Oct 20/almost 28 tonnes of gold standing for October/Exodus of gold continues from the comex/Shanghai continues to lead in the pricing of gold as Dubai agrees to use the Shanghai fix and not the London fix/Donald Trump indicates that he may not accept election decision/Existing home sales down/Philly mfg index down/

Gold $1265.60 DOWN  $2.30

Silver 17.50 DOWN 12 cents

In the access market 5:15 pm

Gold: 1266.00

Silver: 17.50

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

The Shanghai fix is at 10:15 pm est and 2:15 am est

The fix for London is at 5:30  am est (first fix) and 10 am est (second fix)

Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.

And now the fix recordings:

Shanghai morning fix OCT 18 (10:15 pm est last night): $  1276.80

NY ACCESS PRICE: $1271.50 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1274.31

NY ACCESS PRICE: 1269.70 (AT THE EXACT SAME TIME)

HUGE SPREAD TODAY!!  5 dollars

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: OCT 20: 5:30 am est:  $1269.20   (NY: same time:  $1269.30:    5:30AM)

London Second fix OCT 20: 10 am est:  $1271.65  (NY same time: $1271.70 ,    10 AM)

Shanghai premium in silver over NY:  87 cents.

It seems that Shanghai pricing is higher than the other  two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.

Also why would mining companies hand in their gold to the comex and receive constantly lower prices.  They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.

end

For comex gold: 

10  NOTICES FILED FOR 1000 OZ

For silver:

for the Oct contract month:  85 notices for 425,000 oz.

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Let us have a look at the data for today

.

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In silver, the total open interest ROSE by 3,939 contracts UP to 193,168. The open interest ROSE DRAMATICALLY EVEN as the silver price was UP ONLY 3 cents in yesterday’s trading .In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .966 BILLION TO BE EXACT or 138% of annual global silver production (ex Russia &ex China).

In silver for October we had 85 notices served upon for 425,000 oz

In gold, the total comex gold ROSE by 6554 contracts with the RISE  in price of gold( $7.10 YESTERDAY) . The total gold OI stands at 503,615 contracts.

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With respect to our two criminal funds, the GLD and the SLV:

GLD

TODAY WE HAD A HUGE CHANGE AT THE GLD: A DEPOSIT OF 2.94 TONNES

Total gold inventory rests tonight at: 970.17 tonnes of gold

SLV

we had a good sized deposit of .855 million oz at the SLV/

THE SLV Inventory rests at: 363.140 million oz

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver ROSE by 3,939 contracts UP to 193,168 as the price of silver ROSE by 3 cents with yesterday’s trading.The gold open interest ROSE by 6,554 contracts UP to 503,615 as the price of gold ROSE $7.10 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

3. ASIAN AFFAIRS

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 0.261 POINTS OR 0.01%/ /Hang Sang closed UP 69.43 POINTS OR 0.30%. The Nikkei closed UP 236.59 POINTS OR 1.59% Australia’s all ordinaires  CLOSED UP 0.12% /Chinese yuan (ONSHORE) closed DOWN at 6.7380/Oil FELL to 51.03 dollars per barrel for WTI and 52.15 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.7425 yuan to the dollar vs 6.7380  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS  A BIT  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)THAILAND/SOUTH KOREA

none today

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

The USA has just lost a major ally in the Philippines

( zero hedge)

4 EUROPEAN AFFAIRS

i)Bank of England’s chief economist admits that QE is only a temporary benefit and it is more effective as a plunge protection item for stock markets.

 

( Andy Haldane/Bank of England/zero hedge)

ii)In the bailout agreements, the self employed has higher taxes to pay along with higher social security contributions.  Many northern Greek businesses moved their corporations over to Bulgaria where the contributions are lower and the corporate tax is 10% instead of 29%.  No wonder Greece is going nowhere!

( zero hedge)

iii)As expected, the ECB keeps its rates unchanged.  Now comes the press conference:

( zero hedge)

iv)The Euro jumps higher as stocks fall as Draghi suggests that QE cannot last forever.  He stated that the ECB has not discussed an extension of QE beyond March.( zero hedge)

v)Just take a look at the ECB’s balance sheet:  a massive bubble!

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

 none today

6.GLOBAL ISSUES

none today

7.OIL ISSUES

Nigeria caught in a bind as they lower their official oil price by $1.00.  They state that there is a huge cargo glut playing havoc to the oil market

(courtesy zero hedge)

8.EMERGING MARKETS

none today

9.PHYSICAL STORIES

i)The ECB is urging the EU to curb virtual money e.g. bitcoin for fear of losing control:

( Canepa/Reuters)

ii)This story was brought to your attention before but it is worth repeating: Gold in India trades at a premium for the first time in 9 months

( Reuters/gata)

iii)Lawrie Williams states the following facts;

  1. the SGE is gaining in strength and they are now leading the pact in gold price
  2. the Dubai gold exchange is now contracted with the SGE in gold pricing and not the London Bullion Association
  3. Shanghai and India has seen their premiums to spot gold rise
  4. Shanghai is negotiating with other exchanges to use their fix as opposed to the London fix.

looks like the London fix is doomed!

