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Not long ago, the European Central Bank made public its intention to abolish the 500-euro banknote, and the next target may be European cash. Immediately afterwards, some mainstream mouthpieces economists and media in the United States also called for the discarding of $100 and $50 banknotes in turn. In fact, the war on money began many years ago, for example, in Italy, where cash transactions over 1,000 euros were illegal.

Their reasons for banning cash are high-sounding: to suppress criminals, many "illegal activities" are carried out in cash, such as tax evasion, money laundering, drug trafficking, etc., because cash transactions are not recorded through the banking system, leaving no traces, and are relatively hidden - in their eyes, it is estimated that the people who use cash in large quantities are not good people.

Obstruction of criminal transactions is a seemingly righteous reason, but behind it is a strange logic, because cash is not a sufficient or necessary condition for committing a crime; without cash, criminals can completely switch to trading in gold, diamonds, jewelry, etc., and should they also ban all of this? With the banking system to follow, every transaction can be traced, and it will be easy to monitor your tax payments and know where you are going. For example, in late 2015, the federal government retaliated by freezing the bank accounts and credit cards of four former U.S. Air Force drone operators (Figure II) after inflating their ineffective prosecution for exposing the killing of innocent civilians by U.S. drones.?——

Of course, many governments and central banks are banning cash for much more than that, and their other, more important intention is to more effectively implement a monetary policy called negative interest rate policy (NIRP). At the beginning of this year, following the example of Denmark, Sweden and other European countries, the Bank of Japan also announced negative interest rates. What is a negative interest rate? Simply put, you lend me money and you pay me interest – yes, it doesn't need to be explained, it sounds ridiculous.

In the final analysis, it is still one of the Keynesian series of policies that stimulate consumption, stimulate aggregate demand, and do not provoke or provoke discomfort. While interest rates are supposed to coordinate people's time preferences and play a key role in the structure of production, some central banks have long practiced ultra-low or zero interest rates, and this kind of credit expansion has created a short-lived and illusory "boom", but when the side effects of bad investments begin to appear, the economy falls into the recession it should have experienced (for the meaning of interest rates and the business cycle, see my article 13, "A Correct Business Cycle Theory") At this point, the hand of intervention is usually unleashed, and the only stimulus from zero interest rates down is basically money printing inflation and negative interest rates, which are called "quantitative easing".

One of the problems with quantitative easing stimulus is that newly printed money may sit in a corner of the bank and be hoarded without participating in circulation, causing the central bank to intervene in a way that does not serve its intended purpose. As a result, "smart" negative interest rates were invented to make money hoarded in banks pay the price, forcing money to flow into the economy.

In the face of negative interest rates, saving is no longer cost-effective, but you don't want to squander it, and you may have thought of a solution: simply withdraw cash from your account and leave it at home, so as to avoid being swallowed up by negative interest rates in the banking system – yes, this is the main reason why some central banks plan to phase out cash, which will make negative interest rates less useful and make cash a stumbling block to their Keynesian ambitions.

Interest rates have been kept low by central banks, and some regions have moved into negative territory. Negative interest rates are fundamentally anti-capital, and it is important not to forget that capital was initially formed by savings, and even if it boosts economic growth in the short term, this glitzy façade is destined to turn into a collapsing bubble. Unfortunately, however, the era of negative interest rates may remain a short- to medium-term trend in the world, and then the war against money may also be "full of gunsmoke", if this is the case, it will mean more control and less freedom, but this absurd financial experiment is ultimately unsustainable, and in the long run, it will end in an unprecedented financial crisis - I hope that people at that time would understand that the best monetary policy is no monetary policy, abandon the central bank, a product of the planned economy, and start an era of free banking.

Outside: How to deal with an economic crisis

The Austrian School's theories teach us the importance of interest rates, and that central banks that manipulate money and intervene in markets are the ones that cause cyclical illusory "booms" and crashes. The so-called "boom" is often filled with shiny bubbles that reflect colorful colors, but the bubble will burst one day, especially when the central bank begins to shrink credit because of the fear that its monetary expansionary policies will lead to excessive inflation.

Because of the dollar standard for nearly 40 years, the Fed is to some extent the world's central bank. As we all know, the Fed launched several rounds of unprecedented and eye-popping credit expansion in 2008, and then dragged on and on, and finally shyly raised the federal funds rate by 0.25% on the 16th of January, and the rate hike began and the credit contraction seemed to begin. Not to mention the rest of the world, the U.S. stock market fell nearly 10% in the first two weeks of 2016, and if the Fed really dares to keep raising interest rates, then it is expected that the stock market will continue to squeeze the bubble, and the same is true for the bond market, the housing market, etc., and the subsequent recession and crisis are inevitable.

