In 1946, an American singer, Merle Travis, recorded a song called "Sixteen Tons." The song told the story of a poor coal miner in Kentucky, who lived in a small coal mining town. The town's economy revolved entirely around the mine.
The mining company owned a "company store," which had a monopoly on the sale of provisions. It charged rates that were designed to use up the weekly paycheque of the miner, so that the miner, in effect, was a slave to the mining company. As the song states,
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
Negative Interest Rates
Let's put the song aside for the moment and have a look at a concept that has been bandied about by the European Central Bank (ECB) for a while now. Since the collapse of the central banks would doom the world (their claim, not mine), it is essential that the banks be saved no matter what else must be sacrificed. Efforts to "save" the situation have been implemented through quantitative easing (QE) and the setting and continuation of low interest rates.
Unfortunately, in spite of record profits by banks and staggering bonuses handed out to senior bank executives, somehow the QE and low interest rates have not created the prosperity desired. The economy is still in the tank. What to do?
A solution being considered is to create "negative interest rates." Sounds logical, doesn't it? If low interest rates have kept the economy from crashing but haven't fixed it, surely, negative interest rates can only be more positive.
And what are negative interest rates? Well, it simply means that, if you keep your money in a bank, instead of the bank paying you interest, you pay the bank to hold your money.
No central bank has ever done such a thing, so, not surprisingly, it sounds like a bitter pill to swallow. However, the ECB will present it as an "unfortunate necessity."
Let's once again change subjects for the moment. If the fiat currencies, such as the euro and the dollar, collapse (as I believe is all but inevitable), the EU and US are likely to immediately come up with an alternate currency (or currencies), since if an alternative is not made readily available, people will turn to whatever currency is handy in order to be able to continue to purchase goods and to trade.
We are in the electronic age. We are also seeing the EU and US heading in a direction that is marked with increasing controls on the capital held by their citizens. Therefore, the ideal currency would be an electronic one. No more paper notes in the wallet, no more coins in the pocket; just a plastic debit card to take care of all purchases.
All purchases. Whether the purchaser buys something as major as a car or as insignificant as a Cadbury bar, the card would be used for every monetary transaction.
This, of course, is a handy solution to the fuss of dealing with what was formerly regarded as money. But there is an extra advantage—quite a major one, in fact—to the government. It now has a record of every single transaction that you make. There could be no "under the table" transactions, as only the debit card would represent currency.
Of course, a bank would be needed to handle the transactions. The bank would receive your electronic paycheck directly from your employer, and you would spend what you had in your account. The bank would be the central clearing house though which all your financial transactions took place.
An extra advantage to the government would be that they would no longer need to chase their citizens for taxation. Since they had a full record of every penny you earned and spent, they could advise you of the amount of your tax obligation and simply deduct it periodically. If you presently pay tax annually, the deductions could be broken up—say, monthly, or even weekly.
And the tax need not be under one heading. Just as your bank now lists a host of confusing charges on your credit card, so the government may have a wide variety of confusing and even redundant taxes that it deducts on a regular basis. Just as with the bank, the rates for each tax might go up or down (but mostly up) without explanation. (The more numerous the tax categories and the greater the frequency of deductions, the more confusion and, therefore, the fewer the complaints.)
How Does All This Fit Together?
Let's go back to the ECB. If a negative interest rate exists, the bank no longer pays you interest to encourage you to keep your money with them. They now control all your monetary transactions, and you cannot function without them. The servant has become the master. Therefore, it would not be possible to cease to use the bank for your transactions, should their "negative interest rates" start to climb.
At this point, the government and the bank would, between them, control your money totally. You would find yourself, in effect, "owned by the company store." It's even possible that bank fees and tax rates could be increased as your income increased, so that you might never be able to truly save money, invest, or indeed, act independently of your "owners." The flow of your money would have become centralised, and you could not function without them.
Of course, this is all theory. Surely, this could not come to pass, because people inherently do not wish to be enslaved.
And yet it happened on a wholesale basis in Kentucky and other mining areas in the US. So the question really is, "How did it become possible that people in mining towns volunteered for their own slavery?"
First there was a depression. Many people lost their jobs and their incomes and were prepared to do anything in order to feed their families. So they signed up for the only game in town: the mines. It was dangerous work, there were no benefits, and the coal dust would kill a miner after a time. But as long as he lived, his family had enough to eat. He accepted the deal, because (again) it was the only game in town.
So, back to the present day, where the Greater Depression will soon be on us in full force. A large percentage of jobs will be destroyed, but in addition, this time around, the currency will also be destroyed. In order to pay for goods, particularly food, people will do whatever they have to, to obtain currency. Desperate times, indeed.
But there's a light at the end of the tunnel! The government has chosen to eliminate bank notes and coins, as they ultimately proved to be so destructive. Never again will this be allowed to happen. The new Electronic Currency System will ensure that all money is centrally managed.
The press will declare the new system brilliant, and the harder an individual has been hit by the Greater Depression, the more quickly he will jump on board. The greedy rich have all but destroyed his life, and his government, like a knight in shining armour, has come to save him. Like the miner, he will not be musing on how this will all play out over the decades; he will opt for the promise of relief for his family now.
If this all plays out as described above, it will not be just Kentucky, but entire nations.
Editor's note: The day after this article was written, the ECB announced the introduction of a negative interest rate: 0.1% on deposits. As predicted, the media have already begun to the praise the measure.
To see what the consequences of economic mismanagement can be, and how stealthily disaster can creep up on you, watch the 30-minute documentary, Meltdown America. Witness the harrowing tales of three ordinary people who lived through a crisis, and how their experiences warn of the turmoil that could soon reach the US. Click here to watch it now.
The article I Owe My Soul—Why Negative Interest Rates Are Only the First Step was originally published at caseyresearch.com.