( Lawrie Williams/Sharp’s Pixley)

iv)An update on the Chinese inclusion into the iMF’s SDR  currency pricing:

( Steve St Angelo/Tom Cloud/SRSRocco report)

10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER

i)The key event at last night’s debate was Trump suggesting that he may not accept the decision of voters on Nov 8

( zero hedge)

ii)California’s Attorney General launches a criminal probe into Wells Fargo over fake identity theft and other stuff

( zerohedge)

iii)Strange@!! Initial claims jump over 5% this week to 260,000. Finally the poor data on the USA economy is finally catching up to the BLS’s faulty data releases over the past year:

( BLS/zero hedge)

iv)USA consumer confidence tumbles to its lowest levels since 2015:

( zero hedge)

v)Another indicator showing low growth in the USA” existing home sales down:

( zero hedge)

vi)The Philly Mfg index trends lower

(courtesy investing.com)
vii)Now it is Ambrose Evans Pritchard that is sounding the alarm bells for a huge USA recession:

He sites these important points:

1.the USA has engaged in multiple reverse repos as they remove liquidity from the system (as they prepare for raising rates in Dec).  He claims that this is not a good time to raise rates.

2.Global GDP has been in a steady fall these past 2 yrs.

3. total debt denominated in dollars outside the UDS has risen to 9.8 trillion this yr.

4. and this has caused 3 month euro dollars rates to rise to almost 1%.

storm clouds gathering!

(courtesy Ambrose Evans Pritchard/UKTelegraph).

 

end

Let us head over to the comex:

The total gold comex open interest ROSE BY 6,554 CONTRACTS to an OI level of 503,615 as the price of gold ROSE $7.10 with YESTERDAY’S trading.

We are in the delivery month is October and here the OI GAINED 180 contracts UP to 180. We had 11 notices filed yesterday so we GAINED 191 contract or 19,100 additional oz will  stand  for delivery.

The next delivery month is November and here the OI FELL by 143 contract(s) DOWN to 2861 contracts. This level is extremely elevated as generally November is a very poor delivery month.To give you an idea of size, on Oct 19 2015, we had an OI of only 266 contracts.The next contract month and the biggest of the year is December and here this month showed an increase of 4991 contracts up to 372,212.

Today we had  10 notices filed for 1000 oz of gold.
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And now for the wild silver comex results.  Total silver OI ROSE BY 3,939 contracts from  189,229 up to 193,168 as the  price of silver ROSE  to the tune of 3 cents yesterday.  We are moving  further from the all time record high for silver open interest set on Wednesday August 3:  (224,540).  The next non active delivery month is October and here the OI rose by 5 contracts up to 168. We had 0 notices filed yesterday so we gained 5 contracts or 25,000 additional oz will stand for delivery.The November contract month saw its OI LOSE 1 contract DOWN to 328.   The next major delivery month is December and here it ROSE BY 1,746 contracts UP to 150,923.

we had 85 notices filed for 425,000 oz

VOLUMES:

Today the estimated volume was 141,102 contracts which is fair.

Yesterday, the confirmed volume was 149,892,006 which is also fair.

today we had 1 notice filed for 5,000 oz of silver:

INITIAL standings for OCTOBER
 Oct 20.
Gold
Ounces
Withdrawals from Dealers Inventory in oz  NIL
Withdrawals from Customer Inventory in oz  nil
4800.17 oz
Manfra
SCOTIA
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 NIL oz
No of oz served (contracts) today
10 notices 
1000 oz
No of oz to be served (notices)
291 contracts
 29,100
oz
Total monthly oz gold served (contracts) so far this month
8545 contracts
854,500 oz
26.578 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month    oz
Total accumulative withdrawal of gold from the Customer inventory this month    318,473.3 oz
Today we had 1 kilobar transactions,  and MORE GOLD leaving the comex
Today we had 0 deposit into the dealer:
total dealer deposits:  nil oz
We had zero dealer withdrawals:
total dealer withdrawals:  nil oz
.
We had 0 customer deposit;
total customer deposits;NIL
We had 2 customer withdrawal(s)
i) Out of MANFRA; 64.30 oz  (2 KILOBARS)
ii)Out of Scotia:  4733.87 OZ
total customer withdrawal: 4800.17  oz
We had 3 adjustment(s)
i) Out of DELAWARE: 6627.853 oz was adjusted from the dealer and this entered the customer account of Delaware
ii) Out of HSBC: 497.25 oz was adjusted from the dealer and this entered the customer account of HSBC
iii) Out of Scotia: 46,403.384 oz was adjusted out of the dealer and this entered the customer account of Scotia
total leaving the dealer:  53,528.487 oz in an obvious settlement for the huge amount of gold standing in October.
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Total dealer inventor 2,236,180.879 or 69.559 tonnes
Total gold inventory (dealer and customer) =10,463.561/480. or 325.460 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 325.460 tonnes for a  gain of 22  tonnes over that period.  Since August 8 we have lost 29 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best.
For October:

