The stories are all over the Internet. Governments are forcing us into a cashless society. Supposedly the pretext is terrorism, and the real reason is to take more control. No doubt more power appeals to politicians, and banning cash seems like the next step after mandatory reporting of cash transactions. However, I think there is a more serious driver than simple power lust.

A more compelling case is that cash banning is the logical follow up to bail-ins. Most people think a bail-in is when banks steal your deposit. So it seems to make sense that governments want to force people to keep their cash in the bank. Then they are easy meat for the next bail-in.

However, a bail-in isn’t theft by your bank. There’s theft, alright, but the culprit is upstream. For example, in the case of Cyprus, the theft occurred in plain sight. The thief was Greece. That country sold instruments which it fraudulently called bonds, but it had neither means, nor the intent to repay. Those bonds are bogus paper. The Greek government stole the money, in the guise of borrowing it.

The Cypriot banks invested considerable deposits in Greek bonds. When depositors realized this, they began to withdraw their cash—a run on the banks. The banks were insolvent, so someone had to take losses. A bail-in shifts the losses from bondholders and other creditors to depositors.

It’s an example of how a corrupt monetary system causes corruption in banking. If government bonds are defined as the risk-free asset, then banks must hand depositors’ funds over to governments to spend. That can’t end well.

An honest bank will shut down operations before it burns through so much capital as to harm depositors. However, regulation obliges banks to buy government bonds (typically using short-term deposits). Thus the bail-in was devised to protect banks, though it violates law developed over centuries.

Neither control for its own sake, nor bail-ins, are the primary drivers of going cashless. Central banks don’t care about regulating the people, though they do support this new war on cash. Bail-ins are not a consideration in the US yet, though already American economists and bankers have expressed support for cash banning. So what’s really going on?

Citi’s Willem Buiter and Harvard economist Kenneth Rogoff are quite explicit. Central banks are grappling with the limit to their planning. As they push down the interest rate, more people withdraw their cash. This squeezes the banks, which make money by borrowing from depositors and lending at higher interest. Banks cannot pay a positive rate in order to earn a negative rate. If the interest rate on the government bond is negative, then the bank must set the interest on deposits at an even lower negative rate.

For some odd reason, depositors don’t like paying the bank to deposit their cash. It’s weird, I know. Instead, they withdraw their deposits. Withdrawals reduce bank funding, forcing banks to sell bonds. This pushes interest up, contrary to the plans of the central bank. It’s worth noting that bank runs and interest rate pressure are the reasons why President Roosevelt outlawed gold in 1933.

This simple preference not to lose money is dangerous to central banks. It threatens the monetary system to its foundations, because it’s an escape hatch allowing people to opt out of the central plan. If central banks don’t respond, then they accept a hard limit to their power over people. They’re stymied in their desire to set negative interest.

Thus they’re coming to take away your cash. However, they had better be careful. People will react to the central bank response, which forces another policy response, to which people will react, and so on. Central banks risk the destruction of their currencies.

This article is from Keith Weiner’s weekly column, called The Gold Standard, at the Swiss National Bank and Swiss Franc Blog SNBCHF.com.