The "Legal Tender" myth

[red750]

Bully for you octave, that suits you, and fair enough, but others want the freedom to choose. I do most of mu shopping by the card and pay bills by Bpay online. But I still want the choice to use cash if I want to, and believe it or not there ARE people who don't use computers, apps, etc. As I've said before banks are closing branches left right and centre. There used to be many branches around our place, middle eastern suburbs, but now there are only a few left at major shopping centres. Mitcham, Vermont, Vermont South and Brentford Square have no bank branches. Post Offies are also closing.

 

People are entitled to freedom of choice. Once it's gone, it's gone, and all the tears in the world won't bring it back.

[octave]

11 minutes ago, red750 said:

What right does the bank have to tell me what I can and can't buy wit MY money.

How does the bank tell you what you can spend money on?

 

11 minutes ago, red750 said:

Not for long. Once cash is dead, they have you over a barrel and can charge what they like.

 

That is a reasonable point but I think the answer to this is competition between banks and other payment methods such as Paypal.   I have 3 methods of payment, I can tap my phone which uses money from my bank account, there are no fees for this.  I use Paypal for online payments and I have found this to be very safe they are pretty accommodating with refunds if you don't get what you paid for. The third method is my credit card. I don't pay interest because it is merely a temporary payment method and I zero my card every Friday. The card does cost me $50 a year however I get rewards points that I redeem as Bunnings vouchers. i just bought all the hardware I needed to install my new range hood.  I don't think I have ever paid Mastercard any interest however we are quite financially disciplined

 

Like I said I really don't care how people run their finances, it is not any of my business.  I am also happy to admit that both cash and digital have pros and cons.   

 

 

[red750]

13 minutes ago, octave said:

How does the bank tell you what you can spend money on?

By freezing my account if they don't approve the transaction. I've heard of it happening.

[octave]

2 minutes ago, red750 said:

Bully for you octave, that suits you, and fair enough, but others want the freedom to choose.

 

Red I don't believe at any point I have said that society should go cashless.  My post was only critiquing the list of supposed downsides to digital payments.    I am not asking you to abandon cash but your post is asking me to use cash  " Please pay with cash & please say no to a cashless society while you still have a choice."      

6 minutes ago, red750 said:

But I still want the choice to use cash if I want to,

And I am happy for you to have that choice but I also want the choice.

 

 

 

[octave]

3 minutes ago, red750 said:

By freezing my account if tey don't approve the transaction. I've heard of it happening.

 Really? Under what circumstances?   I am happy to take that risk In fact, I don't imagine there are many people that do not use any bank services or credit card services therefore I think almost everyone runs the risk of being "cancelled".   

[red750]

OK. So I didn't edit out the bits of the email that offend you. Seems most of what I post offends you.

 

I don't use Paypal, Aferpay or any other payment system but my EFTPOS card and Matsercard. As soon as I am able to clear my Matercard debt, I too will pat it off immediately. Most online purchases (Amazon, etc) don't accept EFTPOS cards, neither do many parking stations, so I have to keep a Mastercard. My smart watch tells my bood pressure, blood glucose, blood temperature, heartbeat and step count, but no banking or answering my phone.

[onetrack]

The Govt and Banks are hand in glove with the scheme to reduce cash use to a nearly non-existent level. They want to do this to nail drug dealers, who are the biggest users of $50 notes. But by far the most insidious stepe of the banks, is closing branches and ripping out ATM's, so you can't get cash easily.

 

Around here, bank ATM's have been disappearing wholesale, replaced by independent "pay" ATM's who charge you $3 to get cash out of your account. Oldies like us will fight tooth and nail to preserve cash as a viable payment method.

 

Edited August 20, 2023 by onetrack

[octave]

1 minute ago, red750 said:

OK. So I didn't edit out the bits of the email that ofend you. Seems most of what I post offends you.

 

Red I am not offended by it, however I think it does exaggerate (I appreciate that you did not write it). Here is my problem though.  If the post says "No more garage sale without cash" and I have just had a successful garage sale without cash isn't it reasonable for me to say  'hang on that is not correct"      Is that unreasonable?     I do not wish to change what you do and in fact, it seems that you do a fair amount of digital transactions as it is. 😀

 

 

[red750]

Okay, consider this. Proceeds of garage sales are subject to GST and considered as income. If you are a pensioner selling off items you don't need, or are items owned by your decased partner, this could affect the amount of pension you receive.

[willedoo]

17 minutes ago, red750 said:

I don't use Paypal, Aferpay or any other payment system but my EFTPO card and Mastercard.

