What We're Reading

drugs (2)


The Winners And Losers Of A Cashless Society

Courtesy of: The Money Project


There is a global push by lawmakers to eliminate the use of physical cash around the world. This movement is often referred to as “The War on Cash”, and there are three major players involved:

1. The Initiators
Governments, central banks.
The elimination of cash will make it easier to track all types of transactions – including those made by criminals.

2. The Enemy
Criminals, terrorists
Large denominations of bank notes make illegal transactions easier to perform, and increase anonymity.

3. The Crossfire
The coercive elimination of physical cash will have potential repercussions on the economy and social liberties.

Is Cash Still King?

Cash has always been king – but starting in the late 1990s, the convenience of new technologies have helped make non-cash transactions to become more viable:

  • Online banking
  • Smartphones
  • Payment technologies
  • Encryption

By 2015, there were 426 billion cashless transactions worldwide – a 50% increase from five years before.

Year # of cashless transactions
2010 285.2 billion
2015 426.3 billion

And today, there are multiple ways to pay digitally, including:

  • Online banking (Visa, Mastercard, Interac)
  • Smartphones (Apple Pay)
  • Intermediaries ( Paypal , Square)
  • Cryptocurrencies (Bitcoin)

The First Shots Fired

The success of these new technologies have prompted lawmakers to posit that all transactions should now be digital.

Here is their case for a cashless society:

Removing high denominations of bills from circulation makes it harder for terrorists, drug dealers, money launderers, and tax evaders.

  • $1 million in $100 bills weighs only one kilogram (2.2 lbs).
  • Criminals move $2 trillion per year around the world each year.
  • The U.S. $100 bill is the most popular note in the world, with 10 billion of them in circulation.

This also gives regulators more control over the economy.

  • More traceable money means higher tax revenues.
  • It means there is a third-party for all transactions.
  • Central banks can dictate interest rates that encourage (or discourage) spending to try to manage inflation. This includes ZIRP or NIRP policies.

Cashless transactions are faster and more efficient.

  • Banks would incur less costs by not having to handle cash.
  • It also makes compliance and reporting easier.
  • The “burden” of cash can be up to 1.5% of GDP, according to some experts.

But for this to be possible, they say that cash – especially large denomination bills – must be eliminated. After all, cash is still used for about 85% of all transactions worldwide.

A Declaration of War

Governments and central banks have moved swiftly in dozens of countries to start eliminating cash.

Some key examples of this? Australia, Singapore, Venezuela, the U.S., and the European Central Bank have all eliminated (or have proposed to eliminate) high denomination notes. Other countries like France, Sweden and Greece have targeted adding restrictions on the size of cash transactions, reducing the amount of ATMs in the countryside, or limiting the amount of cash that can be held outside of the banking system. Finally, some countries have taken things a full step further – South Korea aims to eliminate paper currency in its entirety by 2020.

But right now, the “War on Cash” can’t be mentioned without invoking images of day-long lineups in India. In November 2016, Indian Prime Minister Narendra Modi demonetized 500 and 1000 rupee notes, eliminating 86% of the country’s notes overnight. While Indians could theoretically exchange 500 and 1,000 rupee notes for higher denominations, it was only up to a limit of 4,000 rupees per person. Sums above that had to be routed through a bank account in a country where only 50% of Indians have such access.

The Hindu has reported that there have now been 112 reported deaths associated with the Indian demonetization. Some people have committed suicide, but most deaths come from elderly people waiting in bank queues for hours or days to exchange money.

Caught in the Crossfire

The shots fired by governments to fight its war on cash may have several unintended casualties:

1. Privacy

  • Cashless transactions would always include some intermediary or third-party.
  • Increased government access to personal transactions and records.
  • Certain types of transactions (gambling, etc.) could be barred or frozen by governments.
  • Decentralized cryptocurrency could be an alternative for such transactions

2. Savings

  • Savers could no longer have the individual freedom to store wealth “outside” of the system.
  • Eliminating cash makes negative interest rates (NIRP) a feasible option for policymakers.
  • A cashless society also means all savers would be “on the hook” for bank bail-in scenarios.
  • Savers would have limited abilities to react to extreme monetary events like deflation or inflation.

3. Human Rights

  • Rapid demonetization has violated people’s rights to life and food.
  • In India, removing the 500 and 1,000 rupee notes has caused multiple human tragedies, including patients being denied treatment and people not being able to afford food.
  • Demonetization also hurts people and small businesses that make their livelihoods in the informal sectors of the economy.

4. Cybersecurity

  • With all wealth stored digitally, the potential risk and impact of cybercrime increases.
  • Hacking or identity theft could destroy people’s entire life savings.
  • The cost of online data breaches is already expected to reach $2.1 trillion by 2019, according to Juniper Research.

As the War on Cash accelerates, many shots will be fired. The question is: who will take the majority of the damage?

Courtesy of Infographics

Read More, Comment and Share......


