Simon Jenkins in The Guardian
In 532AD the city of Constantinople was torn between two parties, the blues and greens. Everyone, aristocrat or slave, belonged to one or other. In January a chariot race between the two erupted into riots. Destruction was appalling. Half the city was gutted by fire, including the great church of Hagia Sophia. A green emperor was chosen to replace Justinian, who backed the blues and butchered 30,000 greens in response. That decided it.
Britain’s EU referendum is looking much the same. At first the pros and antis argued over tariffs and sheep meat premiums. Then they argued over top tables and “influence in Europe”. Now they pit salvation against damnation, national glory against famines, locusts, boils and immigrant hordes. The nation examines the entrails of heirs to the throne, actors and London mayors. Prince William,Emma Thompson and Boris Johnson claim meta-wisdom. On Friday the chariot race starts, and all hell breaks loose.
On Europe there is clearly no compromise between black and white, between yes and no. Yet the shallowness of the argument is shown in the antis’ neo-nationalism and the pros’ “Project Fear”. The antis are in denial over how to reconstruct a workable framework for a free-trade area after a no vote. The pros, notably the business community, have nothing to offer but “remaining in a reformed EU”.
David Cameron has laboured valiantly to deliver that reformed EU, but it was never in his gift. Nor has he done what he promised, which is materially to alter Britain’s relationship with Europe. He has probably won all that the EU could plausibly offer. But given the terms of the debate, I do not see how the reformed-EU party can honestly vote yes. The EU is unreformed. If politics were about truth, Cameron would stun the nation tomorrow by backing no.
To me the referendum as such is not the issue. The issue is the aftermath. I suspect the long-term outcome of the vote will be much the same either way. Two adjacent modern economies cannot co-exist without mutual accommodation, reflecting political and economic reality, not ideology.
During Scotland’s 2014 referendum, “independence-lite” drew ever closer in argument to “devo max”. However Scotland voted, there had to be a new deal between London and Edinburgh. The British government, threatened with losing the union, conceded half a deal, and won.
The EU cannot negotiate nimble-footed, as London did in 2014. It is too big and cumbersome, with too many national insecurities and battling lobbies. It cannot even control its borders. Already split by the eurozone, the EU could not stand more exceptionalism. Programmed to ever greater union, it has no gear-shift to “ever less”. Like Britain’s NHS, it has a dinosaur in its DNA.
Certainly a yes vote would change nothing. All that would result is that any future British government, seeking to resist Brussels power, will be hogtied by the result. The threat of Brexit, which Cameron has struggled to mobilise this past six months, will evaporate.
Instead a furious Conservative party would make the government behave ever worse towards Europe. Britain would continue to fend off immigrants, fawn on China and flog everything to east Asia. It would side with America in foreign and defence policy. Irrespective of Europe, its banks would launder money and evade tax with abandon. Britain would stay semi-detached.
On the other hand, a no vote would certainly be traumatic. It would send Britain’s pro-EU establishment into the mother of all huddles with a panic-stricken Brussels. Half of Europe’s democracies know they could lose an EU vote just now. No one really wants Britain to depart.
The dreaded article 50 of the Lisbon treaty on renegotiation would be activated. Fat-cat thinktanks would argue the Norwegian, Swiss, Australian, American and rest-of-world options. Euro-panic would morph into Euro-conspiracy. Power hates rebellion. Deals would be done.
My reading of lobbyist literature from both sides suggests that Britain would probably emerge from all this with a diluted version of associate EU membership. To ensure trade continuity – which is in everyone’s interest – it would accept much of the present EU regulation. It might even contribute to the EU budget. The UK would gain some discretion in picking and choosing. In return it would lose its present much-cited (though never specified) “influence”, through losing its vote in the council and parliament. The balance of advantage is here too opaque for anyone sensibly to call.
But if the outcome does not matter that much, what does? The answer is disruption versus inertia. Here the argument defaults to tribe. The yes tribe is composed of the insiders, the metro-progressives, the established order averse to change. The no tribe consists of the outsiders, the provincials, the instinctive radicals. On the left this is a divide between the old-style statist socialism and the new left of perpetual dissent. On the right it separates the “natural party of government” and the professional class from the grassroots, the insecure and the dispossessed.
