Watch out criminals! The Aussie government is coming for you. Your criminal ‘cash economy’ is over, kaput, finite. The jig is up.
Just when you thought you could deal drugs, launder money and do whatever else it is you do, think again. It’s time to start looking for a new career.
And I’m not going to blag on about how robots are taking over your criminal career. No, the Aussie government has figured out how to end you once and for all.
The government is set to end the circulation of $100 notes.
HA! Take that criminals.
That’s right, by removing $100 notes from the economy you can no longer hand over wads of the ‘Green Soldier’ in your criminal dealings. Clearly you will no longer be able to run a criminal enterprise.
Hang on a second. What’s that I hear? Oh, it’s the sound of every criminal in Australia falling off their (probably stolen) chair laughing.
To be honest with you, I’m in agreement with them. The government thinks by removing the $100 note they’ll put the kibosh on criminal activity? I don’t think so.
When all the $100, $50, $20, $10 and $5 notes disappear
Even the RBA says removing the $100 note will do little. In a research paper they argue the $50 is the preferred note of the black market. The RBA paper says,
‘Liaison with AUSTRAC (Australian Transaction Reports and Analysis Centre) and the Australian Crime Commission suggests that it is the $50 denomination – rather than the $100 – that tends to be preferred by criminal elements because of its ubiquitous use in legitimate transactions.’
The truth is the possible elimination of the ‘hundy’ is nothing to do with criminals. It’s a tax grab. The government just wants to makes sure that they collect every cent of tax off everyone they can.
Sure, people should rightly pay tax on cash payments. As a taxpayer, cash jobs that go unreported do annoy me. But it’s not just criminals this could potentially impact. It’s also every single tradesperson that works in Australia.
Hair salons, carpenters, plumbers, builders, brickies, it’s a long list, but many of these jobs also take cash payments. And many don’t report them all.
I guess the government probably classifies these people as criminals too — tax criminals.
But there’s one glaring problem with the government’s idea to get rid of the $100 note. It’s just going to make the ‘criminals’ move on to the next one.
If the $100 is the note of choice, crims will move to the $50 as the note of choice.
And if the $50 becomes the note of choice, you can bet on what’s coming next…
Low and behold, the government will outlaw the $50 note. See if you can figure out what comes next?
That’s right the crims will move to the $20 note. And the government will outlaw those. So they’ll move to the $10. And so on and so on.
This begs the question, what happens when there are no notes in circulation? When the last remaining $5 note is gone, what comes next? What on earth will criminals and tradies use in their ‘cash economy’?
According to the government, they’ll simply have to use digital payments like the rest of us. And most of them will. This will mean that every transaction can be verified, and the appropriate tax paid on it.
But then there will be the alternative financial system. A system that crooks and tradies can use. In fact, it’s a system anyone can use when they don’t want government interference with their money.
The currency of choice I’m talking about isn’t gold. It’s not silver. It’s none of the precious metals. It’s the cryptoconomy.
Get paid in bitcoin…one day
The cryptoconomy is a relatively new phenomenon. It’s a digital economy made up of hundreds of different kinds of ‘currency’. These are all digital currencies, which means they all exist online. There is no physical note or coin that they are based on.
In fact most of them don’t have any physical backing. Their creation is digital, from scratch. Which, when you look at it that way, isn’t so different form the normal money you use day to day. Some argue this makes them worthless — but they’re worth what society deems them to be worth. Just like paper money, just like gold.
These cryptoconomy currencies are technically rooted in mathematics. They’re created by complex algorithms which will often limit the number of ‘coins’ that will ever be in circulation.
You might already know a few of these cryptoconomy coins by name. The most famous and popular is bitcoin. This was effectively the ‘first’ digital currency in existence. The benefits were that it’s free from central bank control, borderless and carries a high degree of (although not complete) anonymity.
Another is ethereum. Ethereum is a new kid on the block. It’s become hugely popular in a short space of time because of the platform it’s based on. The ethereum platform allows anyone to create their own digital payments system. That could be your own cryptocoin. Or even your own ‘blockchain’ for contracts or trade.
Bitcoin and ethereum are the two most valuable, highly traded cryptocoins there are. Bitcoin’s total market cap is the equivalent of US$12.5 billion. Ethereum’s market cap is US$680 million.
Now I say market cap because the common thing is to convert these cryptocoins back to a fiat currency. But in my view these cryptocoins will be of far greater value than any fiat currency.
Buy a TV today, a car tomorrow
In my view something like bitcoin should never covert back to a fiat currency. Once you get it, you should hold it or use it to buy goods and services. One day you’ll possibly even get your pay in bitcoin. The future will be a world where bitcoin is as useable and exchangeable as a USD or AUD.
It’s no pie in the sky idea either. In the US recently a new hedge fund paid data scientists to build an artificial brain. The fund paid the scientists in bitcoin.
Open-marketplace Openbazaar just got $3 million in funding from venture capitalists. Coindesk, a cryptocurrency focussed publisher, describers Openbazaar like a ‘decentralised eBay’. Except the central premise of Openbazaar is bitcoin, not fiat currency.
Of course a future solely based on cryptocoins might be a way off. But bitcoin in particular I think will increase in value and potential in the short term. Again the idea is that in a few years’ time what could buy with bitcoin is far more than you could buy today.
Perhaps while you could by a TV with one bitcoin today. In the coming years I think you might be able to buy a car. Seeing the government move to a cashless society reinforces my view of what’s coming for bitcoin.
When the government sticks their nose in and society turns on them, we’ll move to alternative options. And by far the biggest opportunity outside the existing financial system is bitcoin. To me that spells opportunity.
For Money Morning