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued form their client or customer account. The total of all issuance by all participants equates to 10 contracts  of which 0 notices were stopped (received) by jPMorgan dealer and  3 notice(s) was (were) stopped received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (8545) x 100 oz or 854,500 oz, to which we add the difference between the open interest for the front month of OCT (301 contracts) minus the number of notices served upon today (10) x 100 oz per contract equals 883,600 oz, the number of ounces standing in this  NON active month of September.
 
Thus the INITIAL standings for gold for the SEPT contract month:
No of notices served so far (8545) x 100 oz  or ounces + {OI for the front month (301) minus the number of  notices served upon today (10) x 100 oz which equals 864,500 oz standing in this non active delivery month of Oct  (27.483 tonnes).
we GAINED additional 19,100 oz standing in this active delivery month of October and I believe that this is a record standing for October. To give you an idea of size from last yr, we had only a little over 2 tonnes standing at the conclusion of Oct 2015!
The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine
 
IN THE LAST TWO MONTHS  29 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
 
OCT INITIAL standings
 Oct 20. 2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
61,697.55 oz
CNT
Scotia
Deposits to the Dealer Inventory
421,138.110 OZ
CNT
Deposits to the Customer Inventory 
 187,820.600 oz
CNT
No of oz served today (contracts)
85 CONTRACT(S)
(425,000 OZ)
No of oz to be served (notices)
83 contracts
(415,000 oz)
Total monthly oz silver served (contracts) 441 contracts (2,205,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month  5,191,804.6 oz
today, we had 1 deposit into the dealer account:
i) into CNT: 421,138.100  oz
total dealer deposit: 421,138.100 oz
we had 0 dealer withdrawals:
 total dealer withdrawals: nil oz
we had 2 customer withdrawals:
i) Out of CNT:: 1025.65 oz
ii) out of Scotia: 60,671.900 oz
Total customer withdrawals: 61,697.55  oz
We had 1 customer deposits:
 i) Into CNT: 187,820.600 oz
total customer deposits;  187,820.600 oz
 
 
 we had 0 adjustment(s) 
Volumes:
Today the estimated volume was 59,240 which is VERY GOOD.
Yesterday the confirmed volume was 47,978 which is GOOD
The total number of notices filed today for the Oct contract month is represented by 85 contract(s )for 425,000 oz. To calculate the number of silver ounces that will stand for delivery in OCT., we take the total number of notices filed for the month so far at  441 x 5,000 oz  = 2,205,000 oz to which we add the difference between the open interest for the front month of OCT (168) and the number of notices served upon today (85) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the OCT contract month:  441(notices served so far)x 5000 oz +(168) OI for front month of SEPT ) -number of notices served upon today (85)x 5000 oz  equals  2,620,000 oz  of silver standing for the OCT contract month. THIS IS STILL A HUGE SHOWING FOR SILVER AS OCTOBER IS GENERALLY A VERY WEAK DELIVERY MONTH.
We gained 25,000 additional silver ounces THAT WILL STAND.
 
Total dealer silver:  29.707 million (close to record low inventory  
Total number of dealer and customer silver:   174.037 million oz
The total open interest on silver is NOW close to its all time high with the record of 224,540 being set AUGUST 3.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
end
And now the Gold inventory at the GLD
OCT 20/A HUGE CHANGE IN GOLD INVENTORY AT THE GLD OF 2.94 TONNES/INVENTORY RESTS AT 970.17 TONNES
OCT 19/no change in gold inventory at the GLD inventory/inventory rests at 967.21 tonnes
OCT 18/A DEPOSIT OF 1.78 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT967.21 TONNES
OCT 17/ A DEPOSIT OF 3.86 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 965.43 TONNES/IN 10 DAYS 16.29 TONNES DEPOSITED
Oct 14./NO CHANGE IN INVENTORY AT THE GLD
OCT 13/a deposit of 2.67 tonnes of gold into the GLD/inventory rests  at 961.57 tonnes
Oct 12/No changes in inventory/inventory rests at 958.90 tonnes
Oct 11/ what!!! we had a gigantic 9.76 tonnes of inventory increase today/inventory rests at 958.90 tonnes.  (this was done with gold down?)
Oct 7:  949.14 tonnes
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Oct 20/ Inventory rests tonight at 970.17 tonnes
*IN LAST 14 DAYS:  21.04 TONNES ADDED INTO THE GLD

end

Now the SLV Inventory
oCT 20/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 363.140 MILLION OZ
oCT 19/a good sized change at the SLV inventory: a deposit of 855,000 oz/rests at 363.140 million oz/
OCT 18/NO CHANGES AT THE SLV INVENTORY RESTS AT 362.285 MILLION OZ
OCT 17/NO CHANGES AT THE SLV/INVENTOR RESTS AT 362.285 MILLION OZ/
oCT 14: A HUGE ADDITION (DEPOSIT) OF 1.138 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 362.285 MILLION OZ
OCT 13/ NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 12:NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 11/ a withdrawal of 1.762 million oz of inventory from the SLV/Inventory rests at 361.147 million oz/
.
Oct 20.2016: Inventory 363.140 million oz
 end

