Putting Beggars Out of Business

Heard the one about the beggar that asked a businessman for spare change?

Rumour has it the businessman smiled kindly, pointed to his pockets, and apologetically replied, ‘Sorry mate, I only carry cards.’

Before he could stroll off, the beggar reached out to stop him. He ruffled around in his large trench coat pocket.

The businessman, concerned at the prospect of being mugged, flinched. But, to his amazement, the vagrant pulled out a smartphone from his pocket.

Coolly, he told the businessman: ‘That’s OK, mate. I accept AMEX, Visa or MasterCard.’

Now, before you chalk this down as little more than a quip, consider the very real possibility that this scenario could be coming to a street corner near you. And soon.

More on this story below…

The Reserve Bank of Australia announced plans this week to roll out new technology to facilitate the ongoing shift towards a fully digital payment system.

Rather uninventively, it’s been dubbed the New Payment Platform, or NPP.

The NPP will allow you to transfer and receive money instantly. And it won’t matter one jot whether you share the same bank as the person or institution you’re transacting with.

No more hassles involving payee details and BSB numbers, or waiting for the dreaded business days to roll over. All you’ll need is a phone number or email address. With either in hand, you’ll be able to make transactions in split seconds.

It all sounds good in theory. And we imagine it’d work just as well in practice. We only wonder whether the emergence of this new technology will consign cash to the dustbin of history.


The payment paradigm shift is well underway

You won’t be surprised to hear that Australia is well on its way to becoming a cashless society. But it might shock you to learn how far we’ve already come.

ATM withdrawals peaked in 2009–10, and have been falling ever since. Impressively, three out of every four transactions made today use digital ‘tap-and-go’ systems.

We can’t argue with the convenience of digital payment systems. Yet our worry isn’t that Australians are migrating to cashless systems. Rather, it’s the questionable motives behind this push — seemingly intent on eliminating cash altogether — which concern us.

First, this measure will affect consumers and small businesses in equal measure.

Some services will become more expensive. Remember, smaller businesses already have to absorb the costs of surcharges that come with payless systems. That’s already forcing many businesses to pass the costs on to consumers. If they no longer have the option of cash, this will only get worse. It may even push some struggling businesses over the edge.

But there’s a bigger issue at hand here that is all too often overlooked.

Global strategist and former CIA insider Jim Rickards says cashless systems are designed to herd the public into the regulated banking system.

Once everyone is rounded up, so to speak, it gives central banks more room to manoeuvre on monetary policy. As Jim told his subscribers in Strategic Intelligence, central bankers are intent on setting the stage for unencumbered interest rates. This simply means removing any obstacles which allow central banks to manipulate rates beyond existing natural barriers.

As you may have guessed, the number one obstacle standing in the way of unencumbered interest rates is cash.

Eliminating cash would open the door for a whole host of unfettered policies. Commercial banks could raise service fees, freeze accounts and enforce bail-in charges without recourse. These would be impossible to avoid once cash has been eliminated, as you’d have no place to store your money outside of hard assets.

As it happens, the convenience of digital payment systems means policymakers have had to do little to convince the public of its merits. We’ve done all the heavy lifting ourselves. But this convenience is blinding us to the potential pitfalls that lie in wait.

In truth, we’ve already lost the war on cash. There’s no turning back at this point.

Yet, while we may end up as herded cattle, we can avoid being slaughtered.

The end of cash is coming, but it shouldn’t spell the end of your freedom. You owe it to yourself to learn how to escape this banking trap.

We suggest you start today, and that you do so by reading this first.

This week in Markets & Money

Now that the dust has settled, Obamacare appears here to stay. The Democrats and the Freedom Caucus combined to give President Trump’s replacement healthcare plan the thumbs down.

Repealing Obamacare was supposed to free up the kind of money that would help push through Trump’s other policies, like tax reform.

But, as Vern noted in Monday’s Markets & Money, we’re now seeing the limits to Trump’s powers. Those who pronounced Trumponomics as the revival of Reaganomics are getting a dose of reality.

That reality, according to Vern, is that investors are being led into an almighty bear trap. It’s a problem that’s not going to fade silently into the night.

For more on this story, click here.

On Tuesday, Jason calculated that Trump’s failure to repeal Obamacare would cost the United States US$1 trillion. With Obamacare taxes out of the way, it would’ve been easier to lower tax rates. But if Republicans want to eliminate Obamacare taxes now, without adding to the deficit, they’ll need to raise US$1 trillion.

That sobering fact spooked the markets, pushing the US dollar lower and gold higher.

Unfortunately for Trump, the Obamacare decision has cast doubt on his other reforms too. With an unsupportive Congress in tow, the market is losing confidence in Trump. That’s why you’re seeing gold and gold stocks move higher.

Until the market regains confidence, Jason expects the gold price to keep climbing higher. That’s good news for these penny gold stocks in particular.

To read Jason’s analysis in full from Tuesday’s Markets & Money, click here.

On Wednesday, Jason turned his attention to oil. With US oil rig counts rising, production is on the up. Despite a shortage of skilled labour in the oil industry at the moment, last week, the oil rig count jumped by 21, to reach 652 rigs. Oil rig counts are a strong indicator of future production levels.

With production set to rise then, that means only one thing for oil prices: Expect to see crude prices fall in the months ahead, says Jason.

At what price will oil bottom out? Click here to find out.

On Thursday, Callum looked at one of the more unusual reasons for a corporate takeover in recent times. ANA, Japan’s largest airline, bought a supermajority stake in a low-cost carrier. But it had no interest in owning the business. It wanted its pilots!

As Callum noted, the global expansion in tourism is so strong that it’s straining the industry’s ability to serve travellers. It’s not hard to see why, either. Retiring baby boomers and the arrival of the biggest middle class in history in China are boosting air travel demand. For Callum, this is just one sign that we’re heading into the biggest boom of all time.

For more on this story, click here.

To round out the week, Vern had a distinctly different take to Callum on the economic outlook. He drew a comparison between Greece and Australia’s economic paths. Between 1997 and 2009, Greece’s debt increased 3.6-fold. By comparison, Australia’s debt grew threefold.

Why the divergence in fortunes? And why did Greece become an economic basket case while Australia prospered?

Greece decreased its debt by 6%, while Australia added $1.5 trillion of debt.

That’s the difference between ‘growth’ and depression.

What would happen if Australia had a haircut like Greece, instead of a debt binge? Vern bets that we’d find ourselves careening off the cliff much in the same way that Greece has.

For more on this story, click here.

Finally, before we leave you, a reminder to tune into this week’s Financial Anarchist podcast. In this week’s episode, Jordan Eliseo, the chief economist at ABC Bullion, joined Kris to talk all things gold.

In this week’s episode:

Why gold could triple in price in the next 10–20 years…

Buying physical gold with your superannuation…

Why gold is a slap in the face of fund managers….

And much more…

Click here to listen to this week’s episode now.

Until next week,

Mat Spasic,
For Markets & Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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