China’s Predatory Lending
February 12, 2025
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Governments all over the world are fighting a war on cash. It is a known fact that the governments do not like cash. However, what is not clearly known is the reason behind it. What is it that makes governments all over the world unanimously abhor cash and pass legislation to control or even curb its usage.
In this article, we will understand the rationale that the government has when it tries to block cash transactions or at least make them more difficult and inconvenient.
The real reasons for going cashless are much more sinister than the government would have you believe. While it is true that if all the payment transactions are happening through a cashless system, it will be easier to trace who initiated these transactions. It will therefore break the backbone of drug dealers, smugglers, and even terrorists. However, it could also be used for lots of other purposes.
If the government kept the bank interest rates at -4% and levied a -10% charge on withdrawals, people would still keep money in the bank even if they are losing value. The key part of this policy would be to ensure that everyone receives their salaries and other incomes via a bank account. Once every dollar in the financial system is routed via banks, the government can levy negative interest rates.
Bank runs were responsible for several bank crises till the 1980’s. The fractional reserve banking system is in tatters all over the world today. It is likely that the bank runs of the yesteryears might return and put many banks out of business. Hence, to protect their interests and to ensure business continuity the banking lobby may be forcing the government to go cashless. Once society goes cashless, cash cannot be withdrawn, and hence the question of a bank run does not arise at all!
These initiatives that promote cashless societies are therefore viewed by many as an intrusion into the private finances of individuals. Once the government knows the true scale of the money in the economy as well as the people holding it, they will start confiscating the money.
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