Repeal Of Obamacare Not A Simple Task

As the market partied this week, believing that Obamacare would be smashed and their premiums would revert back to lower levels, I sat and chuckled.  You're already spending money you haven't received in terms of lower premiums but there's always a price. Always. Already the "costs" of repealing ACA are being calculated and surprise surprise, it won't be free or easy.  In fact QZ ponders it will cost "us" Billions but let's examine the possibilities.  From BuzzFeed:

In the wake of Donald Trump’s stunning victory Tuesday night, the only certainty for the American health care industry is the end of the Affordable Care Act, at least in its current form.

Everything else for the industry, however, is deeply uncertain. Supreme Court cases have jeopardized parts of Obamacare before, but with a Trump presidency, the industry is for the first time facing the real possibility of a drastic and abrupt repeal of the entire ACA — a scenario that some industry sources say insurance companies and hospitals are unprepared to deal with.

Though he has many ideological disagreements with Republican leaders, including on health care issues like Medicare subsidies, Trump and Congress are united in agreement that Obamacare must go, and quickly. Majority Leader Mitch McConnell told reporters on Wednesday that repeal of the law remained a top priority for the GOP-led Congress.

Many in the health care industry are hopeful that they can still have an influential seat at the table in the shaping of a new health care law — one that would allow them to preserve some of the key parts of the Affordable Care Act that they have spent six years building, and would give them enough time to craft new plans that will keep people insured.

But when the health care law was originally passed, Republicans raged against it for being a product of backroom deals with the insurance and pharmaceutical industries — the same kind of deals Trump consistently campaigned against.

So there remains a strong possibility that, in the face of enormous political pressure in the administration’s early days, Trump and Congress could pursue a sudden, complete repeal, or something resembling one. In that scenario, the most pressing concern would be the immediate defunding of state health care exchanges, which would potentially remove 20 million people from insurance rolls. Abruptly ending the individual insurance mandate, too — something Trump has said he will do — could cause millions of people to end their insurance.

For insurance companies that participated heavily in Obamacare, a full repeal early in Trump’s tenure would be a nightmare scenario, said the industry source, causing a sudden and dramatic loss of revenue.

“I’m not sure that they’re ready for the full repeal,” said a senior health care industry official of insurers like Blue Cross Blue Shield and Anthem, who have invested heavily in the ACA. “They totally changed their business model” for the ACA, the official said.

An ACA repeal would come with some substantial tax breaks for insurers and pharmaceutical companies, which have been paying into the ACA. And drug companies will likely be able to continue their practice of raising prices on drugs they own, something that was not likely to continue under a Clinton administration — a fact that sent pharmaceutical stocks rising sharply Wednesday in the wake of Trump’s election.

But a large number of people losing or leaving their insurance could also cost pharmaceutical companies revenue as people become unable to afford medications, and would drive up costs for hospitals.

Under the ACA, “more people were able to pay hospital bills through insurance,” said Benjamin Isgur, the leader of PwC’s Health Research Institute. “If people become uninsured and there’s no state funding to make up for that, you have hospitals providing services with no payment.”

As of now, Trump doesn’t have the congressional majority he would need in the Senate to quickly dispatch the entire ACA, and in the past, with the law under threat in the Supreme Court, Republicans have signaled some willingness to work on a slower transition that preserves some parts of the law.

Though the industry is “hyper-focused” on the possibility of an ACA repeal, Isgur said, “We don’t know exactly how repeal would be defined.”

But even the more muted scenario of a partial rollback — one where the dismantling of the health care law plays out over a matter of months, or years — could be troublesome for the industry.

“Even with all the problems with the ACA, there was still a fair amount of certainty baked in,” said the senior industry official. “When it comes to insurance companies, there’s a big question of what this practically means. That’s the thing that’s most concerning.”

Outside of declaring his intent to repeal the ACA, Trump has provided relatively few details about what health care would look like under his presidency. Many expect him to focus on “free market” reforms like more transparent pricing, creating health care savings accounts, and allowing the sale of insurance across state lines. But he has also said he intends to expand Medicaid to make up for a loss of coverage under the ACA, something that is deeply at odds with many conservatives’ viewpoints.

Health care stocks have been the worst-performing sector in the S&P 500 so far this year, facing huge uncertainty in the face of controversies over drug prices and troubles with Obamacare.

Read More, Comment and Share......

We welcome you to post a blog entry, oped or share your daily reading with us as long as it is relevant to the topic of investing and not an attempt to sell a product, proprietary strategy, platform or other service. Please provide links to any research data and if re-posting other articles, give credit where credit is due providing a back link to the original site.

300 words minimum per post. You may also sort by category or search by topic. Don't forget to comment and please "share" via Facebook, Twitter and Google+. If you have any questions, please contact us.



This is a member-supported site. Please donate when you can to help pay the rent. Thank you!

Stay Informed. Sign up for the FREE StockBuz eNewsletter


Investing involves substantial risk. All content is subject to StockBuz disclaimer.

Create Income With Option Spreads

All content on StockBuz.net is subject to disclaimer and Terms of Service