In their ever-going race to profit from wealth creation, banks may be inches close to closing a last gap in Denmark. Following the path of Sweden, Denmark has a stated goal of eradicating cash payments. The shift has been seen as neutral, or even an improvement. But the only ones who will benefit this, in the end, are banks.

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"No Cash Only": How Negative Rates
Give Unexpected Boost To Danish Banks
May 2, 2016 12:21 PM ET
In their ever-going race to profit from wealth creation, banks may be inches close to
closing a last gap in Denmark. Following the path of Sweden, Denmark has a stated goal
of eradicating cash payments. The shift has been seen as neutral, or even an
improvement. But the only ones who will benefit this, in the end, are banks.
Banks are time machines. They make money with time. If they can accurately predict that
this share will gain value next week and that one will drop, and take appropriate
dispositions, then they make money. If they don't, then they lose money, something they
are not fond of. And they will lend their customers money and calculate how much time
their customers will spend paying back.
So there is nothing in the world banks love better than setting up their operations in a way
that, either way, they win, at a later point in time. And they are very good at doing so
silently that, when disaster strikes, everyone is surprised at what has been going on in the
back kitchen. And it usually infuriates the public to see that they always come out on top,
despite a few very rare exceptions.
Denmark is currently giving us a great example of how banks turn bad news into good
ones. The world still hasn't recovered from the 2008 subprime crisis. Beyond recouping
their initial stashes of cash, banks are still to re-create the leeway they used to have, and
which has been narrowed down by the post-crisis banking regulations, namely in the
United States.
In the context of social tension and security struggle Denmark is going through, Danish
Finance Minister Claus Hjort Frederiksen and Prime Minister Lars Løkke Rasmussen
responded to demands from the banks, sadly disregarding consequences for their fellow
citizens.
The economies in the Western world are still sluggish, and the European central banks
are pressing down on interest rates, which means that banks lend very cheaply and make
very little money, if any, off loans - their main cash-cow. That's bad for banks, right?
Wrong, Danish banks have been making a killing over the past months, as record-low
interest rates have driven flocks of mortgage-bound customers back to their banks to re-
negotiate their loans. Their initial mortgage contracts did indicate that such re-negotiations
were possible, but at a hefty price. Recent months have therefore been marked with
intense activity which they are struggling to keep up with. Imposed cheap loans are a
disaster for banks, you way? No, they're pennies from heaven.
There is however a downside to low interest rates which banks have not yet been able to
protect themselves from: bank runs. Fortunately for them, interest rates as low as we have
them these days are very exceptional, which makes the problem unlikely for them. But not
impossible, since they are facing it now. With negative interest rates, the public's savings
are no longer rewarded with interest, but taxed!
The intent of the ECB (European Central bank) is to force cash out of banks out into real-
economy investments. But if people are losing money by putting it at the bank, they will
quickly withdraw it and place it under their mattress, leaving banks out to dry. How do you
prevent that from happening, since banks have no authority over the ECB? You kill cash.
The idea may sound crazy, and yet banks are very close to hitting their goal. They already
have in Sweden, where many businesses outright refuse cash. Lobbying on behalf of
banks has been so effective (yet discrete) that cash has been durably tainted in Sweden,
with a poor reputation. Business Insider remarks:" Sweden is shaping up to be the first
country to plunge its citizens into a fascinating - and terrifying - economic experiment:
negative interest rates in a cashless society." This will quickly become real to Swedes, as

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they see their savings slowly depleted, with nothing they can do about it.
This is not good news for the citizens of any country with negative interest rates and an
anti-cash policy, as it locks them into an inescapable deficit. In Japan, households are
suffering from negative interest rates, and the slight panic which they have induced on
financial markets. Switzerland is also taking damage, as economics professor Richard
Werner points out : "The experience of Switzerland [shows that] negative rates raise
banks' costs of doing business. The banks respond by passing on this cost to their
customers. Due to the already zero deposit rates, this means banks will raise their lending
rates. As they did in Switzerland. In other words, reducing interest rates into negative
territory will raise borrowing costs!"
Jim Edwardss, from Business Insider, says:" TheSwedish central bank, the Sveriges
Riksbank, on Wednesday held its benchmark interest rate at -0.35%, the level it has been
at since July. […}That's a problem, because Sweden is the closest country on the planet
to becoming an all-electronic cashless society. Remember, Sweden is the place where, if
you use too much cash, banks call the police because they think you might be a terrorist
or a criminal. Swedish banks have started removing cash ATMs from rural areas, annoying
old people and farmers. Credit Suisse says the rule of thumb in Scandinavia is: "If you
have to pay in cash, something is wrong." Denmark is not quite there yet, but getting
close.
The advantages of a no-cash economy are many for banks. Number one, bank runs are
no longer possible in the rare event of negative interest rates, since there is nowhere else
to put your money. Number two, it gives banks something they have been dreaming of for
many years: complete control of the economy. Any transaction which occurs with
something else than cash is registered, monitored and recorded, yielding high-grade
marketing data. Thanks to that, they know who buys what and when. A very valuable
stockpile of data they can then use. Finally, this means the amount of money circulating in
the economy, under the form of cash, will no longer escape them, and therefore boost
their profits.
The reason why banks always win in the end is the same as always: time. When you and I
take 5 seconds at the store, wondering what to spend our money on, a bank has floors of
people working everyday on exactly the same subject. You and I wonder what do with our
money when interest rates drop through the floor, while banks have been foreseeing this
situation for years. Once they have suppressed cash, in Denmark and elsewhere, they will
have reached complete and utter control of our economies, probably to our societal and
cultural expense.