The War on Cash

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I’m sorry, sir, your cash has expired and we are obliged to confiscate it. (Photo by photosteve101/Flickr)

For a couple of years now the Masters of the Universe have been massing their armored laptops on the borders of insanity to conduct a blitzkrieg against physical cash, to wipe every vestige of paper money and coinage from the face of the earth. Mutterings about the offensive began, as far as I know, six months or so ago on the financial-conspiracy and -contrarian websites. And now Lo! and Behold! the Plastic Curtain is on the verge of falling over two whole countries, Sweden and Denmark. And the softening-up process, the preliminary bombardments of explosive factoids,  and the eruption of fifth columns, is well under way around the world.

Large banks such as J.P. Morgan Chase have told their customers they may not keep cash is deposit boxes (can’t wait to see how they’re going to enforce that). Public transportation companies in London, Sweden and Denmark will not accept cash, only cards activated by computer or cell phone (things that poor people, who disproportionately rely on public transportation, disproportionately lack). The amount of cash that we can withdraw without invoking scrutiny from the Authorities, legally $10,000, is steadily being ratcheted downward.   

A brief, unauthorized biography of money will show us that we should have seen the War on Cash coming. Money stands for something else, something we can eat or wear or burn or otherwise use to live, or to make more money. It was at first a convenience for people whose wealth was in, for example, grain, and instead of moving all the bulky stuff around they could trade it simply by presenting a stick or a tablet that represented the grain. The stick could be traded many times before the end user got it and went for the grain.  

Such a system was eminently hackable, as present-day holders of gold certificates either know or will soon find out. What if the stick didn’t represent anything at all, but was just a stick? The answer was currency with inherent value, gold or silver coins that were themselves worth their denomination. Terrific if you’re primitive, but way too clumsy if you’re bent on becoming a Master of the Universe, and have to get an oxcart of gold coins to the betting window at the Coliseum by 5 o’clock.

The next step was paper currency that was guaranteed, honest, to represent a bit of gold held on your behalf by your government. But the storing of that gold, and the physical limit on the money supply imposed by the necessity to find and refine gold, became way too inconvenient for the wheelers and dealers, so we all went off the gold standard and let cash be free. It also set the banks free to create cash (not to print it, as is often said, but simply to imagine it). Banks are obligated to keep available only a fraction of the money deposited with them, and are allowed to invest (or gamble) with many multiples of the cash actually entrusted to them.

Now, even this has become too restraining on the high rollers. There is still way too much physical cash out there — about 10% of the currency that is in circulation via computer — for their convenience and protection. Which has nothing to do, of course, with our convenience and protection. To the contrary, our political leaders, wholly owned and -operated by the Masters, are coming to believe that we are deriving way too much convenience and protection from the pittance of physical cash that remains in our possession. Among their problems with it:

• We can spend and receive physical cash without paying taxes;
• Cash in our possession cannot (usually) be confiscated without pesky legal procedures;
• Authorities don’t know what we’re doing with our physical cash, or how much we have;
• In the event of a run on the bank, when all the depositors want their cash back and there’s only a fraction of it that even exists, the bank can’t unilaterally confiscate our physical cash (it’s called a “bail-in.” Isn’t that cute?) to keep itself afloat. Not even with a pesky legal procedure, because there isn’t one. Yet.

But consider the wonders of a (physical) cash-free society:

• A bank in trouble can give its depositors a haircut simply by declaring a negative interest rate;
• Authorities will know instantly what you are buying, where you are, who you owe and who owes you, because every single transaction will be on the electronic record.
• Every exchange can be — make that will be — taxed, and charged a fee.

Freedom from cash would at the same time exacerbate the disparity between rich and poor; and prove in the end to be a great equalizer. The poor lack credit cards, bank accounts, and smart phones (not to mention cash) and would find life a great deal more difficult every day under regulations the rest of us, as a practical matter, would barely notice.

On the other hand, when the electric grid goes down, every man, woman, child and business will be instantly and utterly without money. Solidarity at last.