JPMorgan Chase inadvertently tripped a bank run when it briefly allowed its ATMs to dispense unlimited amounts of $100 bills. Customers took them up on that offer, withdrawing tens of thousands of dollars at a time. There were even reports of ATM’s in Eastern Europe dispensing as much $20,000 in a single transaction.
But the frenzy didn’t last long. Earlier this week the company announced it was capping the amount of money non-customers could withdraw at $1000 per transaction. Chase presented the policy change as a bulwark against fraud, though it also admitted there was no evidence of foul play. Remember that these are depositors wanting to withdraw their own money.
This development spotlights a growing trend in both government policy and the financial world: the practice of making it tougher for individuals to access their own money.
For example, there is a move afoot, supported by the likes of former Treasury Secretary Lawrence Summers and openly contemplated by European Central Bank President Mario Draghi, to eliminate large forms of currency; the $100 bill in America and the 500 Euro across the EU. The notion driving this is that only criminals and kooks want their money outside the banking system and the reach of government.
Capital controls are another example. These are government prohibitions regulating the flow of money. Cypress prevented citizens from taking any of their money outside of their country and limited cash withdrawals to what it considered enough for daily needs. The result was very little cash in circulation and most of depositors’ wealth stored in electronic banks accounts.
So when the island nation’s banking system collapsed, it only took a keystroke for the government to seize up to 40 percent of customers’ money in bank accounts holding more than 100,000 euros. The reasoning was the government’s interests overrode citizen’s interests.
The money flowing from Chase’s ATM’s, however, suggests that the very notion of limiting the ways citizens can access their own money is backfiring. Further evidence is found in a newly released report by the Board of Governors of the Federal Reserve System that shows declining deposits in U.S. Banks. All this presents a formidable obstacle to those who want to sunset cash and are busying trying to associate it with criminals.
The truth is Americans have earned less and spent more of their savings in the post Great Recession economy; over half of working Americans make less than $30,000 a year. The nation’s financial health is still shaky and its financial institutions distrusted; large numbers of Americans distrust banks and have an historic aversion to the Federal Reserve.
Accordingly, they want their money at hand and readily accessible. It’s theirs after all. But if governments place limits on how easily it can be accessed, it will no longer be. JPMorgan Chase’s decision to limit transactions, coupled with their attempt to discourage customers from storing cash in safety deposit boxes, suggests that private institutions are on board now too. Americans might want to think of alternative venues to stash their earnings.
Ed Moy served as the 38th Director of the United States Mint from 2006-2011. Moy is the chief strategist for Fortress Gold Group, a provider of gold IRA rollovers and physical U.S. gold and silver bullion coins for direct delivery. Read more from Ed Moy —
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