do I hear the sound of guillotines being constructed?

“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy

detroitmechworks's picture

this would be it.

I'll stay cash as long as I can. Annoys the fuck out of so many people that I feel the need to do it just on principle. I never shop anywhere that doesn't take cash, and frankly I prefer it. Easier to have a visual representation of what you have. Hell, I could get behind hacksilver as a solution if necessary. Looks cool, and as long as I get what I want, why not? (Yes, I'm aware that finite precious metal currency is "Obsolete", but I like my tradition)

[video:https://www.youtube.com/watch?v=L63ET8UTA8I]

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I do not pretend I know what I do not know.

Mark from Queens's picture

Thanks for your reportage, g.

An intrinsic problem in all of this is the societal conditioning of getting the masses to Worship The Rich, with the purposely elusive American Dream carrot stick being pulled ever further away. Major obstacle, as far as I'm concerned.

The names, addresses and headshots of all the Wall St Economic Terroriststs, as well as the monopolists, need to be the top story of every single news outlet across the country.

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"If I should ever die, God forbid, let this be my epitaph:

THE ONLY PROOF HE NEEDED
FOR THE EXISTENCE OF GOD
WAS MUSIC"

- Kurt Vonnegut

@Mark from Queens

or broadcast media are themselves near monopolies, owned, as they are, by about five huge companies, all of whose fortunes vary directly with those of Wall Street.

Ever read Catch 22? We live it.

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We are all so poor we dont have any savings accts.

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@Battle of Blair Mountain

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Pricknick's picture

you've predicted what is in store.
The scary part is that I and many agree with you.
Accolades.

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Regardless of the path in life I chose, I realize it's always forward, never straight.

they admit that they don't care.

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dfarrah

formally known as Gramm (Texas DINO, long since turned Republican), Leach, Bliley, and the Commodities Futures Act of 2000, the combination of which crashed the economies of several nations, including the US. Still continuing, trafficking in crap mortgage derivatives, the specific activity that crashed those economies.

While Bill Clinton's White House did everything it could to get both bills passed, Clinton has never taken responsibility. And I am sure you will recall that Hillary promised to give him a big role in her administration because he's allegedly good with money.

For his part, Alan Greenspan, who worked side by side with Summers, Goolsbee and the rest of that disgusting lot, wrote a self-exculpatory book claiming he was wrong in his belief that the markets would regulate themselves, no matter how much freedom he and his counterparts in the Clinton administration gave them. Who would have guessed looking at him or listening to him that Greenspan had a such a great sense of humor?

Oddly enough, this hilarious satiric novel was shelved in bookstores in the non-fiction section--as if Greenspan and Summers had never heard of the original Black Friday in October, 1929 and what had led up to it--the very reason that Glass Steagall had been enacted during FDR's administration to begin with. What a card!

Then, the second New Democrat President of the US re-appoints Bernanke after the US economy had cratered, with no bailout for Main Street. Bernanke is supposedly a Great Depression scholar, who apparently forgot why the Depression began and how the New Dealers stopped the economy from circling the drain. And of course, as Secretary of Treasury, Obama had already appointed Geithner, former head of the New York Fed. Comedians, all! Unfortunately, while Wall Street grinned from ear to ear, Main Street never found the funny. And now, they want our savings as well as our Social Security.

Sometimes, I hope there really is a hell.

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lotlizard's picture

Before immigration blew up as a topic in 2015, the AfD’s main talking point was that Germany should leave the common currency and reclaim control over her economy from the European Central Bank.

The AfD still argues that the ECB’s ZIRP (zero interest rate policy) is screwing savers in order to bail out irresponsible governments and “zombie” (propped up by state action but actually insolvent) banks.

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Security? Convenience? National Emergency? It's going to take a Hulk Smash to make people take their eyes off of all those 1%'ers striving to enter the .1%.

But oh, think of the absolute control they could have over us. Capitalism on crack.

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@Snode
"kids" (college students) these days often carry no cash at all. at a certain flagship landgrant state university (and many others, i'm sure), they can put money in their "student account", whatever the fuck that is WRT to GAAP, and use their student ID card as a debit card anywhere on campus (e.g., in the various restaurants, convenience groceries, and entertainment facilities associated with the students' union).

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The earth is a multibillion-year-old sphere.
The Nazis killed millions of Jews.
On 9/11/01 a Boeing 757 (AA77) flew into the Pentagon.
AGCC is happening.
If you cannot accept these facts, I cannot fake an interest in any of your opinions.

@Snode
It'll prevent terrorism and crime.
Who could oppose that?

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@gjohnsit direct deposit. It'll be so convenient. Apple will definitely have an app for that. Another might be that they'll be able to track drug dealer money. We need it to fight the opioid crisis.

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Years ago, BBC Television did a dramatic series on where the surveillance state and cashless society is going.

The hero, Benedicht Cumberbatch, I think, got on the wrong side of the State.

His all access ID was locked. He couldn't open his own front door, ride a subway, purchase food.

England, of course, is an island, so he was trapped. Boats full of climate refugees were refused admittance to the island.

It seemed outlandish when I saw it. Now it is entirely plausible.

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NYCVG

as a solution? At least we could bypass the banks, not get their permission to move our funds, be our own bankers, not pay anyone to hold our funds. I strongly suspect this is more the future as I'm not sure how the crypto movement can be stopped. Banks would still exist, but on a much less grand scale, and preferably much more humble ... and heavily regulated.

The poor and down and out? One solution is Andrew Yang's UBI -- everyone over 18 gets $1000/mo. That's coming too, even if he doesn't make it to the big house. Too many people and not enough jobs in the increasingly automated work world.

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even $1.00 transactions are cashless. If I lived in Sweden, I would like it. Living in the US, no thanks.

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"Religion is what keeps the poor from murdering the rich."--Napoleon