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Is Cash Turning Into Trash?

by David EngstromMay 8, 2015

A firestorm of speculative commentary has been ignited by reports that JP Morgan Chase has ceased to accept cash for payments on credit cards, mortgages, auto loans, lines of credit and so on.  Personally, I think this began a long time ago.  Not to defend any bank actions, but it is not difficult to imagine the chaos at a teller stand when you show up with a wad of green with instructions on how to apply the cash toward a loan payment. 

Of course it would beg the question, where did you get the cash?  Did you steal it?  Is it unreported income?  Did you make it yourself?  Or are you just trying to make a point?  That point being, cash is turning into trash.

If you are trying to make a point, you may be 30 years too late.  It has long been argued that cash is a relic.  It’s dangerous to carry large amounts; counterfeiting is still a threat; cash enables a myriad of illegal transactions; and, to the extent one can earn cash and bypass tax laws - that hurts everyone.  Make no mistake, cash began to die a long time ago.  To sound the alarm now is like calling 911 three days after being robbed.

To be sure, we are near the time when cash will no longer exist.  Some point to practical reasons for its elimination.  Others claim an insidious plot by the banks to control all your money (for many reasons) and cash gets in the way.  While still others point to an end-times scenario where you cannot buy or sell without using a numbered account.  So, go ahead.  Pick your reason and know the end of cash is coming. 

If you are one who has stashed cash in the mattress or behind a loose brick, imagine the pain if it is one day announced that we have a new currency or no currency.  Or, what if one day, we learn the world has a new reserve currency.  The dollar would plummet in value [it’s already in a bubble] and you would be left holding a pile of trash relegated to the role of fireplace kindling.  I see it now.  A pile of 20s laying right next to the pile of wood that you could not buy with the cash you now use to start your fire.

Why would you want to store something whose value can disappear in a blink.  Why would you ascribe any value to something they print, at a whim, by the trillions?  And, if you use cash to buy bonds, the returns you get basically scream that your dollar is going to be worth less when this bond matures than it is today.  Hence, negative real returns on bonds.

Now, that we have settled on the inevitability, that the end of cash is approaching, what do we do about it?  I say let them! Then figure out how to take advantage of the fact that the end of the dollar is coming.  How?  It’s simple!  Don’t bet on the dollar.  While the dollar is high, diversify dollars into real assets.  Assets that can never be worth zero.  Warren Buffett owns railroads, Goldman Sachs tried to stockpile aluminum, JP Morgan is stockpiling silver, [more on that to come]  oil barons are buying up oil rigs, farmland sales are booming, Chinese citizens are stashing gold and rich people are buying art.  The list goes on. 

If you think the end of the dollar is coming, Don’t Stash Dollars!  Don’t whine when the banker tells you he doesn’t like cash anymore.  Instead, go with it.  Own something real, just like smart money is doing all over the world!     

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