Cash and Freedom Under Attack.
The Cashless Society Is A Central Planner’s Dream – Freedom’s Nightmare.
The world is heading towards a cashless society.
A cashless society has the danger of becoming a priceless one.
A priceless society is one where private property ownership is compromised, individual choice, privacy and freedom are eliminated.
Welcome to the Cashless Society
There is no war on cash. It’s only a war if two sides are fighting. Instead, there are a series of government and bank led initiatives designed to remove cash from your pockets and wallets.
Who’s complaining? Who is doing anything about it?
This is part one of a two part series, “Welcome to the Cashless and Priceless Economy“. Part one, “Welcome to the Cashless Economy” will deal with the destruction of cash and part two “Welcome to the Priceless Economy” will explore the various ways that price discovery is being destroyed and the role a cashless society plays in that destruction.
A cashless society, coupled with other forces, will eventually lead to a priceless society where prices will not be arrived at by market forces through supply and demand but rather set by central planners and all purchases tracked and taxes collected on them. Eventually, purchases of items deemed to be required by central planning authorities will be mandated by deduction from your account.
Recently, there have been a growing number of examples of government coercion in the private personal and economic affairs of its citizens. None, however, would be as far reaching as a government ban (partial or complete) on the use of cash.
Those who would give up liberty for convenience, deserve neither liberty nor convenience.
Cash Is Inconvenient
Central planners favor a cashless society ostensibly, for our own benefit. Cash, they argue, like “truth’, is inconvenient.
Proponents of a cashless global society, where money can be transferred in a mouse click anywhere in the world, point to the convenience of such a society. Eliminating money in specie form and digitizing it eliminates the need to carry cash. After all, digital money is more convenient than lugging around bills or coins for large purchases and simplies cross border transactions.
Bill Gates, whose Gates Foundation rallies a “Call for Global Citizens” labels cash a “trap” and trashes cash in this short video.
Bjorn Ulvaeus, of the music group ABBA, believes in the cashless society so much, he no longer uses cash and the ABBA museum does not accept it.
Janet Yellen, Chair of the Federal Reserve Bank of the United States recently quipped- “Cash is not a very convenient store of value.” As central banks devalue the currencies they manage by printing more of them and keeping interest rates at, close to or below zero, holding cash indeed becomes unprofitable and inconvenient, causing otherwise savers to spend it or throw into the stock market.
While there are indeed benefits to digital money, convenience, however, should be a choice not an edict.
Ban Open Carry Cash?
What if you are not allowed to carry a large amount of cash or to spend it as you please? In the central planner’s cashless society vision, carrying large amounts of cash may brand you as a potential crimminal or terrorist or the act of openly carrying cash may itself make you a crimminal. Sound far fetched? France and Greece are just two countries that outlaw large cash transactions over $1,000. In the United States, Louisiana already bans the use of cash in yard sales.
Central planners also cite self-serving reasons for going cashless including:
Cash Interferes with Monetary Policy
In doing god’s work in managing the money supply, interest rates and the economy, central bankers and their apologists cite that monetary policy can be rendered ineffective and even irrelevant if people don’t conduct their financial affairs as the central planners wished they would.
Interest Rate Manipulation as a Monetary Tool
We have seen central banks react to economic crisis and sluggish economies by instituting low interest rates, then zero interest rates and finally negative interest rates, with diminishing effectiveness.
Interventionist monetary policies are designed to end the “boom bust” cycles inherent in capitalism. Ironically, or perhaps tragically, the largest booms and busts (e.g. the financial crisis of 2008) have occurred under interventionist monetary regimes.
Some have argued that banning cash would help central banks finally end the boom bust cycle by “forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms.”
Alarming proposals to strip individuals of the power to conduct of their financial affairs and to transfer that power to central authorities are all too common.
Negative Interest Rates Won’t Work if Cash is Around
Kenneth Rogoff of Harvard argues that the existence of cash interferes with implementing successful negative interest rate policies. Artificially low interest rates and zero interest rates encourage spending and risk taking over savings as little or no interest is paid. Intitutively, negative interest rates would operate in the same way. Why save cash in a bank when it not only doesn’t pay interest but costs to keep it there?
Rogoff notes astutely, however, that “hoarding cash may be inconvenient and risky, but if rates become too negative, it becomes worth it.”
Those wanting to save their money and not have to pay to keep it in bank that has instituted negative interest rates might instead withdraw their cash and keep it elsewhere (but not in a bank safe deposit box), thus preserving their capital and thwarting the central planners’ negative interest rate policy goal of discouraging savings and encouraging spending.
Central bankers might view prudent savers who remove their cash from banks to avoid paying negative interest rates as felonious crimminals who hold cash with an intent to hoard and damage the world economy.
Mr. Rogoff doesn’t endorse the crimminalizaton of holding cash but rather concludes: “there are increasingly strong arguments for exploring” the phasing out of cash to help central banks implement their negative interest rate policies.
Going Cashless Saves!
Another argument against cash is that it is expensive to mint and print. The U.S. government is looking into ways to reduce the cost of minting those pesky coins including using zinc instead of copper and nickel. Denmark is touting cash free shops as a way of cutting retail costs. In both instances the overall costs of cash production and use are de minimis in the grand scheme of things. The counter argument that bankers promoting the cashless society fail to omit is that they take a fee on every cashless transaction.
Cashless Prevents Terrorism and Tax Evasion
The other primary argument that cashless proponents make is that cash is at the center of illegal activities including the drug trade and terrorism. Also, cash transacations often go unreported and taxes on them unpaid. Eliminating cash will eliminate these problems. Or will it?
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Next Up: “The Dark Side of Going Cashless” – Part 2 of “Welcome to the Cashless Society”
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Update: Part 3A of “Welcome to the Cashless Society- How Did We Get Here” now available.