I'm wondering what's the deal with Mastercard. Mine is a Visa card, but I'm seeing an increasing number of places online that won't or no longer will accept Mastercard.

[red750]

No idea Willie. I've had a Mastercard since I worked in the bank up till 1991. My bank didn't offer Visa in those days. I had a GE Creditline card through Harvey Norman, but that was paid off and cancelled years go. Now I only buy stuff if I have the money in my accunt to pay for it, unless it's an online purchase. They are few and far between, and paid off immediaely.

[Jerry_Atrick]

37 minutes ago, red750 said:

Proceeds of garage sales are subject to GST and considered as income.

They are only considered as income and subject to GST if the person or organisation selling them is doing so in the course of business - not a private, once off garage sale.  The course of business would include regularly doing so with the purpose of makeing a profit - so if you are flipping stuff on eBay, for example, it would qualify. In terms of treatment of income, pre GST and even digital days, in the times of the Trading Post (I do miss that publication), if you reguilarly sold second hand stuff on there to make a profit, it would be treated as income and a digital currency has nothing to do with it.

 

There is one flaw with the above "cashless" society argument - There can never be one. If all of a sudden, we went to totally digital payments and receipts, it's not like the money goes away. Cash, which represents currency, is a store of value, and the banks or other financial institutions would have to hold cash and allocate it to whoever owns it at the time, It is not just numbers allocated to your account - there has to be the pyhiscal cash or other financial instruments (e.g. government bonds, loans to customers, etc) to cover it. If there isn't, there is no value in the numbes. So, if we were to preserve dollars and cents as our currency in a totally digitial world, there would still be physcial cash in the vaults behind it. So, if you inherited a mattress and found millions of $ in cash stuffed in it, the bank would have to take it as legal tender. In other words, all that has happened is that the method of trasnferring that store of value has moved to digital for transactions.

 

The alternative is they do away with dollars and cents and move to a digital currency. If you think about it, it would have to have the same traits as cash in that there is a limited supply that can only be added to (or subtracted from, which does happen from time to time) but a central auihorty - in Australia's case, the RBA. Even then, you coudl physically withdraw from the bank onto an electronic wallet on a USB or your computer, and then use that wallet to keep it under the mattress, or deposit funds into another bank. If you wanted to, you could, off network, transfer the coin from your wallet to your drug dealers wallet and it would not be traceable as the wallets contain guaranteed ledgers.

 

The other alternative is that the digital currency could be set up to be only transferred through the authorised financial systems.. that would not be good, and the UK government is looking at a crypto currency and system that would do just that. There is a lot of resistance as this means there is no choice - everything is traceable.

 

As with everything, there are positives and negatives. There are many negatives with cash, but I still do very occasionally find it handy. There are many potential negatives with digital payments, but, at least so far, we have been protected from them. In Australia, the biggest issue is the lack of consumer protection regulations over the banks. Even this corrupotion infested government is making sure free cash is available from banks within a mile in an urban/suburban area and three miles within a rural area: https://www.theguardian.com/money/2023/aug/17/uk-banks-will-have-to-ensure-access-to-cash-within-three-miles-ministers-say

 

Of course, I can't see free ATMs every three miles along the Oodnadatta track, but the Aussie government does have to get better - particularly around fees and provision of services. Having said that, the only time I go into a bank branch is when the kids' gran sends them a cheque for their birthday (and with the latest digital tech, we don't even need to do that). My last two mortgages were arraanged over the phone and online respectively; and I am currently doing a bridge to finish this house quicker and get to Aus quicker by email.

 

[Edit] FDor the record, I am not anti-cash, but as @octave says, don't try and force me to do it through an inaccurate scare campaign.

Edited August 20, 2023 by Jerry_Atrick

[willedoo]

Jerry, you might know whether this is true or not, but I once read that of all the world's gold sold on paper, only about 80% of it has physically been mined. I've never bought gold, but I was under the impression that a lot of gold sales don't involve the buyer receiving physical gold, but rather a paper or digital record to say you own X amount of gold. The 80% thing sounds dodgy if true.

[onetrack]

Willie, it's a lot worse than that. As always, wheeling and dealing on paper has far outstripped physical gold production. If all the paper gold holders ever demanded physical bullion, it would upend our economic system as we know it, and gold would soar to its true value - which is many, many multiples of the current price - thereby indicative of just how debased our paper currencies really are.