NPV for Sprott and Central Fund of Canada

Central fund data not available today.

1. Central Fund of Canada: traded at Negative 3.8 percent to NAV usa funds and Negative 3.9% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.9%
Percentage of fund in silver:38.1%
cash .+1.0%( Oct 20/2016).
2. Sprott silver fund (PSLV): Premium FALLS to +0.80%!!!! NAV (OCT 20/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO  1.03% to NAV  ( OCT 20/2016)
Note: Sprott silver trust back  into POSITIVE territory at 0.80% /Sprott physical gold trust is back into positive territory at 1.03%/Central fund of Canada’s is still in jail.
 
 
 

end

And now your overnight trading in gold,THURSDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe

Cashless Society – War On Cash to Benefit Gold?

Cashless Society – Risks Posed By The War On Cash
by Jan Skoyles, Editor Mark O’Byrne

Introduction 

Cash is the new “barbarous relic” according to many central banks, regulators, and some economists and there is a strong, concerted push for the ‘cashless society’.

cashless_society

Developments in recent days and weeks have highlighted the risks posed by the war on cash and the cashless society.

The Presidential campaign has been dominated for months and again this week by the power of information that has been gathered through unconventional means – whether due to email hacks, leaked microphone tapes or even late-night twitter rants.

Both presidential candidates have got things to say when it comes to the gathering of information and both are for it. Hillary Clinton sees a thin line between national security and your personal privacy. Donald Trump has openly said that he is open to mass surveillance and as he puts it, putting the country before personal liberty.

Neither candidate is afraid to say that they support information snooping and gathering for the sake of national security. In the ‘punch and judy’ show that has been the U.S. election, important financial and economic matters have been eschewed in favour of salacious allegations regarding alleged sexual advances etc.

Access to your information is one thing, it is how it is read and what is done with it that is pertinent. In a cashless society information replaces cash. How that information is interpreted is entirely subjective and the chances of any recourse when someone has misread your cash transaction seem to be increasingly slim.

Trump_&_Clinton

This information gives more power to unaccountable banks and corporations. It removes power and liberty from individuals and small to medium enterprises.

Opinion is divided among economists and there are many economists who share our concerns about the risks of the cashless society.

One such economist is Doctor Constantin Gurdgiev.  Dr. Gurdgiev is the Professor of Finance (Visiting) at Middlebury Institute of International Studies in California. He was previously Adjunct Professor of Finance with Trinity College, Dublin, worked as editor of Ireland’s Business and Finance magazine and was a non-executive member of the Investment Committees of GoldCore. Here is his view regarding the risks of a cashless society:

“Central banks, Governments and regulatory authorities are too often keen to highlight the benefits of the cashless society, e.g. efficiency and speed of transactions, ease of compliance and reporting, etc. However, the same agencies promoting cashless society evolution never mention the downsides or costs associated with creating a market structure in which private transactions become fully public through electronic trace-ability and centralised storage of information.

In most basic terms, cashless society removes anonymity of using cash in private transactions, such as gifts, small transfers and small private payments in transactions not involving use of public resources, e.g. tips. Other key drawbacks of cashless payments systems is that they de facto undermine the key role of money as a store of value. Electronic accounts can and will be bailed in (expropriated) by the Governments.

Cash and monetary assets, such as gold, cannot be expropriated or bailed-in as long as they are held in physical form and under proper storage. Cashless accounts amplify the importance of monetary assets, such as gold, in fulfilling the function of being safe havens against systemic risks – risks that are associated with high probability of Government expropriation.

Finally, cashless / electronic accounts represent a significant, and ever expanding in scope and size threat of cyber attacks and cyber crime. Here too, monetary assets, such as physical gold, offer both hedge and a safe haven opportunities to protect wealth.

Governments’ push toward electronic accounts and transactions is ultimately driven by the desire of the modern States to exert maximum control over private wealth and incomes. The only forms of protection against such policies that individual investors and savers have today are gold, silver and platinum held as a part of well-diversified and legally protected portfolios.”

How Close Are We To the Cashless Society?

