LAWRIE WILLIAMS: Cash, Gold, Paranoia and Groupthink

I always look forward to receiving the latest Things that make you go hmmm… (TTMYGH) (www.ttmygh.com) newsletter from Grant Williams.  It is invariably amusing and thought provoking, as well as containing what I feel is a hugely valuable analytical viewpoint on current economic thinking. 

TTTMYGH is always themed and the theme in the latest one revolves around ‘Groupthink’ – which Wikipedia defines as a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome – Wikipedia.

 In the latest newsletter Williams follows through this theme in particular with the current drive by some economists and politicians to do away with cash – a theoretical, if perhaps impractical, means of generating a future cashless society where all monetary transactions, except perhaps the very smallest, will have to be handled digitally, and thus vulnerable to government access.  You may feel that this is unlikely BUT this drive is already resulting in legislation in some countries to ban cash transactions higher than a certain fixed amount and the withdrawal of high denomination bank notes to make major cash transactions more and more difficult.  This is, as is much other spin on restrictive governmental legislation, given a prevention of terrorism financing and money laundering by criminal organisations angle.  This is to make it acceptable to the bulk of the general public who are for the most part blissfully unaware of the gradual erosion of civil liberties moves of this type engender.

Not surprisingly Williams’ newsletter editorial treatise draws heavily on the dystopian society George Orwell envisaged in his seminal novel 1984 where government tries to micro-manage everything through hugely invasive systems which keep the ‘proles’ suppressed and tries to control the thoughts of the intelligentsia, who might question the systems in place, through other draconian means.

1984 may be an ultimate vision of such a society taken to the extreme, but elements of the controls envisaged by Orwell are already in place in many countries.  These elements are perhaps largely beneficial in their effects, but what worries the civil liberties campaigners (who tend to be subjected to much ridicule by politicians and compliant media) is that these may just represent the beginnings of a slippery slope towards a 1984-type society, although one perhaps not quite as dystopian, or controlling, as that perceived by Orwell.  A truly cashless society is just one more element on such a path as government would have access to everyone’s savings and could monitor, and control, even the most innocent of transactions. 

So what, you may say, I have nothing to hide!   But this already applies also to so many other legislative tweaks on the anti-terror front these days which give police and other government authorities powers to aggressively investigate all kinds of activities which are outside the scope of anything the legislation was designed to combat in the first place.  The law of unintended consequences. 

In terms of access to your bank accounts, government, in theory, would be able to block transactions, take money from it, even put a total stop on your access to it if it felt you were abusing some legislation or other.  If government needs to be bailed out financially, but has access to bank deposits, it could well automatically take a percentage of your savings without your having any means of preventing this. (Think the Cyprus bail-in!  Many countries already have legislation in place that would enable them to plunder your bank accounts in the 'national interest'))

So, coming back to the current economic ‘groupthink’ designed to remove cash from use.  To an extent we are already well on the way there.  Use of credit and debit cards to settle shopping and transportation costs is commonplace as is the huge growth in online transactions, where cashless transactions are the only option.  But there’s still an element of society which has no access to anything but cash.  The homeless, the elderly, society dropouts etc. and those who just reject credit cards and banks on principle.

So where does gold come in?  If a truly cashless society is imposed on us with all the government control that envisages, then so would the search for alternative sources of savings outside of government controls.  Physical gold is probably the most tradable of any alternative cash preservation option which isn’t open to digital access by government entities.  So if fears of the death of cash start to be seen as even a possibility, then those who are scared of losing their hard-earned savings may well switch some or all of them into more easily tradable gold options – coins and small bars – where substantial values can be stored in a relatively small space. 

Of course should this scenario come about there’s always the chance that if there was a government perception that too much wealth was being accumulated in a cash alternative like gold, then legislation could be introduced to confiscate, or ban, gold so where this gold is held or stored becomes more and more relevant to the paranoid.   As the saying goes: Just because you’re paranoid doesn’t mean that someone [government] isn’t out to get you!

29 Mar 2016

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com