Tuesday, February 16, 2016

Europe - Now Hunting Pennies

Been a busy time and I wanted to discuss the news out of Europe. Mario Draghi is stating they may remove the 500 Euro note from circulation. Also Germany is trying to impose a limit on cash payments at 5,000 Euro. This would be in conjunction to limits already in place in France(1,000), and on certain transactions in Italy.  So what's the reasoning why they are imposing limits when throughout history they have never existed before?

Drumroll please.

It's of course to stop the fight against terrorism! Because you know cracking down on terrorist financing will really plug the holes in budgets. They want you to think it has nothing to do with the fact that people are losing faith in the banking system and government in general out there.  Not that fighting terrorism is bad, but it seems to be the excuse to ram every forfeiture of previous rights down our throats. What if an individual decides they don't trust electronic transactions because of hackers? Well to bad your fears are not welcome. Mario Draghi is in a desperate situation. Europeans don't want to spend their money because they are fearing the future and do not want to put their money in banks.

Why would you want to put your money in a European bank anyway? You would have to be crazy to accept basically zero to negative rates of return, and the risk of a bail in which was demonstrated as the new choice for saving a bank from failure. All this harms the depositor that is trying to do themselves a little good by saving a few extra bucks. If you want to avoid risk you simply take your money out in 500 euro notes and store it at home in a safe since it's less to transport.

The ECB and governments can't move fast enough to rid cash out of the European society.  The cash limits are just the beginning to get people used to the idea. The governments need every penny it can get their hands on to pay for the massive holes in their budgets, pensions, and other promised benefits. What better way to get your hand on money than by forcing you to keep it in the bank, and harder to store at home when banks aren't trusted. This all after the previous moves of hunting down business and Greek people.

The move to all electronic is just around the corner. Visa is even working on regaining full control of it's European operations. The whole reason is European banks were finally willing to sell their stakes to raise cash(to fill their black hole), and Visa can see the great opportunity coming as every transaction must be recorded with electronic money ensuring a virtual toll road monopoly.

I feel bad for Europeans. I really do. They are in a situation right now that is heading towards more turmoil in the future. Add in the refugee crisis and it seems to be only a matter of time before this powder-keg explodes. Just a matter of time before America is in the same boat.

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