Neither tribe is happy with the present EU, as it fails in its core purpose of holding together a disparate continent in the cause of liberal democracy. It made one mistake, the eurozone, and now faces another problem, the growth of rightwing separatism across south and east Europe. It has humiliated a British prime minister into traipsing round the capitals of Europe, pleading for help in a domestic election. It is a mess. This is the EU that would sigh with relief at a British yes vote.
A no vote would not “isolate” Britain from mainland Europe, whatever the howls of “Project Fear”. But it would traumatise EU complacency. It would press the reset button. A no vote would force the EU, or at least countries outside the eurozone, to seek a new balance between supranational regulation and free trade. However arrogant it might seem to others, Britain would have precipitated reform. That is surely what everyone wants.
There would have to be a new treaty between the EU and Britain, on whatever suite of options would emerge from negotiations. It would be tough. But since such a treaty would probably qualify the decision to withdraw, it would merit a new referendum. That is the referendum that really would matter.
Thursday, 18 February 2016
Tuesday, 16 February 2016
JNU, BJP and Jeremiah Wright’s prayer book
Jawed Naqvi in The Dawn
EASTER is as good a time as any to recall Rev Jeremiah Wright’s admonition of the American political class. The noxious attack on Delhi’s premier Jawaharlal Nehru University by Delhi Police and their Hindutva cheerleaders is another fine reason to remember the pastor who baptised President Obama’s children but remains in bad odour with the right-wing political class in his country.
In a powerful sermon, he illustrates how to criticise your country and not be lynched or jailed. His slamming of America is not rooted in hatred of his country but in his love for its people as he loved people everywhere. Pastor Wright, like other ordinary people, does not have a nationalist bone.
War, he told a congregation not too long ago, does not make for peace. “Fighting for peace is like raping for virginity…When your wife or your children have been crushed by the enemy, when your mother or your father have been mowed down by the military, peace is not on your mind. Payback is the only game in town.” Are Jeremiah Wright’s words subversive for our region?
“Occupying somebody else’s country doesn’t make for peace. Killing those that fought to protect their own homes does not make for peace … We confuse government and God…We believe God sanctioned the rape and robbery of an entire continent. And [they want] us to sing ‘God Bless America.’ No, no, no. Not ‘God Bless America’; God Damn America! That’s in the Bible, for killing innocent people!” It’s a long speech.
Many Americans strongly disagreed with Jeremiah Wright. President Obama distanced himself from his sermons in an election year. But no statute or law book was thrown at him, nor was he harassed or threatened with lynching as happens in India these days. The object lesson here is that America can be accused of a million wrongs, but it remains a confident democracy that allows for dissent at home, though not be always abroad.
The Wright example is relevant for India as last week’s assault on JNU came from an insecure state that is not confident enough to take sharp criticism. The assault, ostensibly invited by some Wright-like words, triggered a heavy bout of nationalist fervour. Sadly, every party, from the left to the right, was pleading to be counted as nationalist as if that would save anyone from the state’s insidious rightist trap.
Nationalism, which Wright shunned, has traditionally been a sly, opportunistic, street-smart, malleable idea, which doesn’t do any good to any society coming under its sway. But it has always been useful for the national elites more or less everywhere, since decades. Ziaul Haq claimed to be a nationalist, so did his quarry, Z.A. Bhutto. Musharraf and Nawaz Sharif, ditto. Mujib and Ziaur Rehman likewise. Hitler rode to power on nationalism, and with him his trusted aide Ernst Rohm. However, when Rohm, the head of the dreaded Nazi SA, posited that socialism in National Socialism was as important as nationalism, Hitler got him shot.
Nehru was instinctively an internationalist, but opposition pressure turned him into a nationalist albeit grudgingly, with soft hands. Then Narendra Modi arrived and declared the first prime minister as the harbinger of the nation’s dark ages. By implication, Nehru was India’s essential foe. Modi struck up a conversation with Bangladesh while assiduously hiding away the role of Indira Gandhi in its creation. Gandhi had shored up the idea of Bangladesh to claim her own nationalist baton. Modi has striven to steal her thunder but may not succeed.
