The official explanation for the banning of cash is that it will stop the so-called black cash in hand economy, although I doubt it, since with e-payments and Bitcoin, I imagine that there would be high-tech ways around it. Maybe pay in tins of baked beans. i.e barter? Anyway, here is something published at their ABC, which is worth thinking about, that it is all about controlling your economic behaviour during recessions. How about just plain old controlling your economic behaviour, full stop?
“As the Federal Government moves to ban cash transactions above $10,000, there's a theory gaining traction that the real motive for the cash ban isn't the so-called "black economy", but rather, to give authorities greater control over your behaviour during recessions. This theory, put forward by economists such as John Adams — and picked up by some federal politicians — has not been plucked out of thin air. It is based on repeated public papers and statements by the international body in charge of financial stability — the Washington-based International Monetary Fund (IMF). A recent IMF blog entitled "Cashing In: How to Make Negative Interest Rates Work", explains its motive in wanting negative interest rates — a situation where instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. As the blog notes, during the global financial crisis central banks reduced interest rates.
Ten years later, interest rates remain low in most countries, and "while the global economy has been recovering, future downturns are inevitable". "Severe recessions have historically required 3 to 6 percentage points cut in policy rates," the IMF blog observed. "If another crisis happens, few countries would have that kind of room for monetary policy to respond." The article then goes on to explain that to "get around this problem", a recent IMF staff study looked at how it could bring in a system that would make deeply negative interest rates "a feasible option". The answer, it said, is to phase out cash.
Cash acts as an 'interest rate floor'
When cash is available, cutting interest rates into negative territory becomes impossible. We are being pushed into a cashless world. The RBA says cash will become a niche payment sooner than we think, as the Government considers imposing tougher penalties on cash economy activity. Cash acts as "an interest rate floor" as people hold cash when bank deposit interest rates are at zero. The thought of paying the major banks to hold your money isn't one that most consumers would jump at. The alternative — as risky as it may be — is hoarding cash, or making investments in tangible commodities like gold. So, the end game, the article explains, is the IMF's ideal world — one without cash. "Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive," it said. This, would "jolt lending, boost demand, and stimulate the economy". In other words, the central banks get greater control to influence your behaviour and economic outcomes. For those who have faith in monetary policy and central banks, this is no problem. But one year on from the banking royal commission, faith in our financial institutions — and the regulators who failed to police the banks' bad behaviour — isn't exactly at an all-time high.
Negative interest rates could affect Australia
This weird world where savers are penalised — and borrowers get paid — is no longer just a problem for central banks in Europe and Japan. The Reserve Bank's consecutive interest rate cuts in June and July have taken the cash rate to an historical low at just 1 per cent. Put this together with Governor Philip Lowe's comment on August 9 at a parliamentary hearing. He was asked by Labor's Andrew Leigh what work the Reserve Bank has done on what "unconventional monetary policy" might look like as Australia heads towards the zero lower bound of interest rates. Dr Lowe answered: "I think it's unlikely, but it is possible. We are prepared to do unconventional things if the circumstances warranted it." In answering some other questions Dr Leigh threw his way, Dr Lowe also noted that "monetary policy is less effective than it used to be". "Once upon a time, when we lowered interest rates people were very quick to run off to the bank to borrow more to spend," he said. "In today's environment people don't run off to the bank to borrow more when interest rates fall; they are more likely to pay back their mortgage more quickly." Dr Lowe also noted international political tensions are weakening the global outlook, "and it's very hard for central banks to completely offset that".
The explanation given above is quite consistent with seeing the cash ban as a form of intense social control, and it is good that there is some awakening to this. This is especially so since most Aussies are now living a hand to mouth existence at present:
“Almost half of all Australian households spend their entire monthly income, while one in five don't feel confident they could raise $3000 in an emergency, a report has found. The ME Bank six monthly survey of financial comfort found stagnant wages were leaving many Australians struggling to cover day-to-day bills. Financial comfort of full and part-time workers saw a steep decline since February, with just a third of households reporting an increase in annual income over the past 12 months. One in every two Australians also felt it would be difficult to find a new job, which is the highest number recorded since late 2016. "It's clear from the latest report that there are increased concerns around job availability and underemployment," ME consulting economist Jeff Oughton said. The report also revealed a decline in comfort levels from homeowners with a mortgage and renters. "It's evident that despite the latest monetary policy changes, there remains high levels of housing debt worry and actual payment stress among Australians," he said. "The number of households contributing more than 30 per cent of their disposable income towards paying off a mortgage has remained steady at about 43 per cent, while the corresponding figure for renters has risen to 62 per cent - partly reversing the improvement reported in the previous two surveys."
Talk about a chronic lack of purchasing power, not only to clear all of the goodies off the shelves, but just to get together the basics of survival, to keep body and soul together in a fashion. I feel this myself, being part of the deprived suffering masses. I could not afford heating this cold Melbournian Arctic winter and only survived from being frozen to death because of my trusty sleeping bag, and parker. If there is one item every person should have, come what may in the uncertainties ahead, it is a good synthetic sleeping bag, and a waterproof, breathable parker, which is two items, but they go together as part of a warmth solution, especially for sleeping in ice weather. Shop around for them.