Wednesday, March 25, 2015

Uneasy Allies: Geopolitics And Cash

I’ve written before – sorry, I’m unable to backlink to it just now – that at a deep level, all governments are allied with all others against their citizens / subjects. This is inherent in the nature of the State: a predatory entity that will only be tolerated for as long as those subject to it regard it as preferable to no State. Note the importance of perception here. It need not be objectively true that your State is preferable to a condition of anarchy; it’s only necessary that a sufficient percentage of subjects believe that to be the case. Therefore, the power-wielder’s first duty is to manage the perceptions of his subjects toward that end. By unavoidable implication, the role (in your State’s schemes) of every other State is to look threatening to you.

Once again, the threats need not be objectively real so long as the perceptions are sufficiently strong and widespread. For example, the geopolitics of the Cold War years were largely propelled by Americans’ fear of the Soviets and vice-versa. In reality, the Soviets posed almost no threat to the United States, though we were provided with reasons to think otherwise. Similarly, until quite recently Red China was no threat to the U.S. Indeed, even today its ability to harm America or Americans is quite limited, though more substantial than in previous years. A good case could be made that the regimes in Iran and North Korea are objectively more threatening to America and American interests than either of the aforementioned “superpowers.”

However, the “assistance” other States provide in helping a given regime to keep its subjects properly subjugated doesn’t make them that regime’s friends. As Benjamin Netanyahu said before Congress quite recently, there are times when the enemy of your enemy is just another of your enemies. That’s often the case in geopolitics.

I wrote in the Foreword to Freedom’s Scion that:

The States of Earth exist in an anarchic relation to one another. Each has its own regional code of law, which might differ markedly from all the others. Despite several thrusts at the matter over the centuries, there is no “super-State” to enforce a uniform code of law over them all. More, they view one another as competitors in many different areas; their populations and institutions are often in sharp economic competition with one another. Thus, they are often at odds. They resolve important disputes among them through negotiation or warfare.

Yet individuals manage to move among them with a fair degree of facility and (usually) little risk. Cross-border trade is commonplace, in some places torrential. Though wars are frequent, they seldom result in major alterations to the overall political pattern. The uber-anarchy of Terrestrial society exhibits more stability than one would expect from two hundred well armed, quarrelsome States, each of which perpetually schemes at snatching some advantage at another’s expense.

The negotiations and advantages of which I wrote in the above often include international agreements of some sort: for example, on matters of trade and finance, currency management, or border controls. Sometimes such agreements synergize with a regime’s deeper priority of “keeping us on the plantation.”

Have a gander at this bit of news from France:

Under the auspices of fighting terrorism, France’s Minister of Finance, Monsieur Michel Sapin, has rolled out a series of eight new restrictions aimed specifically at minimizing the use of cash.

Among the new restrictions is a prohibition of making more than 1,000 euros in cash payments (down from 3,000 before).

Large cash withdrawals exceeding 10,000 euros per month will also now be monitored and reported to the French authorities.

Foreign exchange offices will now be required to obtain a copy of someone’s ID to exchange more than 1,000 euros.

There are several more beyond this. And, just for good measure, they threw in a few controls that aren’t even related to cash.

Most importantly, moving and transporting GOLD through France, even through a professional freight service, must now be declared and reported to French customs.

Simon Black says “It’s pretty obvious what’s happening here.” He’s right. But note the correlation with developments closer to home:

     Imagine going to the bank to withdraw some cash.

     Having some cash on hand is always a prudent strategy, and especially today when more and more bank deposits are creeping into negative territory, meaning that you have to pay the banks for the privilege that they gamble with your money.

     You tell the teller that you’d like to withdraw $5,000 from your account. She hesitates nervously and wants to know why.

     You try to politely let her know that that’s none of the bank’s business as it’s your money.

     The teller disappears for a few minutes, leaving you waiting.

     When she returns she tells you that you can collect your money in a few days as they don’t have it on hand at the moment.

     Slightly irritated because of the inconvenience, you head home.

     But as you pull into your driveway later there’s an unexpected surprise waiting for you: two police officers would like to have a word with you about your intended withdrawal earlier…

That’s from just four days ago, Gentle Reader. Do you suppose there might have been a few words exchanged between Washington and Paris over this? Especially given the acceleration of the rate at which Americans are expatriating? France, currently laboring under an overtly Socialist government, has much the same problem...and quite a few of its richer subjects have been coming here in preference to allowing La Belle Patrie to mulct them further.

Cash has “no provenance.” The cash in your hand could have come from anywhere; unless its delivery to you was actively witnessed and recorded, there’s no way to trace it backward. The same is true of other tangible items that have been used as cash, such as gold and silver.

Governments have always hated cash. Their war against cash has never ceased. Some of the most important “fronts” in that war are at national borders.

