Justifying the War on Cash
A recent New York Times feature went to great lengths to promote the idea of a cashless society, focusing on the war on cash in Sweden.
The Nordic country sits on the cutting edge of the movement away from cash. As the Times put it, cash is so “last century”:
Few places are tilting toward a cashless future as quickly as Sweden, which has become hooked on the convenience of paying by app and plastic. This tech-forward country, home to the music streaming service Spotify and the maker of the Candy Crush mobile games, has been lured by the innovations that make digital payments easier. It is also a practical matter, as many of the country’s banks no longer accept or dispense cash.”
Of course, Sweden is not alone in its war on cash. In September, stringent controls on cash went into effect in France. Residents can no longer make cash payments of more than 1,000 euros, down from the former limit of 3,000. Cash withdrawals of more than 10,000 euros a month are reported to the French government.
Government officials and bankers yearn for the abolition of cash because it means more control over the populace. Sweden brings together a central planner’s dream – negative interest rates in an increasingly cashless system. Last November, the Swedish central bank held its benchmark interest rate at negative 0.35%. According to a Business Insider report at the time, retail banks had not passed the negative rate on to consumers, but they faced increasing pressure to do so. Meanwhile, Swedes are reportedly hiding cash in microwaves because banks won’t accept it.
Why do the central planners want to get rid of cash? The Daily Bell explained it perfectly in its recent analysis of the war on cash:
As financial institutions are increasingly forced toward the ‘zero bound’ by the failure of monopoly central banking, less-than-zero rates are being contemplated. And what’s stopping the program is cash. If you have the choice between storing your money at a bank – and losing a chunk of it every month to negative rates – and keeping your funds in cash … well, cash is bound to win. It’s the reason Citibank’s chief economist not so long ago called for a ‘ban’ on cash.”
The New York Times serves as a premier establishment mouthpiece, so it comes as no surprise that it would promote a cashless society. The recent article does mention some disadvantages of a cashless system, such as the possibility of marginalizing older citizens, and the ease of falling into debt through the use of apps and credit cards to pay for everything. But it sweeps those concerns away, spinning a pretty ingenious defense of the war on cash – security:
But advocates like Mr. Ulvaeus cite personal safety as a reason that countries should go cash-free. He switched to using only card and electronic payments after his son’s Stockholm apartment was burglarized twice several years ago.”
The Times goes on to extend the security argument to the banking system:
At more than half of the branches of the country’s biggest banks, including SEB, Swedbank, Nordea Bank and others, no cash is kept on hand, nor are cash deposits accepted. They say they are saving a significant amount on security by removing the incentive for bank robberies.”
Security concerns weigh heavily on people in both Europe and the US due to threats of terrorism. Of course, governments play on this fear, and in some cases, foster it. Interestingly, Daily Bell analysts argue that security concerns in the midst of the elevating level of social chaos stemming from mass migration and government control will make the general public more reluctant to embrace a cashless society.
One can speculate, as we have, that the social chaos and resultant authoritarian political movements are exactly what those in real power desire and expect. But such an evolution does not necessarily bode well for an evolving cashless society. This is what the Times article misses. Restrict our observations to Sweden and we can surely suggest that if the political climate continues to fracture the current Swedish consensus, many Swedes may rethink their enthusiasm for government/corporate control over digital money…No matter what proponents of the cashless society mandate, competition between negative interest rates and neutral physical currency (and perhaps precious metals) will make sustaining such a system difficult.”
The Daily Bell makes a good point regarding the mood of the public, but it likely underestimates their ability to alter the system. If governments and banks implement policies to limit cash, there is little the people can do. The government can simply quit producing coins and bills, and banks can refuse to accept them, as many already have in Sweden.
On the other hand, central planners can’t easily place such limits on precious metals. If the Daily Bell is right, people are much better off buying physical gold and silver than they are counting on public pressure to stop the war on cash.
It’s important to remember that the war on cash isn’t limited to Sweden, or even Europe. Janet Yellen has expressed willingness to lower interest rates below zero. That means US policymakers have incentives to war on cash as well.
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