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The Cash Crunch: The Short Version...
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This is an extention of my thread from earlier today (if you have any questions about this thread, I will try to answer them, but if you are impatient, I urge you to visit the discussion we had in the prior thread)...
Thread: I Need Your Help GLP!!! For A Massive Financial Story I'm Working On!!!
I'm doing a full story on this, but someone asked me for the short version, so here it is...
The Cash Crunch: The Short Version
First off, there are two types of cash in today's economy. There is electronic credits denominated in Federal Reserve Notes, and there are actual Federal Reserve Notes denominated in dollars. This story is not about the electronic version of cash, the liquidity in that area is still stunningly abundant, what is not so abundant is the actual currency in circulation...
The Fed is printing tons of cash (Check out the 2011 and 2012 printing numbers on the site below against printing numbers in prior years) but plainly speaking, it is not being circulated at anywhere close to the rates we are normally accustomed too...
[link to www.moneyfactory.gov]
They were supposed to switch the Series 2009 for Series 2011 last year, but for some reason they scrapped that and they are still printing 2009 series for everything except $100 bills, which is moving into a new series (2012 or 2013) that they have not yet put into circulation.
[link to www.newmoney.gov]
Now it appears through anecdotal evidence and sources in the banking industry that even though in 2011 they increased printing of currency, and in 2012 they more than doubled the amount of currency printed for some denominations, there is a currency crunch going on. Banks are only able to withdraw a minimal amount for cash withdrawals, business customers, and ATM providers. This, even though the banks I talked too always kept far more than adequate cash reserves in the past. So the question is, why is the Fed limiting cash withdrawals to banks that have adequate liquidity and more than enough money in their Fed accounts to get as much cash as they want? Because this in turn is leading to the banks limiting your cash withdrawals!
So why?
After talking to my banking sources I came up with two reasonable reasons for this capital control of cash withdrawals, and they and I believe this is happening in conjunction with Capital Controls enacted by law that go into effect on Jan 1, 2013.
1.) Tracking purposes. It's easier for the Feds to track debit card purchases than cash. They can track for trends, tax purposes, and criminal purposes much easier, and they want a cashless society (no surprise there) so that they can tax every single transaction that is eligible for taxation.
2.) An impending crash of the world financial system (perhaps in conjunction with the release of the new $100 bill sometime in 2013). Today bank runs are mainly electronic, moving money to safe havens, but after Jan 1 2013 this is going to be much harder to do, and there may be no safe havens. So this limitation of cash available to banks would make it impossible for people to physically run on their bank and totally drain their accounts. The banks can truthfully say, we don't have the cash on hand!
But the cash is there, it's being printed, it's being stockpiled, but it's not being circulated. Anyone else having an opinion as to why is welcome to advance their theory here...
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