His stated objective in this endeavour is, therefore, to finish off the Congress, to weed out from the roots India’s original beacon of nationhood, and, not unknowingly, supplant it with the nationalist fervour of Hindutva’s lynch mobs.
To this end Modi took into confidence the audiences in Beijing about the plot. Indians, he told the world through them, without naming names, were living a life of inferiority complex under decades of Nehru-Gandhi rule. With his advent they had got back their spine.
That spine was in evidence last week in JNU, India’s premier institution of high academic interface with the world. Calls for shooting JNU’s leftist students could be an example of the reinforced spine. Shut down the university counselled another Hindutva acolyte. The agenda to dismantle the “hub of leftism”, of course, precedes by decades last week’s meeting of some as yet unidentified students to commemorate an executed Kashmiri militant.
The Afzal Guru meeting became a ruse for a terrifying police invasion of the campus. The student leader picked up for grilling is a Marxist and it is not his politics to slam the Indian state as Rev Wright would. That may not help though. The Hindu right is hunting for communists, not Kashmiri separatists who the army takes care of.
Therefore, perhaps the most tragedy-prone nationalists anywhere today are India’s communists, not the least because they were never cut out for the job. Their creed up until early 1990s was internationalism. Then they seemed to have run out of foreign partners.
Of the internecine communist battles the world over, two or three mannerisms are staple: brotherly greetings, marginalisation of former comrades and debunking of each other. Their task was to dismantle an unequal world, but Indian communists turned the challenge into a game of blind man’s bluff. Having ground down each other more viciously than they ever did their class adversaries they have unwittingly exposed themselves to the state’s vicious moves against them, as sitting ducks. What happened in JNU had much to do with that.
Jeremiah Wright’s sermon could yet guide the comrades to their old self-assured internationalism, and wean them away from an ill-fitting nationalist makeover. Happy Easter, comrades.
EASTER is as good a time as any to recall Rev Jeremiah Wright’s admonition of the American political class. The noxious attack on Delhi’s premier Jawaharlal Nehru University by Delhi Police and their Hindutva cheerleaders is another fine reason to remember the pastor who baptised President Obama’s children but remains in bad odour with the right-wing political class in his country.
In a powerful sermon, he illustrates how to criticise your country and not be lynched or jailed. His slamming of America is not rooted in hatred of his country but in his love for its people as he loved people everywhere. Pastor Wright, like other ordinary people, does not have a nationalist bone.
War, he told a congregation not too long ago, does not make for peace. “Fighting for peace is like raping for virginity…When your wife or your children have been crushed by the enemy, when your mother or your father have been mowed down by the military, peace is not on your mind. Payback is the only game in town.” Are Jeremiah Wright’s words subversive for our region?
“Occupying somebody else’s country doesn’t make for peace. Killing those that fought to protect their own homes does not make for peace … We confuse government and God…We believe God sanctioned the rape and robbery of an entire continent. And [they want] us to sing ‘God Bless America.’ No, no, no. Not ‘God Bless America’; God Damn America! That’s in the Bible, for killing innocent people!” It’s a long speech.
Many Americans strongly disagreed with Jeremiah Wright. President Obama distanced himself from his sermons in an election year. But no statute or law book was thrown at him, nor was he harassed or threatened with lynching as happens in India these days. The object lesson here is that America can be accused of a million wrongs, but it remains a confident democracy that allows for dissent at home, though not be always abroad.
The Wright example is relevant for India as last week’s assault on JNU came from an insecure state that is not confident enough to take sharp criticism. The assault, ostensibly invited by some Wright-like words, triggered a heavy bout of nationalist fervour. Sadly, every party, from the left to the right, was pleading to be counted as nationalist as if that would save anyone from the state’s insidious rightist trap.
Nationalism, which Wright shunned, has traditionally been a sly, opportunistic, street-smart, malleable idea, which doesn’t do any good to any society coming under its sway. But it has always been useful for the national elites more or less everywhere, since decades. Ziaul Haq claimed to be a nationalist, so did his quarry, Z.A. Bhutto. Musharraf and Nawaz Sharif, ditto. Mujib and Ziaur Rehman likewise. Hitler rode to power on nationalism, and with him his trusted aide Ernst Rohm. However, when Rohm, the head of the dreaded Nazi SA, posited that socialism in National Socialism was as important as nationalism, Hitler got him shot.
