The Silent War on Cash

Posted on December 7, 2016


Twice a week I go to a little hidden gem leaving work called Nutrition Depot where I get a delicious healthy smoothie. With tax the cost is $5.67 which I perpetually pay with cash. Every once in a while the owner, Tim, likes to comment that I am one of the few people that don’t pay with a debit card any more.

There’s a reason for it. I like cash.

Cash is simple. I don’t have to remember a PIN or know if my card has a chip or not. If I start out with $100 in my pocket every Monday morning, I can easily monitor my spending and close the spigot on my expenditures come Thursday if it looks like I won’t have money left for Friday night. For me, it hurts more psychologically to buy something with cash than it does a piece of plastic which helps curb spending or binge shopping. It’s also anonymous and empowering. It doesn’t create some permanent record on some digital ledger in someone’s cubicle when I make a purchase. I can buy a greasy hamburger with a side of Cajun fries without the worry of being chastised for making unhealthy eating purchases. It’s also an efficient way to compensate others. I can help the neighbor boy out by hiring him to rake my leaves and I can tip the Uber driver a few bucks for going the extra mile for me.  Cash brings me a sense of freedom, the same way I felt when I got my first car. How many of us when we were young have held our breath hoping our credit card would authorize the transaction? With cash, I can spend money without obtaining permission from my bank. And finally, I like to put a little cash aside for a rainy day. Remember the run on banks during the great depression?

Cash has a lot of value, and sadly, there is a war on it.

A couple of weeks ago, Indian Prime Minister, Narendra Modi, declared a surprise cancellation of the country’s two highest denomination notes, the 500-rupee and 1,000-rupee bills, effectively invalidating 86% of the total currency in circulation. Anyone with outstanding notes must take them to the bank. The result has been a totally disruptive detriment to everyday life in a country in which 90% of its transactions are conducted in cash. As the Los Angeles Times recently reported, the entire process has stunned hundreds of millions of poor and working-class Indians who live an almost entirely cash-based existence, paying in hard currency for everything from rent to groceries to cellphone credit. Many people have been unable to pay for necessities like food or medical services

To compound the difficulty of the situation, there is a daily limit on the amount of cash that can be obtained for withdrawals from a cash machine. A CNBC reporter wrote a story about his 98-minute wait in line at an ATM, hoping there would still be cash available as many ATM’s have been left empty. People have been reduced to bartering. According to India media news sources, five people died waiting in ATM lines and three children have reportedly died because hospitals refused to accept payment of the now worthless notes the family offered and thus failed to treat them.

If you think this situation is limited to India, think again.

  • Citibank announced last month that some of its Australian branches are now going cashless
  • Transactions of more than 1,000 euros are now banned in both France and Italy
  • The European Central Bank said it is now considering withdrawing 500-euro notes from the system
  • Visa Europe initiated a Cashfree and Proud campaign in 2016

One of the primary arguments used to justify this assault on large note denominations is that that it helps fuel organized crime and illegal trafficking. This is easily disproven however in the fact that both Switzerland and Singapore, which both have a 1,000 note, also have the lowest levels of organized crime in the world according to the WEF. Malaysia, which has a top note of 50 ringgit, worth about $11, is one of the most corrupt countries in the world.

Besides governments, banks are solidly behind the cashless movement, and why wouldn’t they? Digital deposits will increase and banks will have a stranglehold on all transactions. Central banks love the idea of a cashless world as well. In a bizarre economic climate in which major economies in the world such as Japan and several European countries have turned to negative interest rates to foist us into spending, barring cash would greatly enhance their power over the economy. I imagine too that academic elitists are totally salivating at the possibility of enforcing their theories and PHD dissertations on us, discouraging us from buying things that they don’t approve of.

It seems like a cashless society benefits everyone, except for regular people like you and me.

All of this is making my head spin so I think I will get me a beer at the corner pub… and pay cash.