Among the developments of recent years that governments have encouraged has been the steady blossoming of cashless commerce: electronic funds transfer. In the United States, all such transfers are monitored by the Federal Reserve Bank. Indeed, the original form of EFT, the “wire transfer,” passes directly through the Federal Reserve Bank of New York. Supposedly this is to guarantee that banks won’t play fast and loose with the reserve requirements. If you believe that, I have a wonderful opportunity for you. No checks, please. Cash only. Small bills.

U.S. financial dominance has depended on the status of the dollar as the world’s reserve currency, a status conferred upon it at Bretton Woods in 1944. It’s the main reason Washington has been able to inflate without limit. However, there’s a development in progress that’s got our government, and quite a few others, unsettled: the emergence of a new regional banking system founded on a Chinese bank:

Britain has become the first major Western government to apply for membership in a proposed Chinese-led Asian regional bank that Washington worries will undercut institutions such as the World Bank.

The British Treasury said Thursday it will join talks this month on the Asian Infrastructure Investment Bank's structure and governance arrangements.

China proposed the bank in 2013 to finance construction of roads and other infrastructure. It has pledged to put up most of its initial $50 billion in capital.

Twenty-one other governments including India, New Zealand and Thailand have said they want to join. For now, the United States and its close allies Japan, South Korea and Australia are not part of the new club.

The bank is one of a series of initiatives by Beijing to increase its influence in global finance and expand trade links with Asian neighbors and developing countries in Africa and Latin America.

A fair number of other countries have announced their intention to join that new system. It threatens to compete with American financial power, long a virtual monopoly in international finance, in a fashion that would reduce Washington’s overall ability to influence world affairs, especially in the vital Pacific Rim nations. Needless to say, Washington’s expressed concerns address such apolitical matters as reserves and lending standards. Sincere or cosmetic? You be the judge.

“When danger looms, go to cash” has long been a maxim for the well prepared. With cash transactions becoming rarer and government controls becoming ever tighter, the use of cash for non-trivial transactions grows more hazardous in and of itself. For one thing, the rarer they become, the more attention they’ll draw from anyone who becomes aware of them. For another, due to inflation the average amount involved in a “non-trivial transaction” is larger than it’s ever been and will grow larger still.

Add to the above Washington’s fears for the dollar’s reserve-currency status. What do you expect will happen to cash and the laws surrounding it next?

Fortunately, the State can’t completely eliminate the concept of cash. Any tangible that’s sufficiently recognizable, durable, and divisible can function as cash. Time was, tobacco and liquor were frequently used as cash in North America, especially in trades between Amerinds and Euro-derived Americans. A society with a low volume of commerce can easily do so:

    Armand peered into the throat of the little carburetor for verisimilitude while his detached viewpoint quested within for the obstruction that had choked it. It was hardly a moment before he'd found the problem: a clot of carbonaceous lint, left unconsumed by the low-temperature distillation technique the Hopeless used to make alcohol from their composted wastes, was lodged firmly in the jet. He stuck a thin strip of stiff plastic into the device and swished it around as he closed a telekinetic grip on the clot, carefully teased it free, and anchored it to the end of his probe. He pulled the probe gently out of the carburetor's throat and showed the clot to Nigel Simpson.

    "See why I've been telling you to filter your alcohol before you use it?"

    Simpson snorted and reached for the carburetor. Armand pulled it out of his reach.

    "Did you forget my fee, Nigel?"

    The forger's face reddened. "Don't I have credit with you?"

    Armand stared him full in the eyes. "I have a wife to feed." At the far end of their hut, Teresza looked up from her sewing. Armand turned and grinned to indicate that the situation was non-threatening, and she returned to her labors. "No one has credit here. Particularly not a man as well known for his selective memory as you."

    Simpson sprouted angry lines around his mouth and eyes. He was twice Armand's age and half his size, a venal little toad of a man who'd steal the eyes out of Armand's head if he thought he could make a clean getaway. He was smart enough to know that he'd only get his property back if Armand could be persuaded to release it to him, but not smart enough to accept the fact with good grace.

    Over the six months since they'd crossed the land bridge, the Hopeless of Defiance had come to treasure Armand for his unparalleled knack with their ancient machinery. They revered him for his gift of the fresh-water well. In any contretemps he could count on the backing of nearly all his neighbors and other customers, some out of sincere gratitude, the rest for more practical reasons. Simpson could count on nothing at all.

    "All right." The forger shrugged off his backpack, rummaged around in it and produced a pint flask of clear liquid. He thrust it at Armand with a contemptuous gesture.

    Armand took it, eased out the fibrous stopper, and sniffed. "Vodka?"

    Simpson nodded. "Ninety proof."

    From you, that means probably no better than fifty proof, but I can still get what we need with it.

Such a day might be upon Americans sooner than anyone expects.

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