Nehru was instinctively an internationalist, but opposition pressure turned him into a nationalist albeit grudgingly, with soft hands. Then Narendra Modi arrived and declared the first prime minister as the harbinger of the nation’s dark ages. By implication, Nehru was India’s essential foe. Modi struck up a conversation with Bangladesh while assiduously hiding away the role of Indira Gandhi in its creation. Gandhi had shored up the idea of Bangladesh to claim her own nationalist baton. Modi has striven to steal her thunder but may not succeed.
His stated objective in this endeavour is, therefore, to finish off the Congress, to weed out from the roots India’s original beacon of nationhood, and, not unknowingly, supplant it with the nationalist fervour of Hindutva’s lynch mobs.
To this end Modi took into confidence the audiences in Beijing about the plot. Indians, he told the world through them, without naming names, were living a life of inferiority complex under decades of Nehru-Gandhi rule. With his advent they had got back their spine.
That spine was in evidence last week in JNU, India’s premier institution of high academic interface with the world. Calls for shooting JNU’s leftist students could be an example of the reinforced spine. Shut down the university counselled another Hindutva acolyte. The agenda to dismantle the “hub of leftism”, of course, precedes by decades last week’s meeting of some as yet unidentified students to commemorate an executed Kashmiri militant.
The Afzal Guru meeting became a ruse for a terrifying police invasion of the campus. The student leader picked up for grilling is a Marxist and it is not his politics to slam the Indian state as Rev Wright would. That may not help though. The Hindu right is hunting for communists, not Kashmiri separatists who the army takes care of.
Therefore, perhaps the most tragedy-prone nationalists anywhere today are India’s communists, not the least because they were never cut out for the job. Their creed up until early 1990s was internationalism. Then they seemed to have run out of foreign partners.
Of the internecine communist battles the world over, two or three mannerisms are staple: brotherly greetings, marginalisation of former comrades and debunking of each other. Their task was to dismantle an unequal world, but Indian communists turned the challenge into a game of blind man’s bluff. Having ground down each other more viciously than they ever did their class adversaries they have unwittingly exposed themselves to the state’s vicious moves against them, as sitting ducks. What happened in JNU had much to do with that.
Jeremiah Wright’s sermon could yet guide the comrades to their old self-assured internationalism, and wean them away from an ill-fitting nationalist makeover. Happy Easter, comrades.
The housing crisis is creating sharp-elbowed husband hunters
Grace Dent in The Independent
“It is a truth universally acknowledged,” wrote Jane Austen, foretelling the British housing situation in 2016, “that a single man in possession of a good fortune must be in need of a wife.” Oh how I struggled, as a sixth-former in the Nineties, with the opening lines of Pride and Prejudice.
How hideous, I thought, that a time existed when a woman would marry a man for a house. Cut forward some two decades to the era of the £80,000 mortgage deposit. How odd that marrying bricks and mortar – with an added spouse as a bonus – seems pragmatic, rather than mercenary, today.
I very much enjoyed a recent column by the writer Esther Walker, in which she admits spying her then-boyfriend Giles Coren’s slightly neglected five-bedroom London townhouse, seven years ago, and being instantly smitten. With the house, that is. Coren, as alluring as he is, came second in the equation. First, Walker says, she saw the chipped front door, the replaceable carpets and all that lovely space. Here was a home in which she could live, nest, and raise children.
It is fascinating to me that, five short years ago, a confession as gloriously candid as Walker’s would have provoked feminists into bringing down the internet. I would have been among them, perhaps. Today, I greet the same news with a relaxed shrug of acceptance.
Just five short years ago, I remained convinced that if a young woman – or a young man, for that matter – dreamed audaciously and worked very, very hard, they need not be dependent on anyone for a home. I bought my own house through sheer slog and bloody-mindedness; why couldn’t Generation Buzzfeed do the same?
But little by little, I’ve watched the rise of single men and women trapped in later-life house-shares. I’ve seen how grown-up children are reduced to squatting like cuckoos in their parents’ back bedrooms until well after it is polite. Eventually, I was writing about the rise of strangers in London sharing bunkbeds (out of grim necessity, I should point out, not as a niche hobby).
