When Cash Is All You’ve Got

  • What happens when the internet goes down?
  • Case in point: Jim Rickards on a momentous day in Canada
  • Stranger Things didn’t save Netflix
  • Two days away from a global energy meltdown
  • A Paris correspondent on banning cash.

How exactly is a cashless society supposed to function when internet access goes down?

We’ve mused off and on about that question in recent years — sometimes in conjunction with governments deliberately shutting down internet access to suppress dissent. India routinely does so to unruly sections of the country; Kashmir went without for seven months in 2019–20.

Widespread internet outages, whether purposeful or accidental, had been largely confined to developing countries…

Until they became very much a first-world problem in Canada on July 8.

“Canada has two major telecommunications companies, Rogers and Bell,” explains our macro maven Jim Rickards — a regular visitor north of the border.

The Rogers system went down for 19 hours — affecting more than 10 million customers and over a quarter of the population.

“Cellphones didn’t work, ATMs were shut down and credit and debit cards did not work at the point of purchase,” says Jim. “Banks shut down their e-transfer businesses including Royal Bank of Canada, Bank of Montreal and TD Bank among others. Online shopping was closed because the internet didn’t work at all. Businesses that stayed open quickly posted ‘cash only’ signs at the checkout counters.”

Nor did the impact end there: “Police services reported that 911 services were inaccessible on many mobile phones,” says a BBC story.

“Hospitals reported communications problems, and one Ontario hospital had to redirect cancer patients when emergency radiation treatments were affected by the outage.”

Rogers blames the trouble on a “maintenance upgrade” and has offered customers a five-day service credit to make up for the inconvenience. That’s not good enough to mollify Parliament, which is convening a series of hearings.

For many Canadians, for the better part of a day, “society was back to a cash transactions system in a heartbeat,” Jim says.

“It was not the end of the world, but it may have been a great preview of the shape of things to come.

“This episode is one reason I have always recommended keeping some physical cash at home or in a safe place.”

Of course, if you’ve been keeping up with The 5 lately, you know Jim’s been sounding the alarm about physical cash being replaced by a CBDC — a central bank digital currency, or as Jim has dubbed them, “Biden Bucks.”

No, there’s no simple way to resolve this dilemma: “I wouldn’t recommend too much cash on hand,” Jim says, “because the time may come when cash is declared illegal and you have, say, 60 days to hand in your cash for digital credit.

“Handing in too much cash may cause you to be put on a watchlist from a tax or money laundering perspective, even though the money is yours and you obtained it legally.”

There’s no one-size-fits-all amount that’s appropriate for everyone. That said, Jim reckons even $10,000 isn’t too much for the average citizen.

“The bigger question is what to do when the all-digital monetary system arrives and cash is not an option in the first place,” Jim concludes.

After all, “power outages and internet outages will still happen no matter what the elites claim.”

Ah yes, the internet doesn’t function nearly as well without electricity, does it?

Californians and Texans have learned this well in recent years. Others might be about to join them. If your electricity comes via the “MISO” grid operator whose service area stretches all the way from Minnesota to Louisiana — a swath of territory that includes your editor’s home base — you’re at risk of rolling blackouts this summer because too many coal and nuclear plants have been mothballed. (Yeah, that’s a story for another day.)

So then what? “The only solution in that case is the oldest monetary solution in the world,” says Jim — “silver and gold coins.”

But here too, you don’t want to go overboard.

Jim has carefully thought out a strategy that’ll keep you covered for all eventualities — power and internet outages and the onset of Biden Bucks. He calls it his “Asset Emancipation” plan.

“Asset Emancipation is a way to legally secure — and even grow — your wealth,” says Jim, “while hiding it safely away from surveillance and control.”

There’s only one place where you can learn about it — and it’s at this link.

The major U.S. stock indexes are carrying yesterday’s momentum into today.

At last check, the Dow is up a third of a percent and less than 70 points away from 32,000. The Nasdaq is up nearly 2% and less than 70 points away from 12,000.

The S&P 500 is splitting the difference, up nearly 1% and less than 30 points away from 4,000. Indeed, the S&P has rallied 8.4% off the year-to-date lows notched on June 16.

➢ The headline earnings report is from Netflix. Not that anyone pays attention to, you know, earnings with Netflix — it’s all about the subscriber count. The subscriber count is down nearly a million in the last quarter — but that was less than expected, and so often on Wall Street it’s about the expectations game. NFLX is up over 7% on the day.

Shorter-term interest rates are moving down, longer-term moving up. As we write, the 10-year Treasury note yields 3.04%… and yes, the 2-year yield is higher at 3.23%. So an inverted yield curve is still in play and a recession is somewhere on the horizon.

