A War on Cash !

This proposed war on cash payments has some interesting undertones.  If this law comes into effect, from next year it will be a criminal offence to offer cash in any transaction where the amount paid is above ten thousand dollars - and the person receiving such a payment will also face criminal penalties.

So the person who saves and wants to buy a new small car for cash would be likely to serve both a two year jail term and a fine that exceeds the value of the car, and the person who accepted that cash would probably be a neighbour in an adjoining cell.

Of course the intent of this legislation is to crack down on money laundering which is rife in the drug trade and perhaps the government also has in mind that hundred thousand dollars in cash in an Aldi shopping bag that changed hands by way of a donation prior to the last election.

This idea emerged from the government's " black economy " task force in 2018 and was designed to undercut tax avoidance and organised crime.  We are fast reaching the stage where simply having a large amount of cash money will become a crime, and that has a worrying overtone in the way our economy is moving.

The Reserve bank has cut interest rates and appears likely to continue that option to the point that we may face negative interest.  In other words, the banks charge us interest to mind our money in their bank.   Don't laugh !   That was exactly the situation that developed in some European countries during the 2008 recession.

Just think about all those self funded retirees who have their nest egg invested in term deposits. The shrinking interest rates are depleting the money they need to live on and if interest rates go into reverse gear they face the prospect of becoming poorer.    That would be a big incentive to draw the money out of the bank and keep it in a safe under the bed.

That is exactly what governments fear.  When people start withdrawing their savings that is termed a " run on the banks " and their lending is crippled, sending the economy into a nose dive.  When that  last recession happened in 2008 it was the government that had to bail out the banks to keep the economy afloat.

This new law does seem suspiciously like a plan to lock people's money safely away in the banking system and the cynics will doubt that it has much to do with stopping organized crime.  Maybe the government's crystal ball is showing coming trends that look ominous for our economy.  It is probably not as innocent as it seems at face value !