 

https://intelligent-partnership.com/paper-gold-volumes-vs-physical-gold-volumes/

 

Edited August 20, 2023 by onetrack

[red750]

43 minutes ago, Jerry_Atrick said:

don't try and force me to do it through an inaccurate scare campaign.

I'm not trying to force anybody to do anything, Do as you see fit, But don't force people who wish to use cash to stop. Blindly complying with the withdrawal of cash trading by banks will only encourage them. There are already a number of bank branches, ANZ in particular, which do not handle cash over the counter. And ATM's are disappering in many locations.

 

There are many elderly people who cannot cope with the modern way. Some elderly ladies still insist on a bank passbook. It's the only system they now ansd trust.

[Jerry_Atrick]

7 minutes ago, red750 said:

I'm not trying to force anybody to do anything,

I was referring to the original author of the post, not your good self

[willedoo]

19 minutes ago, onetrack said:

Willie, it's a lot worse than that. As always, wheeling and dealing on paper has far outstripped physical gold production. If all the paper gold holders ever demanded physical bullion, it would upend our economic system as we know it, and gold would soar to its true value - which is many, many multiples of the current price - thereby indicative of just how debased our paper currencies really are.

 

https://intelligent-partnership.com/paper-gold-volumes-vs-physical-gold-volumes/

 

I think I'd prefer gold bars I could take home and bury in the backyard.

[old man emu]

2 hours ago, red750 said:

Okay, consider this. Proceeds of garage sales are subject to GST and considered as income. If you are a pensioner selling off items you don't need, or are items owned by your decased partner, this could affect the amount of pension you receive.

Whoa there pardner!

For one thing, only businesses have to collect GST for goods sold or services provided. Added to that, a business does not have to collect GST if its turnover is less than $75,000 p.a. If you have a garage sale just to clear out your junk. you don't collect GST. 

 

For a second, selling off a few items does not count as earning income, so your pension is not affected.

[Jerry_Atrick]

On the gold question... I think a little context is required.. But before, let's talk the most basic of finanical instruments: cash.

 

At any one point in time, there is a far greater claim on the available cash supply than there is cash - it is commonly called the credit multiplier. When you deposit money in a bank account, the bank owes you that amount of money. They lend a lot of your money to someone else; they now owe the bank the money that was lent to them. They spend the money, and whoever they spent the money with, has taken it and deposited that money into the bank. The bank now owe two people more than the original $100 that was deposited with them - but in terms of cash available, there is only $100 available. Of course, they have to keep some back for a run or other stress that could happen (defaults on the loans they make etc), but the point is the money in the economy (I think referred to as M3) is less than the physical cash (I think refered to as M1) in an economy.

 

Onto gold - and I did skim the articple posted by @onetrack toi ensure I wasn't missing anything. That article must be old, as LBMA hasn't been used for years. It was LME, and now I think it is ICE. But, I haven't been involved in commodities for years, and even then, it was not for trading purposes.

 

Gold (and every other commodity) is effectively traded in three ways: Spot market - for which there has to be gold underlying the transaction. Most of the gold traded sits in vaults in the LME/ICE and, like cash in your bank, the ownership is recorded against the gold. You can't not have gold available (in the same way cash is, above) for a spot transaction. It may be loaned (short sold), but whoever is the seller in the spot has to have legal claim to that gold at the time.

 

Then there is exchange traded futures and options - these are standard derivative contracts that compel (futures) or provide an option to exercise (options) buiying or selling gold (or any commodity or asset in the future). These were bascially invented, I think in Japan during the Samurai, to give certainty of income to the farmers, while certainty of costs to the secondary producers. They are called derivatives because they derive their value from an underlying asset - in this case - gold, but for commodities can be as diverse as shipping space on a published route to, yes, frozen concentrated orange juice. Note, you can have futures and options in shares (equities), currencies,  and bonds (debt) as well, and these are commonly used by dealers and market makers to hedge their positions in the underlying asset.

