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February 1, 2016 | What Happens to Cash When Governments Go Electronic?

Martin Armstrong

Martin Arthur Armstrong is the former chairman of Princeton Economics International Ltd. He is best known for his economic predictions based on the Economic Confidence Model, which he developed.


QUESTION: Mr. Armstrong; What happens to paper money when the government moves electronic? Is it just cancelled? Does cash then become worthless?



ANSWER: It appears that electronic currency will first arrive in Europe. The cash will be demonetized, so yes, it will become worthless. However, they will most likely give you a time window to redeem cash for electronic money. Keep in mind that this will produce a windfall for government. They are most likely going to tax anyone who cannot prove why they have cash.

Trajan Restitution Gold Aureus - r

This is typical; it is not a modern invention. The Roman Emperor Trajan (98-117 AD) saw the treasury depleted with the cost of his Dacian War. The brilliant idea was to DEMONETIZE all older coinage prior to Nero’s reform in 64 AD. They declared the old coinage to be invalid for paying taxes. As a result, you had to turn it in under the pretense that it was worn. In truth, he reissued coins with 10% less silver content. So, he took in the old coins, melted them down, and thereby increased the money supply by 10%. This was the Great Restitution Issue of Trajan. Politics never change. The same responses can be cataloged in a book. Perhaps I will do that in my next life since I already have a lot on my plate for this one.

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February 1st, 2016

Posted In: Armstrong Economics

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