The future seemed rather infantalising. And for women, feminism may well have flourished, but owning the house you live in, like Beyoncé sang about in “Independent Women” has fallen on its arse somewhat.
The facts are sobering: recent research by the Resolution Foundation on inter-generational fairness shows that in 1998, more than half of those earning 10 to 50 per cent of the average national income had a mortgage. This figure dropped to one in four by 2015. Within a decade, if things continue as they are, one in 10 will have a mortgage. In the late 1990s, when I was a strident youthful thing, it took determined people like me three years to save up for a deposit. Today it would take 22 years. That’s a long time to share a bunk bed, even if it’s in HMP Holloway.
This is particularly bleak in the light of new research on the rise of the “crowd worker” – people paid through online platforms such as Uber, Upwork and TaskRabbit. Here, instead of fairly paid, pensionable work which impresses mortgage vendors, there is a generation tied to their phones waiting to accept or decline piecemeal “tasks”.
Crowdworkers tend to work without benefits such as sick pay, holiday pay, pension contributions or minimum wage guarantees. There must – I suspect, as I’ve never worked like this myself – be a feeling for crowdworkers of being tremendously busy and usefully employed. But meanwhile, financially at least, they are treading water. I’m not sure how you conduct a family life or a relationship around crowdwork, although I’m pretty sure the people who profit from it will say that it’s this versatility that is the unique selling point.
One thing I do know is that Walker’s confession unveils an unpalatable truth about the modern British relationship. We are, increasingly, a nation of clandestine Austen heroines in search of those “in possession of a good fortune”. Be you feminist or fervent bachelor, gay, straight, male, cis or genderfluid; for the average person, marrying into property will be your best shot at “owning it” these days. And if you can charm your name on to the mortgage deeds, well, even better. The housing crisis will make sharp-elbowed, radar-eyed Chelsea husband-hunters of all of us.
In another five years, I predict that Tinder will be outmoded by a simple database of single millennials who were lucky enough to inherit – or afford – a three-bedroom house with space for a homeworking office and a nursery. Or an app which lists unwedded people with sickly parents about to cark it who, in the meantime, happen to be sitting selfishly on a five-bedroom pile in Surrey. In the future, these property owners – not the slinky, the booby or the muscular – will be the sex gods of society.
These gods will woo you with their seductive talk of land registry documents, convertable attic space and the downsides of a 20-metre back garden. You will be powerless in the face of their Farrow & Ball catalogue and hopelessly impressed that their bed is on one level and not accessed via a ladder. You will swipe right for a place to call home. Sure, deep, real love will keep you warm in bed at night. But when the place is yours, you can stick in underfloor heating and a reliable combi-boiler.
“It is a truth universally acknowledged,” wrote Jane Austen, foretelling the British housing situation in 2016, “that a single man in possession of a good fortune must be in need of a wife.” Oh how I struggled, as a sixth-former in the Nineties, with the opening lines of Pride and Prejudice.
How hideous, I thought, that a time existed when a woman would marry a man for a house. Cut forward some two decades to the era of the £80,000 mortgage deposit. How odd that marrying bricks and mortar – with an added spouse as a bonus – seems pragmatic, rather than mercenary, today.
I very much enjoyed a recent column by the writer Esther Walker, in which she admits spying her then-boyfriend Giles Coren’s slightly neglected five-bedroom London townhouse, seven years ago, and being instantly smitten. With the house, that is. Coren, as alluring as he is, came second in the equation. First, Walker says, she saw the chipped front door, the replaceable carpets and all that lovely space. Here was a home in which she could live, nest, and raise children.
It is fascinating to me that, five short years ago, a confession as gloriously candid as Walker’s would have provoked feminists into bringing down the internet. I would have been among them, perhaps. Today, I greet the same news with a relaxed shrug of acceptance.
Just five short years ago, I remained convinced that if a young woman – or a young man, for that matter – dreamed audaciously and worked very, very hard, they need not be dependent on anyone for a home. I bought my own house through sheer slog and bloody-mindedness; why couldn’t Generation Buzzfeed do the same?
