33 Will That Be Cash or Credit ? Part 2

BLOG 33   Will that be Cash of Credit?  Part 2

Some thoughts on the disappearance of cash. Random order.

The move to a cashless society world-wide is an  offensive by the global banking system to take the power of creating money totally away from national governments.

The lending class, fronted by the banks, have long argued that governments cannot be trusted to control the issuance of money, even the minuscule percentage remaining to them (estimates set that at "probably less than 2%" of the total money in use in the world. Governments - the shrill voices of the fearful bankers insist - will create more money than is needed and the value of the nation's/world's money will collapse. That would be a terrible catastrophe. It would unleash a monster -- H.I.D.!


OK. I give up. Why can't I get that funny cartoon of Humpty Inflation Dumpty falling off the wall to upload?

Oh, there you are. Not very clear, though.



Well, read on.

So what's really wrong with inflation? Maybe we should first ask that cutting question, quo bene? who benefits? No, let's first ask who has most to lose. That answer is easy: those who have the most of the world's money.

So it depends on who you are. Different people are affected differently by inflation. 

In fact, it depends on two things. 1. How much money/wealth you have. If you have a lot, you may still be able to pay more for rent, restaurant meals, and your tailor, and rise above it all.

But if you have very little money/wealth - like most of the world's people - inflation may mean you have to do without food, or a roof, or (you middle class guys and gals)  without private schools for your children,  and a Fiat instead of a Ferrari.

2. Secondly, it depends on whether you are a lender or a borrower, because that brings interest rates into the picture.

So which do you prefer, high interest rates or low interest rates? (Think about that now. Your answer may certify which class or age group you belong to.) If you are a young working couple, looking to rising income, you may want to borrow money now. You grandfather, however, who has spent his lifetime saving for retirement at an expected return on savings of 6%, probably does not appreciate the current 2%.  So if he does give or lend you a down payment, gush a little.

To summarize all that in a diagram:

Preferred by                  Preferred by
 LENDERS             0     BORROWERS
                                 0
                                 0
                                 0
HIGH INTEREST   0      LOW INTEREST
                                 0
                                 0
000000000000000000000000000000000000
                                 0
                                 0       ,
LOW INFLATION  0      HIGH INFLATION
                                 0 
                                 0

Lenders prefer high interest rates, of course. Lenders also prefer low inflation, because inflation erodes buying power. They do not want to be paid back money that buys less than the money they lent. Makes sense.  

 So write down: "Lenders like higher interest rates, and lower inflation ."

For Borrowers, on the other hand, a little inflation is a good thing, especially if it means their wages increase. It could be significant, for instance, if wages have risen with inflation during the 25-year term of their mortgage.

So write down, "Borrowers like lower interest rates and higher inflation.   

OThat is, if they are as smart as you are, and have learned today's rambling Cogs Blog lesson. 

One final point: governments can and usually do create the money to  keep their economies stable -- without inflation. So don't believe all you hear about the benefits of the cashless society.