➢ The big economic number of the day is the median price of an existing home — a record $416,000 per the National Association of Realtors, a 13.4% year-over-year jump. As for sales of existing homes, they fell 5.4% from May to June — and 14.2% from June 2021. No surprise with sky-high prices and high interest rates relative to last year.

Cryptos are rallying strong, to levels last seen in late May — Bitcoin over $24,000 and Ethereum approaching $1,600.

Precious metals are steady, gold at $1,707, silver at $18.83. Crude likewise at $104.02.

We’re two days away from an event that could throw global energy markets into a cocked hat. Again.

Early last week, Russia shut down the Nord Stream 1 pipeline for maintenance. War or no, Europe still relies on Russia for 40% of its natural gas supply — and much of it comes through Nord Stream 1.

Russian officials have been making noises in recent days about how it might not be physically possible to bring the pipeline back into service — for want of a part being repaired in Canada. Canada was holding up shipment of the part because of sanctions against Russia — until European leaders pleaded with the Canadians to make an exception this one time.

(This economic warfare thingy is complicated, huh?)

A few hours ago, Vladimir Putin promised to fulfill Russia’s commitments to deliver gas — but warned that he can’t make any guarantees if sanctions prevent ongoing maintenance.

Nord Stream 1 is supposed to go back online Friday — assuming the part arrives in time. In the event it does not, the European Union is telling member states to make plans for rationing — slashing consumption 15% through the winter.

The International Monetary Fund warns that in the event of a gas cutoff, the countries that would be hurt the most are Italy, the Czech Republic, Slovakia and Hungary. Stay tuned…

For the record: The Disinformation Governance Board has been formally scrapped.

The Department of Homeland Security announced the board’s formation in early May, declaring its initial focus would be on “countering misinformation related to homeland security, focused specifically on irregular migration and Russia.”

But the real agenda was obvious with the naming of Nina Jankowicz as the board’s director. Her qualifications had nothing to do with sniffing out foreign information ops… and everything to do with loyally amplifying the talking points of the Democratic Party’s Goldman Sachs-Lockheed Martin wing. (Including the canard about Hunter Biden’s laptop being a hoax.)

After considerable backlash, Homeland Security “paused” the whole thing later in May. Now comes word that an “advisory subcommittee” decided on Monday that there’s “no need” for such a thing at all.

On the one hand, we’re tempted to chalk up this development as a victory — and a reminder that on some level, the consent of the governed still matters.

But on the other hand, we’re sure the feds have other avenues to pursue the suppression of domestic dissent — not least the pressure the CDC brought to bear on social media companies earlier this year to suppress “misinformation” about COVID.

To the mailbag, where a reader in Paris pulls us back to the cashless society theme…

“In the second half of the 1990s, I was a partner in a small business in France, selling international calling cards (mostly wholesale). These cards were especially popular among immigrants who used them to call home and other countries at a discount price.

“The vast majority of our resellers were immigrants, most of them owning a shop, but some of them just home-based. Both shopkeepers and other distributors, having a strong third-world ‘survive in chaos’ mentality, often sold these cards on an undeclared basis. I could observe that a sizable fraction of the economy was cash-based, with many people having a job or a commercial activity partially or totally undeclared.

“Our largest customer was a Filipino who bought us 3,000 calling cards per month. He worked from his home and didn’t declare his business. He bought the cards from us slightly under $17, resold them around $18 and his distributors marketed them at $20. He’d built an extensive network of informal dealers among his fellow citizens in Paris (including a priest at a Filipino church).

“A ban on cash would deprive oxygen to this part of the population,” our reader continues. “This would be especially striking in the USA, due to the big percentage of immigrants. This would certainly lead to a rise in crime and some kind of social unrest.

“I am not even sure that global elites are aware of this reality. When I was a partner in this business, I met a banker who said that he made all his purchases with a credit card, so he didn’t see why our customers mostly paid in cash. I really resented having to explain to this kind of person that not everybody lives the same way.

“All in all, even if our so-called elites often have no clue of real life, there would be some resistance from civil society and I don’t see how a ban on cash could be implemented.

“You can also notice that Sweden tried to move toward a cashless society but discovered that this was not so simple.”

The 5: We were unaware that Sweden’s grand plans were running into trouble — we’ll have to look into that sometime.

As for what happens to folks near the bottom of the economic heap if cash is banned altogether… our thoughts go back to early 2016.

Then, we related the story of a homeless guy in Detroit who took credit card payments with a Square reader attached to a smartphone. We imagine by now he’s moved on to “contactless” payment methods.

As we said at the time, “Once in a while as we muse about the ‘war on cash’ and a cashless society, we get stuck on what the powers that be would do about the 7.7% of Americans who have no bank account.

“Now we know. Give ’em all ‘Obamaphones’ and Square readers. Done.”

Best regards,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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