But little by little, I’ve watched the rise of single men and women trapped in later-life house-shares. I’ve seen how grown-up children are reduced to squatting like cuckoos in their parents’ back bedrooms until well after it is polite. Eventually, I was writing about the rise of strangers in London sharing bunkbeds (out of grim necessity, I should point out, not as a niche hobby).
The future seemed rather infantalising. And for women, feminism may well have flourished, but owning the house you live in, like Beyoncé sang about in “Independent Women” has fallen on its arse somewhat.
The facts are sobering: recent research by the Resolution Foundation on inter-generational fairness shows that in 1998, more than half of those earning 10 to 50 per cent of the average national income had a mortgage. This figure dropped to one in four by 2015. Within a decade, if things continue as they are, one in 10 will have a mortgage. In the late 1990s, when I was a strident youthful thing, it took determined people like me three years to save up for a deposit. Today it would take 22 years. That’s a long time to share a bunk bed, even if it’s in HMP Holloway.
This is particularly bleak in the light of new research on the rise of the “crowd worker” – people paid through online platforms such as Uber, Upwork and TaskRabbit. Here, instead of fairly paid, pensionable work which impresses mortgage vendors, there is a generation tied to their phones waiting to accept or decline piecemeal “tasks”.
Crowdworkers tend to work without benefits such as sick pay, holiday pay, pension contributions or minimum wage guarantees. There must – I suspect, as I’ve never worked like this myself – be a feeling for crowdworkers of being tremendously busy and usefully employed. But meanwhile, financially at least, they are treading water. I’m not sure how you conduct a family life or a relationship around crowdwork, although I’m pretty sure the people who profit from it will say that it’s this versatility that is the unique selling point.
One thing I do know is that Walker’s confession unveils an unpalatable truth about the modern British relationship. We are, increasingly, a nation of clandestine Austen heroines in search of those “in possession of a good fortune”. Be you feminist or fervent bachelor, gay, straight, male, cis or genderfluid; for the average person, marrying into property will be your best shot at “owning it” these days. And if you can charm your name on to the mortgage deeds, well, even better. The housing crisis will make sharp-elbowed, radar-eyed Chelsea husband-hunters of all of us.
In another five years, I predict that Tinder will be outmoded by a simple database of single millennials who were lucky enough to inherit – or afford – a three-bedroom house with space for a homeworking office and a nursery. Or an app which lists unwedded people with sickly parents about to cark it who, in the meantime, happen to be sitting selfishly on a five-bedroom pile in Surrey. In the future, these property owners – not the slinky, the booby or the muscular – will be the sex gods of society.
These gods will woo you with their seductive talk of land registry documents, convertable attic space and the downsides of a 20-metre back garden. You will be powerless in the face of their Farrow & Ball catalogue and hopelessly impressed that their bed is on one level and not accessed via a ladder. You will swipe right for a place to call home. Sure, deep, real love will keep you warm in bed at night. But when the place is yours, you can stick in underfloor heating and a reliable combi-boiler.
Monday, 15 February 2016
Crime, terrorism and tax evasion: why banks are waging war on cash
Paul Mason in The Guardian
Governments would love to see the end of banknotes. But what would a cashless society mean for freedom?
Will contactless payment help usher out cash? Photograph: Bloomberg/Bloomberg via Getty Images
I can remember the moment I realised the era of cash could soon be over.
It was Australia Day on Bondi Beach in 2014. In a busy liquor store, a man wearing only swimming shorts, carrying only a mobile phone and a plastic card, was delaying other people’s transactions while he moved 50 Australian dollars into his current account on his phone so that he could buy beer. The 30-odd youngsters in the queue behind him barely murmured; they’d all been in the same predicament. I doubt there was a banknote or coin between them.
The possibility of a cashless society has come at us with a rush: contactless payment is so new that the little ping the machine makes can still feel magical. But in some shops, especially those that cater for the young, a customer reaching for a banknote already produces an automatic frown.
Among central bankers, that frown has become a scowl. There is a “war on cash” in the offing – but it has nothing to do with boosting our ease of payment or saving trees.