There is little denying it, we are edging closer and closer every year. Here are some key facts

  • In the UK over half of all payments in 2015 were cashless
  • Many EU countries have capped the amount that can be legally paid in cash
  • In India a radio address from Prime Minister Modhi urged citizens to stop using cash
  • In Kenya about a quarter of it’s GNP is through mobile payments app M-Pesa
  • In the U.S. the economist Kenneth Rogoff’s latest book ‘The Curse of Cash’ has put the quest to reduce cash firmly on the agenda of many central banks and governments.

Why the sudden strive to eliminate coins and more importantly paper money or cash? Is it environmental? Of course not. There environmental benefit of eliminating cash use is absolutely minimal.

cashless_table
Rather, it is to do with government control and distrust of markets and individual freedom and it is to do with uber Keynesian economics and corporatism which supports banks and large corporations at the expense of the individuals, small and medium size enterprises and the wider society.

However, it is presented under the guise of efficiencies and crime-fighting. Central bankers and governments state a cashless society, or even just currency controls, will help to drive out criminal activity, money laundering and tax evasion, all whilst saving the economy time and money.

But really, as you’ll see, there’s little real benefit to society in reducing the physical cash we have available. Aside from the cash management and cyber security aspect, you need to ask what’s in it for the banks and governments and to also consider how it’s dangerous and creates unappreciated risks when you don’t get to choose how you spend and hold your wealth.

How is the cashless society coming about?

Right now a number of governments, fintech entrepreneurs and economists have declared that we should move to a cashless society. Being told how we can spend our money is always an emotive topic, but now that going cashless is actually happening in the background of a struggling financial system, it is proving to be a real threat to our very sovereignty and freedom.

Cashless has been legitimised in the minds of the electorate by the rise of the trendy industry of ‘fintech’, an industry that I am normally proud to be associated with. Like all new technological movements the intention is to improve systems, economies and the standard of living, but at the same time they can be misused, creating suspicion and undesirable consequences.

New technology that changes the status quo is something that will always be met with some resistance and a belief that more harm than good will come from it.

In 1858 people said the transatlantic telegraph was ‘too fast for the truth.’ In 1904 The Times accused the telephone of creating a ‘race of left-eared people—that is, of people who hear better with the left than with the right ear’! In 1994 the same paper asked if the internet had been ‘overhyped’.

Prior to fintech, which has expanded the means in which we can spend money day-to-day, it was not practical (either physically or financially) to suggest society no longer use physical cash when spending. But in a world seeking financial efficiencies and where there are officially more mobile devices in the world than people, it is not surprising that there are devices and apps to make your money easier to manage, spend and invest popping up throughout the world.

The cashless society is unlikely to become an official thing i.e. cash is unlikely to be suddenly outlawed overnight. More likely, is that cash will be made so inconvenient that people will first live with less cash. But slowly but surely we may find ourselves (and the societies we live in) cashless – like a frog in a pot of cold water slowly coming to the boil.

Efficient to be cashless?

Like all technological developments, we are encouraged to adopt them as it will vastly improve our lives/save money/protect our grandchildren/cure cancer etc. So, is this the case with going cashless?

Cash does obviously cost money. In 2015 the Danish government ruled that businesses were no longer obligated to accept cash payments. The ‘aim’ was to reduce costs of managing and securing money whilst on the premises.  Whether you assess the time you spend waiting at the ATM, the cost of transporting the money between banks and businesses or even the cost to count it.

According to a 2014 study commissioned by PayPal the cost of cash, in terms of counting and depositing, to small businesses in the UK, is £2.5 billion per year and about a fortnight in terms of time lost.

And we’re already savvy to the efficiencies of going cashless as it is estimated that there is approximately £800m in lost sales due to businesses not accepting cards.

But do these efficiencies stack up against the true cost of going cashless?

Crime prevention

One of the many arguments for going cashless is that the removal of cash from society will help to prevent criminal activity and money laundering. According toEuropol ‘the use of cash is the main reason triggering suspicious transaction reports, accounting for more than 30% of all reports.’

Money laundering is big deal. According to Diane Francis, between 2002 and 2011, ‘some $880.96 billion was spirited out of Russia, $461.86 billion left Mexico, $370.38 billion left Malaysia, $343.93 billion left India, $266.43 billion left Saudi Arabia, and $192.69 billion left Brazil. The total outflow, among 20 emerging economies, was $5.9 trillion, equivalent to $49 billion a month.’

Following the Charlie Hebdo attacks France’s Finance Minister Michel Sapin declared war on cash, placing the terrorists’ ability to buy dangerous goods with cash as one of the main reasons for the murders. There is now a €1000 cap on cash payments, down from €3000 previously.

But it’s not just money-laundering thanks to big drugs cartels (as facilitated by some banks) or terrorism that is a risk when dealing with financial crime. Going cashless is a concern for individuals who will be forced to use cards as a means of payment, a growing target for cybercriminals.

Some rightly believe that the concerted push by banks to end the use of cash is to boost profits.

