The war on cash is escalating. As Mises’ Jo Salerno reports, the latest combatant to join the fray is JP Morgan Chase, the largest bank in the U.S., which recently enacted a policy restricting the use of cash in selected markets; bans cash payments for credit cards, mortgages, and auto loans; and disallows the storage of “any cash or coins” in safe deposit boxes. In other words, the war has moved on from one of words to actions.
Here are ten quotes that should chill the spine of any individual who cherishes his or her freedom and anonymity:
1. Kenneth Rogoff (from the intro to his paper The Costs and Benefits to Phasing Out Paper Currency):
Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries… Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate.
In other words, cash (not money) is the source of all evil and must be destroyed because governments can’t trace its every movement, and it represents a limiting factor on central banks’ ability to continue their insane negative-interest-rate experiment.
2. Citigroup’s Chief Economist Willem Buiterresponds to the monetary economist Charles Goodhart’s description of abolishing currency as “shockingly illiberal.”
(T)his cost has to be seen against the cost that the anonymity of currency presents to society. Even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency.
This, I believe, is the hidden intent behind all the excited talk about banning cash: to do away with the personal anonymity it offers.
3. France’s finance minister Michel Sapin adds a dose of scare-mongering, which can do wonders. In the wake of the Charlie Hebdo murders, he put much of the blame for the attacks on the assailants’ ability to buy dangerous things with cash. Shortly thereafter he announced a raft of capital controls that included a €1,000 cap on cash payments, down from €3,000. Such radical counter measures were necessary, he said, to “fight against the use of cash and anonymity in the French economy.”
4. Guillermo de la Dehesa, a Spanish economist, former senior civil servant and current international advisor to Banco Santander and… (cue drum roll) Goldman Sachs, already demonized cash (as opposed to digitalized bank credit) as a source of all crime and evil back in 2007, when he wrote the following in an El Pais article titled “The Great Advantage of a Cashless World”:
Without cash, we would live in a much safer, less violent world with enhanced social cohesion, since the major incentive fuelling all illegal activity [i.e. cash]… would disappear.”
Dehesa also lamented that political authorities in all countries were incapable of taking this “transcendental step” to build a “safer and fairer world, in which there will be a reduced need for public and private policing and fewer wars, terrorist attacks, and burglaries, and drugs could only be bought legally.” So he ludicrously elevated cash (rather than money) as a major cause of war and a laundry list of other evils. They’d be stamped out by electronic payments where every single movement will be tracked and recorded for posterity.
5. Economist and former US Secretary of Labor Robert Reich, among the growing ranks of policymakers, business leaders, academics, and bankers picking up the torch of Dehesa’s dystopian dream, is barely able to conceal his glee as he tells CBS news:
There will be a time – I don’t know when, I can’t give you a date – when physical money is just going to cease to exist.
6. David Wolman, author of the Death of Money, told CBS just why cash is so impractical (not to mention unhygienic, or as he puts it “pretty gross”):
Everyone thinks cash is so simple and so easy and so fast and so secure. It’s NONE of those things. It’s really expensive to move it, store it, secure it, inspect it, shred it, redesign it, re-supply it, and round and round we go!
7. Founder of mobile payments provider Square, Jack Dorsey seems to understand that to kill cash for good the authorities must go beyond just vilifying it; they must romanticize the alternatives. Here’s his take on mobile money:
I think there is a general desire in American culture right now to find something that is more crafted, more personal.
As anyone who’s ever received money as a gift will tell you, there’s nothing more impersonal (and, of course, more untraceable and anonymous) than cash. Mobile payments will fix that shortcoming.
8. Chris Skinner, author of The Future of Banking and Digital Bank, drives home the point that digital money doesn’t just offer a more personal touch; it also offers a far more secure payment system, especially with the advent of biometric authentication systems.
Imagine that your payment mechanism is built into a watch that your bank gave you. The watch includes an RFID or NFC capability, biometric recognition and is supported by existing infrastructures at the merchant front-end and money transmissions process back-end. The retail consumer can therefore go into any store, wave their watch at the contactless terminal, press their finger to the pay point and they have purchased the goods. No card or cash involved.
That is the vision of the future of retail payments and we are almost there today. We already have contactless payment terminals, fingerprint recognition payments, micro and mobile payments. The only logical step is to introduce non-card based (i.e. biometric-based) payment systems.
As the saying goes: you can create a new password many times (for example, if your accounts get hacked), but you can create your biometrics only once. If they’re compromised, they remain compromised. So a payment system based on them would be really cool.
9. Bill and Melinda Gates Foundation, in its 2015 annual letter, adds a new twist. The technologies are all in place; it’s just a question of getting us to use them so we can all benefit from a crimeless, privacy-free world. What better place to conduct a massive social experiment than sub-Saharan Africa, where NGOs and GOs (Government Organizations) are working hand-in-hand with banks and telecom companies to replace cash with mobile money alternatives? So the annual letter explains:
(B)ecause there is strong demand for banking among the poor, and because the poor can in fact be a profitable customer base, entrepreneurs in developing countries are doing exciting work – some of which will “trickle up” to developed countries over time.
What the Foundation doesn’t mention is that it is heavily invested in many of Africa’s mobile-money initiatives and in 2010 teamed up with the World Bank to “improve financial data collection” among Africa’s poor. One also wonders whether Microsoft might one day benefit from the Foundation’s front-line role in mobile money.
10. Buiter’s employer Citi, a big player in the African arena, recently launched a partnership with USAID aimed at accelerating mobile money adoption in developing countries. Here’s a nugget from their joint press release:
[E]xpanding the adoption of mobile financial solutions is a critical economic development strategy with the potential to drive growth and increase financial access and security for the developing world’s poor population. The effort seeks to strengthen alternatives to a cash-based system that is inefficient, costly, and prone to corruption.
As a result of technological advances and generational priorities, cash’s days may well be numbered. But there is a whole world of difference between a natural death and euthanasia. It is now clear that an extremely powerful, albeit loose, alliance of governments, banks, central banks, start-ups, large corporations, and NGOs are determined to pull the plug on cash — not for our benefit, but for theirs.
As I warned in We Are Sleepwalking Towards a Cashless Society, we (or at least the vast majority of people in the vast majority of countries) are willing to entrust government and financial institutions – organizations that have already betrayed just about every possible notion of trust – with complete control over our every single daily transaction. And all for the sake of a few minor gains in convenience. The price we pay will be what remains of our individual freedom and privacy.