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| Sir John Monash is not looking happy about this idea |
There is a very worrying top of page news story in the online Sydney Morning Herald as I am writing this post decrying the "extraordinarily high" amount of AU$50 and $100 notes in circulation in the Australian economy. The story attempts to lay blame for this terrible situation on retirees trying to rort (cheat) federal government provided pensions.
Whilst this may be partly to blame the bigger story is that a former senior RBA official is calling on the current RBA Governor to further restrict the tangible representations of the Australian currency.
Could it be that there are a "extraordinarily high" number of $50 and $100 notes in circulation in the market place because the interactions of the millions of Australians in the said market place want to transact in $50 and $100 notes? God forbid that the market place is allowed determine the form and nature of its interactions, if this is left unchecked the market place could voluntarily choose to transact in Gold and Silver and of course that would be crazy!
Of course what is not said in this article is that the most likely reason people are holding $50s and $100s is that they no longer trust banks and brokerages. After issues with bank "outages" and MF Global type brokerage collapses can anyone blame them? After all in this era of low interest rates for money at risk the opportunity cost of holding cash (and Gold/Silver) in your hand is very low.
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From smh.com.au my additions in italics
Story link
In a letter to the Reserve Bank governor, Glenn Stevens, dated July 4, Mr Mair (a former senior Reserve Bank official) laid the blame squarely on elderly people wanting to get the pension and hiding their income in cash to ensure they qualified for the means-tested benefit.
"The bank is basically facilitating a tax avoidance scheme by issuing high denomination notes," he told the Herald. "They are not needed for day-to-day transaction purposes, or even as reasonable stores of value."......at least he realises fiat currency is not a reasonable store of value!
His letter to the governor proposes phasing out the $100 and $50 denominations.
"Cards and the Internet have delivered a body blow to high-denomination bank notes. They are redundant," he said. "There is no longer any point in issuing them except to facilitate tax dodging. The authorities would announce that from, say, June 2015 every $100 and $50 note could be redeemed but no new notes would be issued. After June 2017 every note could only be redeemed at an annual discount of 10 per cent. It would mean that after two years, each $100 note could only be redeemed for $80, and so on."......ha ha how true, a $100 note in 2017 will only be worth $80 in 2012 purchasing power.
The letter acknowledges the proposal would be contentious and says it should not be done "in any way precipitously", but as payments become more electronic it will become inevitable.....if it will become inevitable why do anything with the banknotes? Obviously it will only become "inevitable" if the RBA makes it so.
"What would remain in circulation are coins and a modestly expanded issue of currency notes in the $10 and $20 denominations. There is every reason to expect that a national currency issue of this character would soon be adequate.''.....says who? obviously not the market place otherwise 50s and 100s wouldn't circulate now.
Read more: http://www.smh.com.au/business/the-grey-economy-how-retirees-rort-the-pension-20120924-26hku.html#ixzz27Uwpi7gh
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