Covid-19: A New Front in the War on Cash
“You never want to let a serious crisis go to waste.”
--Rahm Emanuel, former Chicago mayor and advisor to President Barack Obama
Call me a skeptic, but it seems that the response of governments to the Covid-19 pandemic is more than a little self-serving. While many of the quarantines and other public health initiatives taken to fight the pandemic appear reasonable under the circumstances, others appear to be designed to complete the transition to a surveillance society.
Consider China, where Covid-19 appears to have originated. The government contained the spread of the virus through a hefty dose of surveillance technology. In many parts of China, any citizen leaving home must produce their smartphone at checkpoints and show a green barcode, indicating they aren’t infected and haven’t come into contact with anyone who is, or traveled to a high-risk region.
It’s an expansion of an ongoing campaign by Chinese law enforcement to monitor the movements and purchasing patterns of its citizens, who are likely to “trust authority” when it comes to public health. The centerpiece of this campaign is the Social Credit System, which aggregates data collected from social networks, web searches, purchasing records, and other information on every billion Chinese citizens. The goal is to assign every citizen a “national trust score.”
Along those lines, consider another mandate by the Chinese authorities, initiated since Covid-19 spread: requiring banks to literally “launder” any cash they hold with UV light and high temperatures, then placing it in quarantine for up to 14 days before releasing it to the public. Cash originating in high-risk areas is sent back to the central bank and destroyed. China has also suspended physical cash transfers between provinces to avoid the possibility of new infections from that source.
But how likely is it that Covid-19 can be spread through paper currency? Not very likely, according to experts; the primary means of transmission is through person-to-person contact.
But that’s not stopping Chinese authorities from restricting the use of cash. Indeed, Covid-19 comes at just the right time to allow the government to end the use of paper money altogether. Only instead of justifying the move as a crime-fighting measure, it can be spun as a means to protect public health.
Similarly, Covid-19 gives other governments an excuse to take similar measures restricting the use of cash. Of course, the traditional reason why governments hate cash is that it’s anonymous and almost impossible to track. The US government hates cash so much that it robs its own citizens of it through a procedure called civil forfeiture. Just getting caught with a large wad of bills is enough for cops to consider you a drug lord or terrorist. If you doubt it, read this article I wrote recently.
While Uncle Sam hasn’t restricted cash transactions – yet – many other countries have. Even before Covid-19 arrived, Italy (ironically a hotbed of Covid-19 infection) banned all cash transactions over €999.99. To pay €1,000 or more, you must use a debit card, credit card, a “non-transferrable check,” or pay by bank transfer. Violations are punished by confiscation of up to 40% of the amount paid.
In France, cash transactions over €3,000 are now illegal. In Spain, the limit is a little lower: €2,500. Restrictions on cash transactions also are in place in Belgium, Bulgaria, Greece, Mexico, Russia, Uruguay, and a handful of other countries.
Moreover, the demise of cash facilitates something far scarier, using the excuse of propping up economies enfeebled by the pandemic. By combining a cashless society and negative interest rates, governments can effectively flush out any hidden or saved wealth.
You can’t save money, because negative interest rates mean you’re paying the bank. You can’t withdraw it, because it’s useless in a cashless society. There’s nowhere to hide.
Harvard Professor Kenneth Rogoff explicitly makes this connection, arguing that governments should ban cash so the world’s central banks can more easily “go negative.” That would go a long way, he suggests, to prop up the global economy in a serious recession.
Ending privacy along with the ability to earn income from your savings is bad enough. But don’t forget that the “bail-in” model applies to bank deposits worldwide. If a bank goes bust, depositors must now share in the losses, as I discussed in this article.
Negative interest rates and escalating restrictions on cash transactions are just two more indications of the desperate situation the global financial system faces. They call for urgent defensive measures:
Drawing down bank reserves and hoarding cash. Document the withdrawals carefully so that you can prove the origin of the cash if cops try to claim it’s the proceeds of crime.
Converting a portion of assets now in banks or in cash to gold. Store the gold securely at home or in a non-bank depository. If you have more than $100,000 of gold, consider keeping a portion of it in a private vault in another country.
Keeping the assets you maintain in banks in ultra-strong banks, to avoid the coming bail-ins.
It now seems inevitable that the Covid-19 pandemic will lead to a global recession. Here in the US, that means you can expect negative interest rates and eventually, restrictions on cash transactions. How quickly it happens depends on the severity of the outbreak. Make sure you’re prepared.
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