In ‘Card on the Table’ Bjorn Eriksson presents the move to a cashless society as a moneymaking move by the banks who are benefitting from the low incident of bank robberies, whilst their client details are hacked by cybercriminals.

In 2015 the UK contributed 43% of the total card losses seen across Europe. Losses through card fraud totalled £88.5 million, attributed to the ‘growth in online spend and the digital revolution’ . Credit card fraud and attacks on food and beverage transactions climbed by 116% (yoy) in the last quarter, according to the Global Fraud Attack Index.

This can happen in a number of ways: skimming, when your card is physically scanned by the thief; if your card is contactless enabled then a close-range scanning device will do the trick; and, do you think you’re so techie because you pay on your mobile? Well, look out for the near-field communication (NFC) devices that are an easy target to hack by criminals.

It’s not only a money-making move by banks. The nascent cyber security industry will also hugely benefit. Cybercrime will benefit the Fraud Detection and Prevention market which is estimated to grow from $14.36 bn in 2016 to $33.19 bn by 2021. Within this, the retail sector is the highest growing area, i.e. you and I using our innovative cashless payments as a way to spend, spend, spend.

Yet as much as economists and governments would like to blame cash-based money-laundering as a reason to go cashless, in the UK it is not as big a problem as cyber money laundering. The Treasury and Home Office believe that they ‘know about most cash-based money laundering’ but the big problem lies in ‘high-end’ money laundering, such as from bank accounts:

“The size and complexity of the UK financial sector means it is more exposed to criminality than financial sectors in many other countries, including abuse enabled by professional enablers in the legal and accountancy sector.” It is here that the intelligence agencies see ‘significant gaps’ in their knowledge.

The digital sector is by no means more secure for the average citizen and, if anything, puts your money more at risk of criminal activity than previously.

In April 2016, SWIFT — the Society for Worldwide Interbank Financial Telecommunication – the vital global financial network that western and most international financial services companies, institutions and banks use for all payments and transfer billions of dollars every day, warned its customers that it was aware of cyber fraud and a number of recent “cyber incidents” where attackers had sent fraudulent messages over its system and $81 million was stolen from a central bank.

SWIFT acknowledged that it wasn’t just the $81 million stolen from Bangladesh’s central bank that alerted them to cybersecurity issues, these attacks have been attempted on several other institutions as well. SWIFT acknowledged that the cyber-attack on the New York Federal Reserve Bank was not an isolated incident but one of several recent criminal schemes that aimed to take advantage of the global payments platform used by some 11,000 financial institutions and all of us.

This in itself shows the vulnerability of our modern online and digital international payments system.

Banks and governments will try force you to be cashless 

And how are we being persuaded to ‘go cashless’? Not by whipping out the debit card, but instead through our mobiles. There is no doubt that the ability to turn mobile phones into both your bank branch and your wallet will empower a huge number of people but this does not mean it is safer than carrying cash. There was a three-fold increase in mobile malware in the last year, according to the FT, as hackers target mobile-banking applications and payment apps.

In Sweden, the bastion of the cashless society, banks have done such a great job in making cash appear so suspicious that:

“In general, the rule of thumb in Scandinavia is: ‘If you have to pay in cash, something is wrong,’” writes Mikael Krogerus for Credit Suisse. Arvidsson explains that “At the offices which do handle banknotes and coins, the customer must explain where the cash comes from, according to the regulations aimed at money laundering and terrorist financing,” The hassle, for the depositor, is enough to make them go cashless.

Surely the risks of holding cash are for you, the individual, to manage. And the risks of criminal activity, if facilitated by cash or even diamonds, is for the police to manage. Why are the two conflated?

How much does cash matter?

Despite the joy of spending on a mobile app or whipping your contactless card out to pay for public transport, the attachment to cash in society, even if it is becoming decreasingly obvious each day, has been under appreciated.

According to David Wolman, author of The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society, those of us who have access to both physical cash and the electronic banking system truly believe that having some cash is a good thing.

The demand for cash is still very real. Whilst cash transactions might be falling the demand for banknotes is climbing. The Telegraph reports, ‘the demand for banknotes has risen faster than the total amount of spending in the economy, a trend that has only become more pronounced since the mid-1990s.’  and in the last decade the number of ATMs has increased by 20%, in the UK.

In the UK, the Bank of England found that 18% of people hoard cash mainly “to provide comfort against potential emergencies”. Around £3bn- £5bn is thought to be being “hoarded” or prudently saved to be less pejorative.

This cash is under the proverbial “mattress” meaning hidden in a safe place in a house – possibly a home safe or up in the attic. Burglars rarely go up in the attic. Alternatively the cash is stored in safety deposit boxes or in vaults.

The world’s largest insurance company, Munich Re, has opted to store some of their cash reserves in vaults – and a little bit of gold for good measure. Indeed, even banks including Commerzbank in Germany are considering holding actual bank notes in their vaults again.