Consider the central banks’ anti-crisis measures so far. The first was to slash interest rates close to zero. Then, since you can’t slash them below zero, the banks turned to printing money to stimulate demand. But with global growth depressed, and a massive overhanging debt, quantitative easing (QE) is running out of steam.
Enter the era of negative interest rates: thanks to the effect of QE, tens of billions held in government bonds already yield interest rates that are effectively below zero. Now, central banks such as Japan and Sweden have begun to impose negative official interest rates.
The effect, for banks or long-term savers, is that by putting your money in a safe place – such as the central bank or a government bond – you automatically lose some of it.
Not surprisingly, these measures have led to the growing popularity of cash for people with any substantial savings. Bank of England research shows demand for cash has grown faster than GDP in many countries. So the central banks face a further challenge: how to impose negative interest rates on cash itself.
Technologically, you can’t. If people hold their savings as physical currency, it keeps its value – and in a period of deflation the spending power of hoarded cash increases, even as share prices and the value of bank deposits fall. Cash, in a situation like this, is king.
But the banks are ahead of us. Last September, the Bank of England’s chief economist, Andy Haldane, openly pondered ways of imposing negative interest rates on cash – ie shrinking its value automatically. You could invalidate random banknotes, using their serial numbers. There are £63bn worth of notes in circulation in the UK: if you wanted to lop 1% off that, you could simply cancel half of all fivers without warning. A second solution would be to establish an exchange rate between paper money and the digital money in our bank accounts. A fiver deposited at the bank might buy you a £4.95 credit in your account.
More radical still would be to outlaw cash. In Norway, two major banks no longer issue cash from branch offices. Last month, the biggest bank, DNB, publicly called for the government to outlaw cash.
Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place.
Calls for the eradication of cash have been bolstered by evidence that high-value notes play a major role in crime, terrorism and tax evasion.
In a study for the Harvard Business School last week, former bank boss Peter Sands called for global elimination of the high-value note. Britain’s “monkey” – the £50 – is low-value compared with its foreign-currency equivalents, and constitutes a small proportion of the cash in circulation. By contrast, Japan’s 10,000-yen note (worth roughly £60) makes up a startling 92% of all cash in circulation; the Swiss 1,000-franc note (worth around £700) likewise. Sands wants an end to these notes plus the $100 bill, and the €500 note – known in underworld circles as the “Bin Laden”.
The advantages of a digital-only payment system to the user are clear: you can emerge from the surf in only your bathing shorts and proceed to buy beer, food, or even a small car, providing your balance is positive. The advantages to banks are also clear. Not only can all transactions be charged a fee, but bank runs are eliminated. There can be no repeat of the queues outside Northern Rock, nor of the Greek fiasco last summer, because there will be no ATMs, only a computer spreadsheet moving digital money around. The advantages to governments are also clear: all transactions can be taxed. Capital controls are implicit within the system.
But there are drawbacks, even for governments that would like to take absolute control of money transactions. First, resilience. If a cyber-attack or computer malfunction took down a digital-only payment system, there would be no cash reserves in households and businesses to fall back on. The second is more fundamental and concerns freedom. In most countries, the ability to take your cash out of the bank and to spend it anonymously is associated with many pleasurable activities – not all of which are illegal but which exist on the margins of society. How tens of thousands of club-goers would pay for their drugs each Saturday night is a non-trivial issue.
Nevertheless, the arrival of negative interest rates for banks, together with new rules allowing governments to bail-in – ie confiscate – deposits above a protected minimum, are certain to increase savers’ awareness of the value of cash, and will prompt calls in earnest for its abolition.
If it happens, it would be the ultimate demonstration of the power of finance over people. As for resistance? Go ahead and try. It may be the Queen’s head on a £50 note but the “promise to pay” is made above the signature of a Bank of England bureaucrat.
I can remember the moment I realised the era of cash could soon be over.
It was Australia Day on Bondi Beach in 2014. In a busy liquor store, a man wearing only swimming shorts, carrying only a mobile phone and a plastic card, was delaying other people’s transactions while he moved 50 Australian dollars into his current account on his phone so that he could buy beer. The 30-odd youngsters in the queue behind him barely murmured; they’d all been in the same predicament. I doubt there was a banknote or coin between them.
