The amount of physical cash in the banking system is limited. Cash today is similar to gold in the 1930s.
There’s a difference between physical cash (the kind you can touch and use immediately) and the electronic kind, associated with your bank balance or credit card cash advance limit.
The expanding debate about how much of your cash you get to withdraw at any given moment is something new.
The notion of a bail-in, or recourse to people’s deposits, is related to the idea of restricting the movement, or existence, of physical cash. Bail-ins, like any cash limitations, imply that if a bank needs emergency liquidity, your deposits are the place to find it, which has negative repercussion on your own solvency. This is exactly what the Glass-Steagall Act of 1933, coupled with the creation of the FDIC sought to avoid – banks confiscating your money at the worst possible times.
The ‘war on cash’ is thus really a war on the difference between the money you can hold on to and the money the banks can take away from you. The existence of this cash debate underscores the need for a personal policy of cash extraction from the big banks. Do you have one?
Edited by stocks, 05 July 2015 - 11:42 AM.