Switzerland is about to launch a huge experiment in ‘the war on cash’

Thursday, November 26, 2015
By Paul Martin

Jim Edwards
Nov. 26, 2015

A huge economic experiment will begin in Switzerland and Sweden in 2016, and some people are calling it the “war on cash.”

Both countries have central banks that have imposed negative interest rates on their commercial banks, making it costly for those banks to store cash. The intent is to force the banks to lend out the cash, thus spurring the economy and a small amount of healthy inflation.

But the two countries have very different attitudes to holding actual hard cash. So negative interest rates could have very different effects on the cash-free Swedes and the cash-loving Swiss.

That, some right-wing economists are arguing, is why you’re not seeing Swiss people complaining about the fact that they are penalised for keeping money in the bank.

The SNB (the Swiss central bank) expects to hold its rates negative until 2017, according to board member Andréa Maechler — so this war seems likely to last at least two years. At least one consumer bank will charge its customers negative rates beginning in 2016.

Sweden, on the other hand, is one of the most cash-free societies on the planet. Many Swedish businesses are cashless, so you need electronic cash in the bank in order to buy anything. If you use too much cash in Sweden, banks call the police because they think you might be a terrorist or a criminal. That means it’s a lot more difficult for any Swede encountering a negative interest rate (or increased bank fees that act like negative rates) to just pull cash out of the bank and hide it under the mattress until rates go positive again.

To sum all that up: In the war on cash, Switzerland is taking the pro-cash position, and Sweden has the anti-cash position.

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