The Cashless Society

Discussion in 'West Mall' started by Musburger1, Feb 10, 2016.

  1. Musburger1

    Musburger1 2,500+ Posts

    I've copied the article below which enumerates some of the pros and cons, but I think Bloomberg left the biggest concerns unaddressed. On the positive side they mention:
    1. Expediency
    2. Easier to crack down on money laundering and tax evasion (all transactions would be tracked)
    3. Reduce cost of printing money

    Cons
    1. See bolded paragraphs below which are considered "pros" by the authors
    2. The government pretty much controls what you can do
    3. If there is systemic financial failure, your digital assets are gone; you are left with just the faith that the government can make you whole
    4. If the purpose is to inact negative interest rates, there is no incentive to save; You really lose that conservative option and must choose only to spend or borrow money in hopes of getting a return greater than you would otherwise lose.

    There are some trial balloons some of the large banking institutions are floating in favor of a cashless society. Frankly, it scares me to death. I see it as a power grab by the State and financial powers as a last resort to keep the system alive. Any thoughts?

    http://www.bloombergview.com/articles/2016-01-31/bring-on-the-cashless-future

    By Editorial Board

    Cash had a pretty good run for 4,000 years or so. These days, though, notes and coins increasingly seem declasse: They're dirty anddangerous, unwieldy and expensive, antiquated and so very analog.

    Sensing this dissatisfaction, entrepreneurs have introduced hundreds of digital currencies in the past few years, of which bitcoin is only the most famous. Now governments want in: The People's Bank of China says it intends to issue a digital currency of its own. Central banks inEcuador, the Philippines, the U.K. and Canada are mulling similar ideas. At least one company has sprung up to help them along.

    Much depends on the details, of course. But this is a welcome trend. In theory, digital legal tender could combine the inventiveness of private virtual currencies with the stability of a government mint.


    Most obviously, such a system would make moving money easier. Properly designed, a digital fiat currency could move seamlessly across otherwise incompatible payment networks, making transactions faster and cheaper. It would be of particular use to the poor, who could pay bills or accept payments online without need of a bank account, or make remittances without getting gouged.

    For governments and their taxpayers, potential advantages abound. Issuing digital currency would be cheaper than printing bills and minting coins. It could improve statistical indicators, such as inflation and gross domestic product. Traceable transactions could help inhibit terrorist financing, money laundering, fraud, tax evasion and corruption.

    The most far-reaching effect might be on monetary policy. For much of the past decade, central banks in the rich world have been hampered by what economists call the zero lower bound, or the inability to impose significantly negative interest rates. Persistent low demand and high unemployment may sometimes require interest rates to be pushed below zero -- but why keep money in a deposit whose value keeps shrinking when you can hold cash instead? With rates near zero, that conundrum has led policy makers to novel and unpredictable methods of stimulating the economy, such as large-scale bond-buying.

    A digital legal tender could resolve this problem. Suppose the central bank charged the banks that deal with it a fee for accepting paper currency. In that way, it could set an exchange rate between electronic and paper money -- and by raising the fee, it would cause paper money to depreciate against the electronic standard. This would eliminate the incentive to hold cash rather than digital money, allowing the central bank to push the interest rate below zero and thereby boost consumption and investment. It would be a big step toward doing without cash altogether.


    Digital legal tender isn't without risk. A policy that drives down the value of paper money would meet political resistance and -- to put it mildly -- would require some explaining. It could hold back private innovation in digital currencies. Security will be an abiding concern. Non-cash payments also tend to exacerbate the human propensity to overspend. And you don't have to be paranoid to worry about Big Brother tracking your financial life.

    Governments must be alert to these problems -- because the key to getting people to adopt such a system is trust. A rule that a person's transaction history could be accessed only with a court order, for instance, might alleviate privacy concerns. Harmonizing international regulations could encourage companies to keep experimenting. And an effective campaign to explain the new tender would be indispensable.

    If policy makers are wise and attend to all that, they just might convince the public of a surprising truth about cash: They're better off without it.​
     
  2. BevoBeef

    BevoBeef 250+ Posts

    There is definitely a lowering of overhead costs in doing business by using electronic transactions. However, the pros and cons as mentioned above seem to be mainly related to psychological effects. This discussion would seem to imply that by making electronic transactions, we are changing what currency that we are exchanging. No matter if a transaction in this country is made with exchange of cash, exchange of gold/silver coins, or by a cellphone, it is all based on the value of the US Dollar. The value of the US Dolllar is based on its relative strength to other national currencies. The strength of the US Dollar today is not really based on the strength of the US economy but based on a fear of using other currencies of other countries instead. In other words, the US GDP or how we exchange money is not controlling the value of our money, it is the lack of growth or existence of currency fears that is controlling a strong dollar. That is because the inter-dependency of the global markets is increasing as a result of the national markets not being as isolated as they used to be - even 20 or 50 years ago.

