{"id":129938,"date":"2016-03-05T19:58:21","date_gmt":"2016-03-05T19:58:21","guid":{"rendered":"http:\/\/www.thetruthseeker.co.uk\/?p=129938"},"modified":"2016-03-08T07:33:23","modified_gmt":"2016-03-08T07:33:23","slug":"its-a-revolution-german-banks-told-to-start-hoarding-cash","status":"publish","type":"post","link":"https:\/\/www.thetruthseeker.co.uk\/?p=129938","title":{"rendered":"It’s a Revolution: German Banks Told to Start Hoarding Cash"},"content":{"rendered":"

Simon Black — Sovereign Man March 4, 2016<\/a><\/h1>\n

\"offshore-bank-account\"<\/a><\/p>\n

Just stunning.<\/span><\/p>\n

German newspaper Der Spiegel reported yesterday<\/a><\/strong><\/span> that the Bavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.<\/span><\/p>\n

Europe, of course, has been battling with negative interest rates for quite some time.<\/span><\/p>\n

What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank.<\/span><\/p>\n

In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic.<\/span><\/p>\n

They believe that economic growth is simply a function of loans. The more money that\u2019s loaned out, the more the economy will grow.<\/span><\/p>\n

This is the sort of theory that works really well in an economic textbook. But it doesn\u2019t work so well in a history textbook.<\/span><\/p>\n

Cheap money encourages risky behavior. It gives banks an incentive to give \u2018no money down\u2019 loans to homeless people with no employment history.<\/span><\/p>\n

It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago).<\/span><\/p>\n

Banks are supposed to be conservative, responsible managers of other people\u2019s money.<\/span><\/p>\n

When central bank policies penalize that practice, bad things tend to happen.<\/span><\/p>\n

Traditionally when a commercial bank in Europe wants to play it safe with its customers\u2019 funds, they would hold excess reserves on deposit with the European Central Bank.<\/span><\/p>\n

In the past, they might even have been paid interest on those excess reserves as an extra incentive to be conservative.<\/span><\/p>\n

Now it\u2019s the exact opposite. If a bank holds excess reserves on deposit at the ECB to ensure that they have a greater margin of safety, they must now pay 0.3% to the ECB.<\/span><\/p>\n

That\u2019s what it means to have negative interest rates. And for the bank, this eats into their profits, especially when they have tens of billions in excess reserves.<\/span><\/p>\n

Talk about being between a rock and a hard place.<\/span><\/p>\n

On one hand, banks stand to lose a ton of money in negative interest. On the other hand, they put their customers\u2019 deposits at risk if they don\u2019t hold extra reserves.<\/span><\/p>\n

Well, the Bavarian Banking Association has had enough of this financial dictatorship.<\/span><\/p>\n

Their new recommendation is for all member banks to ditch the ECB and instead start keeping their excess reserves in physical cash, stored in their own bank vaults.<\/span><\/p>\n

This is officially an all-out revolution of the financial system<\/strong> where banks are now actively rebelling against the central bank.<\/span><\/p>\n

(What\u2019s even more amazing is that this concept of traditional banking\u2013 holding physical cash in a bank vault\u2013 is now considered revolutionary and radical.)<\/span><\/p>\n

There\u2019s just one teensy tiny problem: there simply is not enough physical cash in the entire financial system to support even a tiny fraction of the demand.<\/span><\/p>\n

Total bank deposits exceed trillions of euros. Physical cash constitutes just a small percentage of that sum.<\/span><\/p>\n

So if German banks do start hoarding physical currency, there won\u2019t be any left in the financial system.<\/span><\/p>\n

This will force the ECB to choose between two options:<\/span><\/p>\n

1) Support this rebellion and authorize the issuance of more physical cash; or<\/span><\/p>\n

2) Impose capital controls.<\/span><\/p>\n

Given that just two weeks ago the President of the ECB spoke about the possibility of banning some higher denomination cash notes, it\u2019s not hard to figure out what\u2019s going to happen next.<\/span><\/p>\n

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Our goal is simple: To help you achieve personal liberty<\/b> and financial prosperity<\/b> no matter what happens.<\/span><\/p>\n

Multiple times every week, we help over 100,000 Sovereign Man subscribers who are taking their family’s liberty and prosperity into their own hands with our free publication, Notes From The Field<\/span>.<\/span><\/p>\n

Activate your free subscription today, and get fresh intelligence delivered securely to your inbox as we travel the world discovering the biggest opportunities available to smart, enterprising individuals like you.<\/span><\/p>\n

About the Author<\/h3>\n

Simon Black<\/a><\/strong> is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field<\/a><\/span> is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.<\/span><\/p>\n

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<\/i> Free Access | Notes from the Field<\/span> <\/a><\/h3>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

This will force the ECB either to support this rebellion and authorize the issuance of more physical cash; or impose capital controls<\/p>\n","protected":false},"author":39262,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[61,66],"tags":[],"class_list":["post-129938","post","type-post","status-publish","format-standard","hentry","category-Commentary","category-Economics"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/129938","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/users\/39262"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=129938"}],"version-history":[{"count":3,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/129938\/revisions"}],"predecessor-version":[{"id":129942,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/129938\/revisions\/129942"}],"wp:attachment":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=129938"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=129938"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=129938"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}