As interest rates turn negative and the risk of bail-ins grows closer by the day, holding cash appears increasingly attractive

As calls to remove high denomination bills from circulation sweep across both Europe and the US, two Swiss politicians have called for the opposite to happen.

Philip Brunner and Manuel Brandberg are asking for the creation of a 5,000 Swiss franc note, in order to protect both the currency and the liberty of the citizens. In their motion to parliament they argue that “cash is comparable to the service firearm kept by Swiss citizen soldiers.” Indeed the pair go as far as to argue that they both “guarantee freedom”.

Guarantee might be a strong word in this regard but most would accept that they protect personal privacy, property rights and by extension our freedom. Totalitarian regimes of all colours and especially communist regimes are quick to confiscate wealth, including gold and property.

Chairman Mao confiscated gold and then banned gold ownership in China. In Stalin’s Russia, merely owning gold coins or bars would result in being sent to jail or worse the Gulag. We digress but you get the point.

Interestingly in Sweden, the first country that will seemingly go completely cashless, sees only 40-60% of its circulating cash in regular circulation with the remainder believed to be being saved by citizens outside the banking system – “under the mattress”, in home safes and in safety deposit boxes.

In Germany 79% of transactions are cash based, also for liberty reasons. As the WSJ reported, ‘Germany’s love of cash is driven largely by its anonymity. One legacy of the Nazis and East Germany’s Stasi secret police is a fear of government snooping, and many Germans are spooked by proposals of banning cash transactions that exceed €5,000. Many Germans think the ECB’s plan to phase out the €500 bill is only the beginning of getting rid of cash altogether.’

Even in Sweden there is still an appreciation for holding cash. Niklas Arvidssonpoints to a survey he recently carried out where he found that ‘two-thirds of Swedes think carrying cash is a human-right’.

The problem is, if the government and banks are able to push through an infrastructure that doesn’t support cash then it doesn’t really matter what people think. If their cash is suddenly null and void then their concerns about human rights have become a bigger matter entirely.

What’s it all for then?

In Niklas Arvidsson’s study ‘The Cashless Society’ he states that security and efficiency is the external sales pitch from banks, as it allows banks to ‘avoid complex cash handling and eliminate bank robberies, theft, and dirty money.’ However internally it helps with their main target: individual clients. The fully digitised payment system gives the bank a wealth of information about their clients in terms of what they spend, what they buy, when they shop etc. For advertising purposes this is effectively free market research.

Big data is now very bug business indeed. If the data is used for market research, who else can take advantage of knowing what you’re spending your money on? Even if you live in a politically stable country, with ethical laws you’re still at risk of losing out – that car boot sale you did at the weekend? Get ready for the taxman to benefit. That cheeky McDonalds you had last week? Get ready for your health insurance provider to put up your premium.

Never mind those who still enjoy the occasional cigarette and cigar of God forbid a few glasses of wine of an evening or a few drinks down the local boozer!

It seems logical and quite obvious to most that one of the primary reasons that some central banks are striving for a cashless society is to pave the way for deepening negative interest rates. Once all of your money is in the digital banking system you can get ready for it to be frozen, taken to fund a bail-in and even taxed. And in the meantime, enjoy governments, banks and possibly large corporations knowing what you’re spending your money on.

Negative interest rates

Negative interest rates are seemingly accepted as a way to preserve capital in a banking system. Ostensibly, they are put in place to prevent destabilising movements of money at times of financial crisis and to encourage spending and investment.

Negative interest rates in the UK seem to be an ever-present threat that no-one really believes will happen. But it is very real in the global economy, according to the WSJ, more than a fifth of global GDP is produced in countries with negative interest rates imposed by central banks.

Since 2012, seven countries have experimented with negative interest rates: Hungary being the most recent, Germany, Denmark, Sweden, Switzerland, Bulgaria and of course, Japan. Not all of them have hit depositors, yet. However this does not mean that customers are ready to be charged for lending their money to a bank.

negative_interest_ratesNegative rates are there in part to stimulate spending, but the more negative the nominal rate the greater the chance cash will be hoarded and resulting in a reduced velocity of money. But, how much impact can negative interest rates have when savers and depositors can escape the NIRP environment?

As the Financial Times wrote last month, “As long as people have access to cash, they may be able to avoid negative interest rates, limiting the scope for central banks to cut interest rates much further.”

But, in a cashless society if banks decide to impose negative interest rates account holders will not be able to access their money and this is hugely advantageous, to the banks. When a bank gets into difficulty, a cashless society helps protect the bank from a bank run. However, as negative interest rates become widespread and the risk of bail-ins more widely appreciated, we will likely see even more runs of the banks and the scene of ATM queues around the block.

However if cash is no long common in society how will depositors be able to protect their money? They won’t.

