Toward the end of last year, the big economic story that was taking place in the background of the Trump election win was India’s cash experiment: their de-legal-tenderising of 85% of their cash in circulation. I wrote two posts on this, the first about India’s experiment, and the second about the risks of society going cashless:
Then The Money Project released this awesome infographic yesterday, The Global War on Cash:
I know there have been a few weeks of infographics on the blog, but I really thought that this particular one was:
- Excellent; and
- Quite important.
The trouble is, both governments and central banks have a clear vested interest in society abandoning physical cash. And that’s fine in some ways, but there are going to be consequences. And not enough people are thinking about them.
In particular, it locks you into the financial system – and you can’t get out when it goes bad. Just have a look at what is happening in Zimbabwe’s ‘cashless’ society…
Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, or like the Rolling Alpha page on Facebook at www.facebook.com/rollingalpha.
Mark January 19, 2017 at 11:31
Cashless is great, safer and convenieant, unfortunately it is even better for governments, but why do I have to pay ridiculous fees in order to change currency ? I find it a real pity that most crypto currencies have become a commodity more then a currency. and I guess the obvious choice to get away from a cashless society would be to buy something like gold or silver
you’ve struck several of my nerves here 😛Reply
Jayson January 19, 2017 at 11:58
Well, it’s just going to force us to think differently about our liquidity requirements. We might become more reliant on foreign currency cash rather than local bank account money. For example, my guess is that the US is going to be reluctant to abandon its cash format – the global use of USD cash is a great source of revenue for the Fed (and that’s driven by physical cash, not electronic money). That particular global use of the USD also underpins US global reserve currency status. Basically, I think that the cash option will probably still exist in some form.
But even on your cryptocurrency point: I agree that they are commodities, but I think that they are commodities for now, because that’s how people are using them. If people start using them as a short-term way of holding their cash reserves (ie. an alternative to keeping their money in the banking system), then those cryptocommodities will start to function as actual cryptocurrencies.
Does that help your nerves? 🙂Reply
Anonymous January 19, 2017 at 11:59
They will try, the criminals will just go over to use BTC and if that does not work, Monero, which is anonymousReply
Mark January 19, 2017 at 15:02
I think it is part of a much bigger trend, namely that work is becoming less and less geographically constrained. Business visa’s are much easier to get then a work visa so really it becomes very easy to not be tax resident in any one country. Currently the major control states have is that you will have to have at least one bank account. Once you can realistically use a cryptocurrency as your primary means of payment, life gets a lot easier.
Oviously the super rich have been exploiting this forever, but if middle to high income earners can jump on the band wagonReply