We have become accustomed to the idea of cash, the feel of cash between our fingers, the action of counting through the bills and sending them on yet another voyage, traveling between the countless checkpoints of its many owners' hands in exchange for goods, services, information, loyalty, and more reports Thomas Hughes.
The list goes on and the spectrum of what cash can purchase is well-nigh limitless. Cash is the physical form of currency that has been around for millennia, with commercial use dating as far back as the classical antiquity in the form of coins that were minted out of valuable metals in order to facilitate trade. By the early Middle Ages, Venetian merchants have adopted the use of paper bills that represented payments due to be made by their banker in the form of silver bars, and thus the concept of paper for metal was born.
Nowadays, little thought is given to the worth of metal behind the paper bills and the currency itself has grown to represent other values, such as credit and debt – a legal tender, as it is in the case of the US dollar. Regardless of what is it that really backs the worth of cash, throughout history, we have become so reliant on paper currency that it is hard to ideate a world without it – a world where cash no longer constitutes the tangible portion of one's wealth. However, considering the technological advancement and all of the changes brought upon us by the age of information, it would make sense to reflect upon that thought, for the war on cash is more than just a possibility – it is becoming a reality and few seem to notice that the process is already underway.
Just recently, the price of gold in India has skyrocketed up to $2,294 USD per ounce and its sudden rise in demand has depleted many of the stores across the country. The reason for such a rapid increase in appetite for gold is attributed to the Indian government's ban of 500 and 1,000 rupee banknotes, effective as of 8th November 2016, consequently rendering a great deal of current money practically illegal as an attempt to ‘eliminate corruption’ and make counterfeit banknotes unusable. Inevitably, economic uncertainty has engulfed individuals and businesses alike and as people swarmed the banks in the wake of the ban, almost half of the country's 202,000 ATMs were out of new notes. While India's finance minister Arun Jaitley has exhorted people to resort to cheques, cards and electronic transfers during the period of transition, none of these seemed as convincing as tangible wealth, and Indians were quick to rush for gold and cash.
A WAR ON PRIVATE WEALTH
Earlier this year, in May, the Governing Council of the European Central Bank has made the decision to permanently take the 500 euro banknote out of production in 2018. While the €500 bill will preserve its value as a legal tender and the consequences of its removal are nowhere nearly as dramatic as the events that shook the Indian economy, it is yet another step on the path of taking cash out of circulation. The issue with the withdrawal of the 500 euro note is a lot more subtle. As the European Central Bank has imposed negative interest rates on commercial banks, charging them interest on the reserves that they keep within the ECB, those banks began to apply the same practice to their customers, effectively ruining their savings. Naturally, the simplest individual solution to this problem is to keep savings in physical cash. This is where the €500 banknote comes in particularly handy because one can store a great deal of wealth in a small space, which the Central Bank obviously does not want because the banking system functions on a high number of deposits and a substantially smaller number of withdrawals, therefore it depends on those savings to fuel its endless loop of bonds and loans. If people were to opt for independent savings as a result of negative interest rates, the banks would lose the funds that they gamble with, so them taking out high-denomination banknotes serves the purpose of preventing such a scenario from taking place.
EUROPE'S DIGITAL PRECEDENT
Sweden is well on its way towards becoming an entirely cashless society within the next decade, increasingly swapping cash transfers for payments by either card or phone. Swedish public transit no longer accepts tangible currency and retailers have the legal right to decline notes and coins. More than a half of the 1,600 bank branches that operate in Sweden have given up on cash reserves and do not accept cash deposits anymore. Applications such as Swish, developed in accordance with Swedish major banks, now allow smartphone users to transfer money between accounts at will, effectively replacing cash payment for individuals and businesses alike. Sales have significantly increased thanks to the simplicity of payment via a system such as iZettle, that allows traders to accept money through a smartphone application fitted with a card-reader. While such an approach has made the transfer of money a lot more convenient, the shift to a cashless society has also resulted in concerns about fraud and privacy. The UK itself seems not to tag too far behind on the path towards a cash-free economy, actively transitioning to contactless payments in
many aspects of people's lives. The tendency amongst younger consumers is to pay digitally, through the phone or the card and businesses are quick to adapt to this trend, while the producers of new technologies are eager to capitalise on the digital revolution.
Despite the rampant hype of a cashless society, it is important to consider all of the implications of this phenomenon before jumping on the cash-free bandwagon. As convenient as digital transfers may appear at a first glance, they ensnare your wealth within a system that is regulated by banks, and a look at the ECB's policies should make it clear that they do not have your best interest in mind. On the other hand, in the best interest of central banks and governments, a society that functions without cash saves them from the cost of issuing, transporting and storing coins and notes. To de-monetise a nation and transition to a cashless society would necessarily force everyone to deposit their funds into the banking system, consequently increasing bank profits. Governments and central banks would enjoy a new, undisputed freedom to implement regulations and to control the capital. Considering the questionable safety of the banks due to their gambling nature, considering the frail state of the economy and the upcoming collapses across the globe (courtesy of their shortsighted decisions), it makes no sense to consciously leave them in charge of your personal finances.
THE PROBLEM WITH A CASHLESS WORLD
A society, whose financial transactions in their entirety are logged as data, offers an unprecedented opportunity for control to those who hold the reins of the system that is used to process this data. The trail of digital currency can be analysed and a person's purchases can be used to build a profile of their habits. Such technology already exists and this can be observed in the shape of credit card companies issuing fraud warnings for transactions that are deemed to be way out of the cardholder's recorded pattern. While this currently serves the purpose of protecting the customer, it is not hard to imagine how such a system can be abused. In the scenario of a cashless society, this data would extend to every single purchase, to every transaction made by an individual. An access to information of these proportions offers an unparalleled control over the person, which is not only a threat to privacy, but a direct attack on private wealth. Banks, governments and technological giants definitely have a lot to gain. Individuals and entrepreneurs, on the other hand, will end up having to dance to their flute.
Cash offers freedom – the freedom to manage your finances independently, the freedom to conduct business on your own terms, the freedom of commerce that constitutes the core of capitalism. Give that freedom up and leave the government with the power to make decisions for every single citizen and you may well have a system that is no better than a socialist regime, where opportunities for individual prosperity are heavily regulated and the entirety of a nation's wealth resides within the hands of those that run the show. If we have learned anything from history is that state socialism never worked in the favour of the people, because centralised, limitless power is too irresistible not to abuse. Instead of empowering the same institutions that have repeatedly lead the economy to one crisis after another, the economic system must empower entrepreneurs – the people that produce wealth, not the people that gamble with it. In order to see this through, we need freedom and until the banks can prove themselves trustworthy, this freedom is tangible currency. EG