This is common thinking; in a recent report by the ICMB entitled, ‘What else can Central Banks Do?’ ‘If cash ceases to exist, so there is no riskless [sic] asset with a zero nominal return, central banks can make nominal interest rates as negative as needed to spur recoveries from recessions.

At present, with cash flowing around the economy there is a ‘lower bound’ in terms of how low negative rates can be. This zero lower bound issue is quite the problem, with even Benoît Cœuré,  Member of the Executive Board of the ECB suggesting banks either tax physical cash or ban it altogether.

But this can be solved by going cashless, according to the ICMB, “If cash did not exist, there would be no lower bound, and policymakers facing an economic downturn could make rates as negative as needed …” The ICMB thinks this latest monetary experiment would “spur a strong and rapid recovery.”

That’s what the central banks believed quantitative easing (QE) would do. It hasn’t.

This is a scenario that is likely to become reality in the near future. A year ago Credit Suisse analyst Christel Aranda-Hassel told investors, “Crucially, we also expect the ECB to remove the lower bound, leaving the door open to go more negative if needed …”

For Jens Weidmann, president of the Bundesbank, it is a no-brainer:

‘Going cashless would hence allow for greater macroeconomic stability, as well as lower inflation targets, than when monetary policy is at risk of being constrained by the lower bound.’

But, he states it is important that you don’t realise that you soon won’t be able to use cash:

“It would be fatal if citizens got the impression that cash is being gradually taken away from them.” Imagine.

paper_currencySo far negative interest rates haven’t significantly spurned a huge spending increase in the countries that have implemented them. Implementing cash controls, or banning it altogether, it is hoped, will soon see to this. At the moment, cash remains ever present in these NIRP economies.

Another possible motivation for wanting to ban cash, is the belief that it could spur consumer spending.  According to some research, we are more likely to spend when it is not cash that we are using.

Economic and Psychology Professors Drazen Prelec and George Loewenstein havewritten about ‘coupling’ to describe how much we link a consumption and payment experience. They find that there is strong coupling when there is physical cash payment, as opposed to on a credit or debit card. On the latter two options the coupling sensation is less strong, an unsurprising finding given that “credit card financing seems to be a stimulus to spending.”

Cash doesn’t have to be ‘cash’ – Return to gold and silver? Rise of ‘crypto’

We are in a fun place now with cash, a situation that is echoing the warning of Alan Greenspan, “In the absence of the gold standard, there is no way to protect savings from confiscation through monetary inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.”

Soon, if the central bankers have their way, it will be cash that will be possibly illegal to hold.

At the moment we know cash to be coins and notes but what we really understand it to be is a medium of exchange that can be used in an almost decentralised manner. It doesn’t have to go through any kind of intermediary in order for the shop keeper to accept it as payment for my chocolate bar.

So in a cashless society where there are negative interest rates, ‘cash’ or the medium of exchange will just be something else, and I suspect that will involve gold and silver and possibly cryptocurrency – especially a blockchain-based digital currency.

The idea that negative interest rates will work because of a cashless society is something that will have to be rethought. Rogoff himself agrees that gold will become more popular and rise in price, as the cashless society grows. He uses India as an example of a country that has been through multiple economic traumas  and yet gold remains king, not cash.

The same is true in China and much of the Asian world.

Can you avoid it and how do you manage it?

I don’t believe you will be able to completely avoid the cashless (or even less-cash) society in your day to day life in the coming years.

This summer, I traveled to eight different European countries. For none of them did I withdraw cash before I went, as I perhaps would have done a few years ago. In every one of those countries I was able to use contactless payments, payment apps and even UBER in a couple of them.

Whilst cash still accounts for 85% of all transactions across the globe according to a MasterCard survey, more developed economics and indeed more debt and credit based economies are going through a cash-purge as well as negative interest rates.

The cashless society tries to force us to keep money and our savings in bank accounts. But what can happen when all of your money is in a bank account, aside from negative interest rates? See Cyprus for bail-ins, Greece for capital controls, deposit and ATM withdrawal limits etc., Argentina for the nationalisation of approximately $30 billion in private pensions (2008), and Venezuela’s own limits on card withdrawals and spending.

The threat of banks charging negative interest rates on customer deposits in a cashless society makes the proverbial stashing cash under the mattress more attractive.  Indeed, it becomes more attractive to even the most trusting and sophisticated investor and saver and indeed to companies and institutions.

Whilst you cannot avoid the day-to-day cashless issue you can protect yourself from the cashless society through a diversified portfolio that includes gold and silver – some in your possession and for larger amounts, bullion coins and bars in allocated and segregated storage in the safest vaults in the world.

The problem is thus, monetary policy ‘solutions’ remain a double edged sword. On one hand the push to go cashless looks concerning, but we are reassured that this may be gradual and take time as social inclusion and security issues take hold, but on the other hand banks will likely continue to raise the inflation target as their preferred use of monetary policy.