"And I don't give a damn about a greenback a dollar, spend it fast as I can..."
I hear from time to time that we're heading for a cashless society. I don't believe that.
There are numerous problems with the idea of a cashless society, beyond the difficulties that would have to be overcome to implement it, which are great in themselves.
1. Monetary systems are based on one of two things: the amount of a resource, such as a precious metal, an economy possesses, upon which the currency is based; or the faith people who use the currency have in it.
Most world currencies today are fiat money, based on the credit of the governments which issue them. Fiat money's value fluctuates more severely than material-standarded money's value, and it can be affected wildly by the issuance of too many bank notes, as seen in Germany and Russia in 1923, in Greece in 1944, in Hungary in 1946, and in China in 1949. Imagine how much worse that volatility would be in a system where the amount of currency in circulation is based on bits of information and subject to the interference of people who can change data values. It's one thing to have to invest resources into printing fake bank notes, but it's another thing entirely to be able to reach the same gains without having to put any significant resources into it.
2. The poor don't have universal access to plastic monetary instruments. Many poor people don't have bank accounts, which today only prevents them from using checks, debit cards, and sometimes credit cards. Additionally, many people abstain from holding a banking account because of the vulnerability of bank holdings to governmental clerical errors. In a society with no physical means of exchange, the poor would be unable to participate in economic activities.
3. Wal-Mart and other businesses in the same categories. Those categories are these: shrewdly-run companies, companies that cater to the poor and middle class, and/or companies that carry inferior goods. As I see it, Wal-Mart is highly unlikely to stop accepting cash, because it is not in their best interests to make it more difficult for consumers to spend money there. They may widen the number of monetary instrument types they accept, but they will not stop accepting a form of payment unless that form becomes expensive to accept, which cash is currently one of the cheapest types of payment to accept, since the devices to accept it are universally in place in all their stores already. Secondly, since their market is largely based on people with below-median incomes, who are more likely to use cash instead of check or credit card, they are highly unlikely to make a move that would cut out a large percentage of their patronage.
4. Vending. Quite simply, a vending machine that accepts coins or coins and bills can be set up anywhere there is power. But for a vending machine to accept any form of electronic payment, it must either be connected to a communication line in addition to power, or it must accept electronic payments that are much less secure, those whose value is stored in the information on the card, for example. Having the balance encoded on the card makes alteration much easier and more prevalent. And since such a system would not likely be enacted for the majority of financial transactions, it would be incompatible with them and therefore could not be used in vending machines. And vending machines are not going away any time soon. I was at two malls the other day, and I saw at least two store locations with no entrances. They'd been closed in with a wall that held two drink-vending machines. It's more profitable, apparently, to set up two vending machines and pay for a full mall-store space than it is to hire someone to sell drinks from behind a counter in that same mall-store space. Vending machines are here to stay, and they resist a cashless economy.
5. Private or illicit transactions. Regardless of what governments do, the people will always be the final arbiters of currency value. In times when a nation's government has subjected the national currency to hyperinflation that made their money more valuable as wallpaper than as groceries, the people used currencies from elsewhere to make transactions or fell to bartering. People won't use a currency that doesn't do what they want to do. And one thing cashless currency doesn't do is provide a medium of untraceable exchange. There are many reasons one might wish to make a monetary transfer that can't be traced, and this is most certainly not limited to lawlessness.
Charity is one of the major reasons. Many people believe that charitable donations should be done secretly. These are some of the people who give to their churches with loose cash. They don't want any record of the gift because they believe their giving is between them and God.
It can also be expedient for the recipient of a gift to be unaware of its giver. One might wish to avoid the possibility that someone who receives a gift will feel obligated to pay it back. Thus, the giver would not want the receiver to be able to know who had given it.
Privacy is another reason. There are many people who are doing nothing illegal or unethical who simply believe that a person's financial transactions should not be known by just anyone, including their government, without a valid reason. If a citizen obeys the laws of the land but conducts all transactions in cash to prevent the nosy from prying into his or her private affairs, why should any legitimate government care? Absent some just cause to suspect that a crime is committed, no government has the right to arbitrarily look into someone's private affairs.
But I did mention illicit transactions. Yes, they happen. No, going away from cash will not stop them or even really hinder them. As mentioned, people will use the currency that best suits their purposes. In a cashless official economy, there would not automatically be a cashless society. People will conduct business with cash, whether it is issued by a government, a private bank, or decided upon as some non-issued material. As an example, instead of gold being the standard of an illicit currency, cocaine or diamonds might be the basis, or they might buy up all the stock in certain companies and pass stock issues around as money. As another example, a large crime syndicate might begin issuing its own currency, which would have street credit whether the official currency was paper or plastic. If someone wants to commit a crime, they'll find a way.
6. Reprise: Counterfeiting. I mentioned this in the first point, but I think it is worth mentioning again, because it is important for two reasons. In the first point, I talked about faith and credit. Now, I want to talk about counterfeiting. As we have seen with the rise in piracy when music and movie are digitized, money that is based on nothing but computer data will be impossible to protect against replication. Large amounts of money are now transferred using computers, but we still have paper records to help catch people when they try to gain real money by simply changing the computer data. A large part of the difficulty today is that money needs to eventually be converted from theoretical data into real money. But in a cashless world, once you have altered the data, it is real money... theoretically. As I hope I've shown, the reality of virtual money is no more real than a virtual tour in home design software.
So, as hard as we may try to do away with cash, it's not going anywhere any time soon, and if we try to kill the coin and the bill, they'll return in another form. You can bet your last dollar on it.