The possibility of a cashless society has come at us with a rush: contactless payment is so new that the little ping the machine makes can still feel magical. But in some shops, especially those that cater for the young, a customer reaching for a banknote already produces an automatic frown.
Among central bankers, that frown has become a scowl. There is a “war on cash” in the offing – but it has nothing to do with boosting our ease of payment or saving trees.
Consider the central banks’ anti-crisis measures so far. The first was to slash interest rates close to zero. Then, since you can’t slash them below zero, the banks turned to printing money to stimulate demand. But with global growth depressed, and a massive overhanging debt, quantitative easing (QE) is running out of steam.
Enter the era of negative interest rates: thanks to the effect of QE, tens of billions held in government bonds already yield interest rates that are effectively below zero. Now, central banks such as Japan and Sweden have begun to impose negative official interest rates.
The effect, for banks or long-term savers, is that by putting your money in a safe place – such as the central bank or a government bond – you automatically lose some of it.
Not surprisingly, these measures have led to the growing popularity of cash for people with any substantial savings. Bank of England research shows demand for cash has grown faster than GDP in many countries. So the central banks face a further challenge: how to impose negative interest rates on cash itself.
Technologically, you can’t. If people hold their savings as physical currency, it keeps its value – and in a period of deflation the spending power of hoarded cash increases, even as share prices and the value of bank deposits fall. Cash, in a situation like this, is king.
But the banks are ahead of us. Last September, the Bank of England’s chief economist, Andy Haldane, openly pondered ways of imposing negative interest rates on cash – ie shrinking its value automatically. You could invalidate random banknotes, using their serial numbers. There are £63bn worth of notes in circulation in the UK: if you wanted to lop 1% off that, you could simply cancel half of all fivers without warning. A second solution would be to establish an exchange rate between paper money and the digital money in our bank accounts. A fiver deposited at the bank might buy you a £4.95 credit in your account.
More radical still would be to outlaw cash. In Norway, two major banks no longer issue cash from branch offices. Last month, the biggest bank, DNB, publicly called for the government to outlaw cash.
Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place.
Calls for the eradication of cash have been bolstered by evidence that high-value notes play a major role in crime, terrorism and tax evasion.
In a study for the Harvard Business School last week, former bank boss Peter Sands called for global elimination of the high-value note. Britain’s “monkey” – the £50 – is low-value compared with its foreign-currency equivalents, and constitutes a small proportion of the cash in circulation. By contrast, Japan’s 10,000-yen note (worth roughly £60) makes up a startling 92% of all cash in circulation; the Swiss 1,000-franc note (worth around £700) likewise. Sands wants an end to these notes plus the $100 bill, and the €500 note – known in underworld circles as the “Bin Laden”.
The advantages of a digital-only payment system to the user are clear: you can emerge from the surf in only your bathing shorts and proceed to buy beer, food, or even a small car, providing your balance is positive. The advantages to banks are also clear. Not only can all transactions be charged a fee, but bank runs are eliminated. There can be no repeat of the queues outside Northern Rock, nor of the Greek fiasco last summer, because there will be no ATMs, only a computer spreadsheet moving digital money around. The advantages to governments are also clear: all transactions can be taxed. Capital controls are implicit within the system.
But there are drawbacks, even for governments that would like to take absolute control of money transactions. First, resilience. If a cyber-attack or computer malfunction took down a digital-only payment system, there would be no cash reserves in households and businesses to fall back on. The second is more fundamental and concerns freedom. In most countries, the ability to take your cash out of the bank and to spend it anonymously is associated with many pleasurable activities – not all of which are illegal but which exist on the margins of society. How tens of thousands of club-goers would pay for their drugs each Saturday night is a non-trivial issue.
Nevertheless, the arrival of negative interest rates for banks, together with new rules allowing governments to bail-in – ie confiscate – deposits above a protected minimum, are certain to increase savers’ awareness of the value of cash, and will prompt calls in earnest for its abolition.
If it happens, it would be the ultimate demonstration of the power of finance over people. As for resistance? Go ahead and try. It may be the Queen’s head on a £50 note but the “promise to pay” is made above the signature of a Bank of England bureaucrat.
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