 

The difference between futures and options trading as opposed to trading in the underlying asset is that an underlying asset (shares, bonds, gold, rice, etc) has a finite supply at any one time, whereas the number of outstanding futures/options (or other derivative contracts) is theroetically limitless. Very few of these instruments will ever be used to sell or procure the physcial asset. They are used for risk management or speculation. Note, since MiFID II, which is regulation for financial markets, there have been position limits introduced to stop cornering of the market. Here is the ICE specification for gold daily futures: https://www.ice.com/products/62026758/Gold-Daily-Futures

 

How futures (which is by far larger than options  in terms of volume) is that the specification then has contracts written These are standard contracts which refer to the specification, the delivery date (usually at the end of a quarter). For example, I can have the Sep 24 Gold Daily Fuitures contract. This will refer to gold that meets the ICE Daily Gold Futures specification, which is deliverable on a specified date in September 2024. There is also a roll date, which is the last date of trading in that contract, and is usually between 2 weeks and a month before the roll date. Anyone holding a net "position" (i.e. after taking all the long and short contracts they hold, they have a residual long (buy) or short (sell) amount outstanding), are requied to either purchase (net long position) or supply (net short position) the amount of gold contained in that position for the price of the contract (strike or future price).

 

Over 90 percent of participants inb the futures and optioons markets do not want to make or take supply of the physical asset. In some cases, futures are taken on a cash settlement basis - meaning that they will settle the difference between the closing spot price on the day the contract becomes deliverable - so, say the futures price was $100 per troy ounce of gold and on the day the contract matures, the closing spot price is $110. As short positions pay the spot price, the person holding a short position would have to pay $110 per troy ounce outstaning in their short position. As the long position buys the strike/futures price, the holder of the long position pays $100 per troy ounce in that long position - or receives a net $10/troy ounce held. Similarly if the spot price was $90/troy ounce, the short position holder would pay $90 and the long position holder would pay $100 - the short position holder (seller) makes $10/troy ounce out of the sale.

 

OK - this works for cahs settled futures/options, but what about those that are physically settled - of which the overhelming number on exchanges are. This means that most futures contracts will require making or taking supply of the underlying asset, or in the case of options, require it if the options holder excerises their right to buy (call) or sell (put). Whoever holds a net position in a contract at close of business on the roll date is required to supply (short/put) or take supply (long/call) on the maturity date (+1 day I think). Those that are in it for risk management or speculation close their positions by the roll date. This means they find equal/opposite buyers/sellers as requied, through their brokerage to cancel out their positions. Wherever the futures price is on the day determines whrether or not you make a profit. Of course, trading in a particular futures contract will happen for quite some time before the roll date. Some people speculators or risk managers hold the  position to make or take delivery on maturity - but they will have hedged by actually holding or having the legal right to hold the physical asset on the day of exchange.

 

There's a lot more to it than that, but yes, while in theory there is much more outstanding in futures and options markets than there is gold (or any other underlying asset) on any one day. What would happen if everyone held their contracts to maturity. A lot of sepcuialtors would go broke as they could not afford to supply or take supply on the day.

 

Going back to cash (which is currency), it has the same risks. Even other underlying assets such as bonds and equities can be also subject to multipler effects. In certain transactions known as securities financing transactions - the most commonly know ones meing repurchase agreements (repos) and reverse repos, bonds or equities are put up as collateral for short term cash borrowing. Those securities can be re-used as collateral by the lender for their cash, or traded in the markets.

 

[old man emu]

Hey Jerry! Will there be an exam on this next Friday?

[Jerry_Atrick]

Yes..

 

Some of the financial markets are complex in their operation and need more than a remedial treatment to give an accurate response. Having said that, the above is not much more than a remedial treatment.

[red750]

I was warned today, as I am a pensioner, NOT to cancel my credit card. I would not be issued another if I needed it. You can only pay for your parking at the hospital with a credit card, they don't accept debit cards.

 

Even though I had a credit score above 900, I was declined a $2000 loan to buy my car, I borrowed if from family and had it paid back within 3 months. When I answered the employment question with Pensioner, it was automatically a no-no.

[onetrack]

Agreed. Obtaining finance or a credit card when on a pension is virtually impossible, unless you deal with loan sharks. I got an unrequested loan offer the other day, the interest rate was variable between 19% and 27%. A guaranteed way to end up with an unpayable debt and eventual bankruptcy.

[willedoo]

I remember when I was still working I was bombarded with letters from the bank offering to raise my credit card credit limit. Since I've been a pensioner, not a peep out of them. I definitely think it would be a good idea for a pensioner to hang onto that card while you've still got it. My bank doesn't do personal loans anymore, housing and business loans only. I've forgotten what the inside of a bank looks like. They keep closing branches and the only one left in the district is buried deep within a shopping centre and a nightmare to access for anyone with mobility issues.

[facthunter]

They used to say XXXX Bank with "Branches" everywhere.

 

   Spacey how can UK be a democracy with LORDS appointed to part of the Parliament and a KING Reigning all over you that you pledge ALLEGIANCE to?    Nev