    I am not saying that the psychologies in money exchange are not important. What affects how people save or spend money does affect the strength of our currency. To me, this value in the money is not really tied to how we exchange it. The best analogy to me is comparing money exchange to the memory storage hierarchy in computing systems. Throughout the past 50 years, the medium of storage and its cost has changed dramatically as the technology has given us magnetic tape, optical disks, flash memory, hard disks, and all kinds of dynamic ram storage techniques. The memory storage technology does control the cost per bit of storing that data and the amount of data (i.e., the transactions) that can be handled. However, it does not directly control the value of the data that is stored on that particular medium of storage
     
    Last edited: Feb 11, 2016
  3. nashhorn

    nashhorn 5,000+ Posts

    Currently we cannot obtain an independent audit of the Fed Reserve I cannot even imagine what power/control would the Govt have in a total digital currency/economy.
     
    • Like Like x 1
  4. Musburger1

    Musburger1 2,500+ Posts

    Currently, you have the option of using the system or opting out (i.e. holding cash). If cash is banned, the system controls everything.

    One of the points BevoBeef talked about is that whether or not you hold cash or go to a digital only system, the value of your "money" is depenent on the strength of the dollar. That is true, and it is a whole 'nother topic on its own, and it is a very important one. Later perhaps I'll start a thread on that.
     
  5. Musburger1

    Musburger1 2,500+ Posts

    http://www.freemansperspective.com/banning-cash-serfdom-time/

    Here's the best argument against a cashless society. You can summarize it as tyranny.

    To make this clear, I like to paraphrase a famous (and good) quote from Alan Greenspan, back from 1966, during his Ayn Randian days: The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    That was a true statement, and with a slight modification, it succinctly explains the new war on cash:

    The preservation of an insolvent currency system requires that the owners of currency have no way to protect it.

    Cash is currency that you hold in your own hands, that stands more or less alone. It is primarily external to bank control. Electronic money – bank balances, credit, etc. – remains inside the banking system and fully subject to bank control.

    A combination of no cash and negative interest rates would be a quiet, permanent version of what was done in Cyprus, where the government simply shut down everything, allowed only the smallest deductions via ATMs, and then stole money from thousands of bank accounts at once.

    The Cypriot spectacle was fairly large, however, and that tends to undermine the legitimacy of rulership. So, it is much better to have no ATMs and no cash at all. There would be no lines of angry people talking to each other, only isolated losers with no recourse, licking their wounds while the talking heads on television tell them to stay calm and watch the flashing images.

    Negative interest rates would give the banks 100% control over your purchases. They could, even in the worst pinch, allow you to purchase food while freezing the rest of your money. The average person would have no recourse and would simply be robbed… but very smoothly and with no human face to blame on.

    Negative interest rates mean that your bank account shrinks day by day, automatically. Your $1000 in January becomes $950 by December. And where does that money go? To the banks, of course, and to the government. They syphon your money away, drip by drip, and there’s nothing you can do about it. This accomplishes several things for them at once:

    • It finances government, limitlessly and automatically. Forget tax filings; they can just take as they please.

    • It pays off the bad debt of the big banks. (And there are oceans of debt.)

    • It forces you to spend everything you’ve got, as soon as you get it. (Otherwise it will shrink.)

    • It gives the system full control over your financial life. Everything is monitored, everything is tracked, and every single transaction must be approved by them (or not). If they decide they don’t like you, you’re instantly reduced to begging.
    In short, this is a direct return to serfdom.

    I suggest that you start talking to your friends and neighbors about this now, before it’s too late. Don’t let them comply without a fight.
     
  6. Son of a Son

    Son of a Son 1,000+ Posts

    Before a cashless society, can we just start with a no penny society?
     
    • Like Like x 2
  7. Musburger1

    Musburger1 2,500+ Posts

    That's funny, and inflation has made pennies practically meaningless. People no longer bother to pick them up from the floor. But in fact, The EuroZone is considering a piecemeal removal of currency which would start from the opposite end by discontinuing the 500 Euro note.
     
  8. Musburger1

    Musburger1 2,500+ Posts

  9. zork

    zork 2,500+ Posts

    prepping for nirp
     
  10. ShAArk92

    ShAArk92 1,000+ Posts

    As long as the amount is rounded DOWN.
    Recall some genius "statesman" sought to eradicate BOTH pennies and nickels ... rounding UP for the tax applied. Ah ... NO.
     

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