Just as the mainstream media in the United States blamed the collapse of US stocks on external factors such as the Chinese stock market and the North Korean hydrogen bomb, an interesting thing happened a week ago: Richard Fisher, the former chairman of the Federal Reserve in Dallas, confided in a live interview with BC (the mainstream financial television station in the United States) that the Fed's previous credit expansion was intended to produce the so-called "wealth effect" After all, the Fed had not admitted it before ("the stock market is good because the U.S. economy is good"), and the moderator immediately asked Fisher if the Fed should apologize for the bubble inflation of the stock market. (QE3 is the Fed's third round of quantitative easing, in short: printing money) - I translated it for Mr. Fisher, what he meant: I supported it, only blew two breaths on the bubble, and the third one doesn't blame me, QE3 has to blame Bernanke, Yellen and others.

It's rare to have such a heartfelt statement on BC, because the mainstream media in BC is almost always promoting singing and dancing, and I have the impression that Ricksantelli is the only one who is a heretic on the mainstream Keynesian screen in BC who is worthy of praise. If you are concerned about finance and economics, it is recommended to read less mainstream media, and if you have the ability to read English, you should read more zerohedge, which is beneficial to your cognitive and mental health.

In fact, this is a choice between long-term pain and short-term pain -- like taking drugs; credit expansion is like taking drugs for the economy, and taking drugs is very refreshing and exciting, but when you stop taking drugs, your body will have withdrawal symptoms and feel uncomfortable -- then should you hold back your addiction and quit drugs, or should you continue to smoke to relieve temporary discomfort? The Austrian school advocated that in the face of an economic downturn, it was the long-term solution that the market should settle itself, because knowledge was ultimately scattered, albeit temporarily. On the contrary, the mainstream argument is that it is important to take two more puffs and be comfortable, that is, to stimulate aggregate demand and beware of deflation is the top priority, which may show signs of "recovery" in the short term, but it is a palliative and immoral transfer of wealth, and in the end, it only leaves a larger crisis for the future, just as drug addicts continue to increase their doses to maintain satisfaction until they collapse and die.

As an individual, one of the best ways to prevent a crisis is to store a portion of your property in the form of gold and silver (preferably in kind, rather than a paper IOU, which usually recommends a 5%~10% portfolio). In fact, in the investment world, many bigwigs attach great importance to gold and have a deep understanding of the meaning of gold and silver, such as rschiff and so on. Raydalio, the CEO of Bridgewater, even said, "If you don't own gold, you don't know history or economics." "Gold and silver are the kings of currencies that have been baptized by thousands of years of civilization and stand out from the competition with their excellent physical, chemical, economic and other properties.

In times of economic crisis, those in power may still favor the more bailouts and policy stimulus that the mainstream has called for, and if so, the result will still be the Austrian School's insights that have been repeatedly tested. Only by allowing the market to function can healthy and long-lasting freedom and prosperity become a stable reality.

Peter Schiff has a wonderful saying:

"The more we are in a recession, the more we need capitalism, because in a boom we at least have money to deal with the stupidity of the government. ”

In the other two articles, you have become poorer again--- tariffs are harmful and unprofitable

Tariffs, which are equivalent to sales tax levied on imported goods, came into effect on April 8, and the new policy on it came into effect, and the details will not be repeated here, in short, the customs tax is more.

Imagine that Wang Xiaoer, who lives in the northeast, buys a bunch of goods from Chen Xiaoming's shop in Lingnan, and whether there are other harsh taxes and miscellaneous taxes in the middle are not discussed here, but at least there is no tax called "customs duty". Then why did Wang Xiao'er have to pay an extra tariff when he bought a bunch of goods from Xiao Ming Williams's store abroad? Why did an artificially drawn border change the nature of an ordinary transaction between two ordinary people?

Defenders of tariffs usually cite a number of reasons, but the first thing to point out is that these pro-tariff proponents tend to have a characteristic that they do not support other countries in imposing tariffs on their own exports – they support tariffs on the outside side of the border, but they do not support tariffs on their own side of the border – and this logical incoherence suggests that they probably know that tariffs are not a good thing that makes sense.

Tariffs are one of the core claims of mercantilism. To be clear, the term mercantilism seems to be a doctrine of "valuing commerce", but in fact it is an anti-free-market and anti-capitalist theory that blindly pursues trade surpluses and hoards money. Mercantilism dominated Europe from the 16th to the 18th centuries until classical economics, led by Adam Smith, criticized it to the fullest. Although mercantilism has been refuted for more than 200 years, some of its ideas still linger today, and traces of trade protectionism can be found everywhere.

Tariffs are one of the important tools of trade protection, and one of the main reasons to support them is to protect the rise of domestic related industries, especially those in the so-called "infancy". Can tariffs protect domestic industries that are still in their infancy? Admittedly, they provide protection, but at the same time, they "protect" consumers from buying better and cheaper foreign goods.

For example, a landlocked country lacking lakes and rivers would raise tariffs on imported fish and shrimp and other aquatic products, which would indeed promote a booming aquaculture industry, but the absurdity of this would be obvious, as the people of the country would no longer be able to enjoy high-quality and affordable aquatic products. The result is that the fishermen who raise fish and shrimp in this water-scarce landlocked country are fattened to the rest of the population – tariffs protect a domestic industry, and many people only care about the visible "benefits" and ignore the welfare lost by the rest of the consumers.