There are numerous problems with the idea of a cashless society, beyond the difficulties that would have to be overcome to implement it, which are great in themselves.
1. Monetary systems are based on one of two things: the amount of a resource, such as a precious metal, an economy possesses, upon which the currency is based; or the faith people who use the currency have in it.
Most world currencies today are fiat money, based on the credit of the governments which issue them. Fiat money's value fluctuates more severely than material-standarded money's value, and it can be affected wildly by the issuance of too many bank notes, as seen in Germany and Russia in 1923, in Greece in 1944, in Hungary in 1946, and in China in 1949. Imagine how much worse that volatility would be in a system where the amount of currency in circulation is based on bits of information and subject to the interference of people who can change data values. It's one thing to have to invest resources into printing fake bank notes, but it's another thing entirely to be able to reach the same gains without having to put any significant resources into it.
2. The poor don't have universal access to plastic monetary instruments. Many poor people don't have bank accounts, which today only prevents them from using checks, debit cards, and sometimes credit cards. Additionally, many people abstain from holding a banking account because of the vulnerability of bank holdings to governmental clerical errors. In a society with no physical means of exchange, the poor would be unable to participate in economic activities.
3. Wal-Mart and other businesses in the same categories. Those categories are these: shrewdly-run companies, companies that cater to the poor and middle class, and/or companies that carry inferior goods. As I see it, Wal-Mart is highly unlikely to stop accepting cash, because it is not in their best interests to make it more difficult for consumers to spend money there. They may widen the number of monetary instrument types they accept, but they will not stop accepting a form of payment unless that form becomes expensive to accept, which cash is currently one of the cheapest types of payment to accept, since the devices to accept it are universally in place in all their stores already. Secondly, since their market is largely based on people with below-median incomes, who are more likely to use cash instead of check or credit card, they are highly unlikely to make a move that would cut out a large percentage of their patronage.
4. Vending. Quite simply, a vending machine that accepts coins or coins and bills can be set up anywhere there is power. But for a vending machine to accept any form of electronic payment, it must either be connected to a communication line in addition to power, or it must accept electronic payments that are much less secure, those whose value is stored in the information on the card, for example. Having the balance encoded on the card makes alteration much easier and more prevalent. And since such a system would not likely be enacted for the majority of financial transactions, it would be incompatible with them and therefore could not be used in vending machines. And vending machines are not going away any time soon. I was at two malls the other day, and I saw at least two store locations with no entrances. They'd been closed in with a wall that held two drink-vending machines. It's more profitable, apparently, to set up two vending machines and pay for a full mall-store space than it is to hire someone to sell drinks from behind a counter in that same mall-store space. Vending machines are here to stay, and they resist a cashless economy.
5. Private or illicit transactions. Regardless of what governments do, the people will always be the final arbiters of currency value. In times when a nation's government has subjected the national currency to hyperinflation that made their money more valuable as wallpaper than as groceries, the people used currencies from elsewhere to make transactions or fell to bartering. People won't use a currency that doesn't do what they want to do. And one thing cashless currency doesn't do is provide a medium of untraceable exchange. There are many reasons one might wish to make a monetary transfer that can't be traced, and this is most certainly not limited to lawlessness.
Charity is one of the major reasons. Many people believe that charitable donations should be done secretly. These are some of the people who give to their churches with loose cash. They don't want any record of the gift because they believe their giving is between them and God.
It can also be expedient for the recipient of a gift to be unaware of its giver. One might wish to avoid the possibility that someone who receives a gift will feel obligated to pay it back. Thus, the giver would not want the receiver to be able to know who had given it.
Privacy is another reason. There are many people who are doing nothing illegal or unethical who simply believe that a person's financial transactions should not be known by just anyone, including their government, without a valid reason. If a citizen obeys the laws of the land but conducts all transactions in cash to prevent the nosy from prying into his or her private affairs, why should any legitimate government care? Absent some just cause to suspect that a crime is committed, no government has the right to arbitrarily look into someone's private affairs.
But I did mention illicit transactions. Yes, they happen. No, going away from cash will not stop them or even really hinder them. As mentioned, people will use the currency that best suits their purposes. In a cashless official economy, there would not automatically be a cashless society. People will conduct business with cash, whether it is issued by a government, a private bank, or decided upon as some non-issued material. As an example, instead of gold being the standard of an illicit currency, cocaine or diamonds might be the basis, or they might buy up all the stock in certain companies and pass stock issues around as money. As another example, a large crime syndicate might begin issuing its own currency, which would have street credit whether the official currency was paper or plastic. If someone wants to commit a crime, they'll find a way.
6. Reprise: Counterfeiting. I mentioned this in the first point, but I think it is worth mentioning again, because it is important for two reasons. In the first point, I talked about faith and credit. Now, I want to talk about counterfeiting. As we have seen with the rise in piracy when music and movie are digitized, money that is based on nothing but computer data will be impossible to protect against replication. Large amounts of money are now transferred using computers, but we still have paper records to help catch people when they try to gain real money by simply changing the computer data. A large part of the difficulty today is that money needs to eventually be converted from theoretical data into real money. But in a cashless world, once you have altered the data, it is real money... theoretically. As I hope I've shown, the reality of virtual money is no more real than a virtual tour in home design software.
So, as hard as we may try to do away with cash, it's not going anywhere any time soon, and if we try to kill the coin and the bill, they'll return in another form. You can bet your last dollar on it.