from The Daily Bell:
Want a Free Market? Abolish Cash … If you believe that government meddling in financial markets was responsible for the last recession and the lackluster recovery, you might be right. But probably not in the way you think. – Bloomberg
Some Bloomberg editorials are stranger than others. This one is especially strange because it argues that banning cash will create a stronger, freer market.
How does a government ban on certain items make anything freer? We don’t understand.
Here’s Bloomberg’s logic:
Two government mechanisms prevent real interest rates from getting too negative. The first is cash: As long as people can hold currency, which loses its value only at the rate of inflation, they won’t buy safe assets that yield even less.
The second is the central bank’s promise to keep the inflation rate low and stable — at about 2 percent in most developed nations. As a result, people have little reason to hold any asset that yields less than negative 2 percent (perhaps negative 3 percent, considering that cash is bulky and hard to store).
In other words, governments — by issuing cash and managing inflation — put a floor on how low interest rates can go and how high asset prices can rise. That’s hardly a free market.
Say what? The reason rates are so low in the first place is because of monopoly central banking, which exists in the US only because Congress voted to create the Federal Reserve.
The Fed is a monopoly money facility. It is not a free-market creation.
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