Further, in the market, if a company has a bright future, then in the "infancy" of the first few years of loss is not a big problem, after all, there are many investors who value long-term development and do not expect to produce immediate profit returns; on the contrary, if a company does not have that kind of potential, can not attract investment loans, and actually needs trade protection to survive, then this may indicate that it will waste resources and reduce the efficiency of the economy, so why let it exist? Moreover, to build a truly powerful enterprise, how many are not through the struggle in the market competition?

Another big argument in favor of tariffs is the protection of domestic jobs (I've written a short article to refute the blind pursuit of jobs before, click here: "Why not dig a canal with a spoon?"), and no matter how unreasonable it is to pursue jobs at the expense of efficiency and progress, this view is also very naïve in its view of trade. A lot of people don't realize that trade is a two-way street, and at the end of the day, you're actually exchanging exports for imports. Zooming to the individual level, the same is true, that is, you have to create wealth first, and when you make money, you can only be able to buy things to meet your needs – supply creates demand (Say's Law).

Explain with a simplified two-country scenario: After the merchants of country X export their products into China for sale, after all, these goods earn RMB; people of country X earn RMB, can they take the RMB back to country X for daily consumption? Obviously, no, the RMB earned by people of country X can be used for investment or consumption in China, for example, they can buy Chinese tea and bring it back to country X, or invest in a Fujian tea farmer, and the result is to promote the prosperity of China's tea market and increase employment in the tea market. Of course, people in country X can also directly exchange RMB into the currency of country X to return to China for use, that is, sell RMB to buy currency X, at this time, the RMB will depreciate in the foreign exchange market relative to currency X, and then, this makes China's products more affordable and competitive for people in country X, and promotes the people of country X to buy Chinese goods, that is, increases China's exports, and the development and employment of China's export manufacturers will be improved.

It's all dynamic. When you suppress imports by imposing tariffs, you are also reducing the access to renminbi for foreigners, so that investment and consumption, such as the above-mentioned stimulus for the tea market, do not appear. In addition, the floating exchange rate regulates the whole process, and at this moment, the relatively more expensive renminbi makes Chinese goods more expensive and less attractive to people of country X, and as a result, exports are not as high as they could have been. Some people may say: "Then intervene in the foreign exchange market and lower the exchange rate", but adding mistakes to mistakes is not the same as right, and artificially lowering the value of the currency is equivalent to giving wealth to foreign countries to a certain extent. Eventually, as a result of tariffs, the economic development and wealth creation that would have been born were curtailed, and employment did not necessarily increase in net employment compared to those that would have been without tariffs.

In addition to the well-known reason (which I will not mention the comments that may have led to the deletion of this article), there is also a major factor in lobbying from special interest groups, such as the government to enforce protection, such as tariffs, in order to avoid the tougher competition in the market that comes with foreign companies. In addition to the above-mentioned aspects, they may also include unreliable excuses such as national honor and national security. Successful examples of this kind of political lobbying are not uncommon, and public choice theory explains them specifically: concentrated benefits and dispersed costs.

Suppose that U.S. agricultural interests lobby the government to raise tariffs on imported wheat in order to protect homegrown wheat farmers. After the tariffs were raised, the relative price of wheat in the United States occupied more market share, and now the 300 million people in the United States buy bread, noodles and other wheat products more expensive, on average one person has to spend an extra $10 a year. This 10 yuan is insignificant, and spending this little money for more than a year is not painful for the vast majority of people. However, 300 million people spend an extra $10 per person per year, which adds up to a whopping $3 billion a year. Of course, the extra $3 billion spent by American consumers has nothing to do with foreign wheat farmers; in addition to a part of the tariffs imposed by the government, more of them go into the pockets of American wheat farmers -- in order to increase the income of billions of dollars a year, the interest group composed of wheat farmers with a size of only tens of thousands of people has a great incentive and incentive to lobby the government to raise tariffs, which is a concentrated interest; on the other hand, 300 million Americans almost all do not care about spending an extra 10 dollars a year, which is a dispersed cost. Eventually, a tariff that would reduce economic efficiency and quality of life was introduced.

Henry Gee, a 19th-century American economist, once made an extremely apt classic judgment on trade protectionism:

whatprotectionteachesusistodotoourselvesintimeofpeacewhatenemiesseektodotousintimeofwar.

What trade protectionism teaches us is to treat ourselves in peacetime the way the enemy tries to treat us in wartime.

The best tariff rate, no more, no less, is 0%. On the contrary, tariffs and other interventions that restrict free trade are a lose-lose policy; it harms not only the business of foreign businessmen, but also the interests of domestic consumers, and only a minority of interest groups benefit, while the rest of the population has become poorer. (To be continued.) Mobile phone users, please browse and read, a better reading experience.