December 12, 2017
With every year, new payment methods come out, ever more convenient, ever more modern. Now, the question is: do we really need cash altogether, anymore? Many players on the market argue that we don’t. For the general public, the question isn’t really relevant, as they are excluded from the debate. Should hard currency disappear, who would win and who would lose? Since the 1980s, businesses and individuals have been offered ever more solutions to conduct their payments and make their purchases in every possible way. Ranging from debit cards to credit cards, and from wire transfers to IOUs, contactless payments are everywhere on the rise, to the extent that many wonder if we still need cash at all! The disappearance of cash has been a social fantasy for many decades, but that doesn’t mean it couldn’t occur. In fact, some of the boldest reforms in modern history sometimes took over a century in the brewing. While supporters of the war on cash claim it would bring nothing but benefits for all involved, civil rights activists warn that only some categories would be on the long end of the stick - and citizens would draw the short straw. Banks are the most diligent champions of the war on cash. Actually, some banks have already implemented it, making their agencies cashless. In 2016, Australian bank Citi decided to stop managing cash in its agencies. Head of retail banking Janine Copelin announced (1): “This move to cashless branches reflects Citi's commitment to digital banking and we are investing in the channels our customers prefer to use". Part of these banks’ strategy is to explain that it is in the customer’s interest and at their behest. Janine Copelin therefore added that “4 per cent of the bank's customers had made cash transactions through a branch in the last year.” Many other banks are tempted to drop cash altogether, because it doesn’t represent a source of revenue, and look keenly on the trend, as Susan Edmonds reported (2): “Banks said they were adjusting their systems to cater for a world where consumers wanted less physical cash in their pockets. ASB executive general manager retail Russell Jones said branches in New Zealand had already noticed a drop in the requirement for cash to be handled over the counter. Increasingly the sorts of volumes of cash handling people are doing can be handled by ATMs to get cash out and by ATMs to put deposits back into the system. The amount of cash that is going through branches over the counter is reducing." And banks can count on a sizable ally to help them increase their profits. Governments are opposing very feeble resistance to the banks’ lobbying pressure, as they also have something to gain in the dissolution of hard currency. Central banks see in the production and management of cash an unnecessary expense. And law enforcement agencies tend to frown upon cash, as their investigations regularly lead them to arrest individuals who have stashed their illegitimate earnings in high piles of banknotes. Their professional misperception often lead investigators and law enforcer to associate cash with crime. Lastly, fiscal agencies loathe the banknotes they so often fail to recoup in taxes. With the advent of the cashless and computerized era, governments could more easily track wrongdoers, investigate criminal networks and increase their tax revenues and bases by shedding light on every single corner of the economy. Economist Kenneth Rogoff assures (3): “Law-abiding citizens rarely have need for $100 bills, yet there are 34 of them in circulation for every woman, man, and child in the U.S. That suggests the bills are circulating mainly in the underground economy.” Bloomberg editorialist Peter Coy adds: “Law enforcement officials are among Rogoff's biggest allies in the war on cash, he says, and some central bankers are also interested. The front of his book carries a blurb from former Fed Chairman Ben Bernanke, who calls the book "fascinating and important" and the argument "compelling and wide-ranging." Former Treasury Secretary Larry Summers and Citigroup Chief Economist Willem Buiter have also endorsed the idea, which Rogoff first broached in a scholarly paper in 1998.” But when there are winners in a change of setting, there are also losers. What civil rights activists are worried about is not economic performance, tax revenues or police efficiency. They are worried about how much power a State would have, if it could monitor every single citizen on a screen. Glenn Beck, a civil rights watchdog, warns (4): ”You want to talk about true power? True power comes from everyone knowing exactly where you’ve spent your money, every penny, you not having the ability to make any transaction at all in cash. So, somebody wants to stop you, all they have to do is freeze your funds. All they have to do is wipe out your bank account”. Because computerized transactions are logged in with details, amounts, location, time, and parties involved, a cashless world would amount to a society where citizens would always feel the threatening eye of their government watching over their shoulder as they conduct their business. Additionally, the deletion of hard currency would amount to a significant transfer risk, from the banks to the citizens. For example, the current European economy is marked with particularly low interest rates, dictated by the European Central Bank, which have sometimes even gone below zero. As a result, citizens can be tempted to withdraw their holdings from the bank, where they earn nothing or even lose some of their value - something the banks fear. In a cashless society, every citizen’s savings would be trapped in the banking system, no matter what. Individual citizens and companies would therefore bear the brunt of whatever economic turbulence occurred, so that banks could remain out of harm’s way. As former IMF president and economist D. Strauss-Kahn summarized, “when there is a loss, the question is simply: who will suffer it?” In a cashless society, it would necessarily be citizens. One could consider the ongoing debate to be roaring with its silence. How is it that such an important aspect of our society is in jeopardy, while none of it is being discussed on prime television talk shows, where experts are usually so keen to express themselves? One may also wonder why banks and governments are so keen and eager to take care of their citizens’ and customers’ interests for them. A social heist may be afoot. (1) http://www.smh.com.au/business/banking-and-finance/citis-australian-bank-branches-go-cashless-20161114-gspedd.html (2) http://www.stuff.co.nz/business/93272085/banks-adjust-plans-for-cashless-future (3) https://www.bloomberg.com/news/articles/2016-09-07/harvard-economist-kenneth-rogoff-is-trying-to-kill-cash (4) http://www.glennbeck.com/2016/11/17/h1-cashless-society/
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Isabelle Walker