Cashless Society …When?
Ty J. Young Editorial
Fans of science fiction, and of personal convenience, may welcome the advent of the cashless society. It will supposedly make things easier, and contribute to the digitized world that is quickly approaching.
We already have digital currency in many forms, and one of the more well-known is Bitcoin (BTC). Bitcoin is an alternative currency used through the internet. It has had wild price swings in its stock, specifically after China announced significant regulation of the online usage of Bitcoins. This is truly a new frontier!
But will we see the new frontier, and do we want to?
In November of 2016, the government of India instituted a policy to eliminate paper currency. The stated objective was to reduce crime and “under the table” transactions…..what India describes as “Black Money.”
This is a widely under-reported story by the U.S. press, including the involvement of the U.S. government essentially strong-arming India’s government into doing it, as a test run for implementation here at home.
The U.S. media ignored the move and what has happened since. India, the world’s 6th largest economy, has seen their economy freeze up. The Indian Composite PMI (Purchasing Manager’s Index) shows a near collapse since the November decision:
Furthermore, India’s growth has shrunk from 7.6% in 2015, to 6.6% in 2016,. Almost all of the slowing is due to contraction in the 4th quarter of the year. Cash shortages have led to near panic amongst the middle class and banks have not properly accounted for people’s deposits who brought the cash in for credit, . This essentially means the government has confiscated the cash and the government’s expected tax windfall has not materialized. Lastly, they didn’t need to do it for the reasons stated: the “Black Money” was already shrinking as anti-corruption efforts were taking hold.
Demonetizing society (eliminating actual cash in your pocket as a means of exchange or in other words moving to a cashless society) can sound “cool” to the millennials and can have sound arguments in its favor. But the strongest argument against it is simple … you are turning over more control of your life to the government.
I. Three Reasons FOR Eliminating Cash:
1. Reduces financial crime and tax evasion. It would seem obvious that financial crime and tax evasion could be reduced if you require all transactions to move through the digital banking system. But criminals adapt. They would use the larger or smaller denominations not banned. When all cash is eliminated, they would barter until the transaction was laundered, and then sell the final hard asset which was “clean” for the cash involved. The same would apply to evading taxes as well. Demonetizing will change crime, not stop it, and it will have limited impact on the collection of additional tax revenue.
2. Makes life and record keeping more efficient. Obvious to the 21st Century person, eliminating cash could help make life more efficient and allow for an easier way to maintain your own personal records. No doubt it disciplines spending, and helps keep your personal finances much more in order. It can reduce business costs as well, in terms of keeping money on hand, secured, and accounted for.
3. Costs less to the taxpayer. Printing costs, production costs of physical coins and paper money, government agencies tracking counterfeiting … this all can be saved in a digital banking system, in theory.
II. Three Reasons AGAINST Eliminating Cash:
1. It makes daily life inefficient. It is hard to argue against digital money being more efficient IF the entire society has adequate infrastructure for it. Does your local high school swipe a card or scan a phone to get into games? Does the hot dog vendor have credit card processing capability? The cost and lack of uniformity make this not feasible as we stand today. Yes, technology has made things awesome in the 21st century, but that does not mean eliminating cash is going to work anytime soon. India’s problems are proof of that.
2. It is part of a global central bank agenda. It is not a secret for peddling conspiracy theories to say that Central Banks, of all governments around the world, would love to eliminate cash. It would help them collect taxes, and would lead towards global taxation on things such as carbon taxes. It would be a step towards eliminating American sovereignty. That does not seem like the direction any traditional American would welcome.
3. It puts more control in the hands of our government. Make no mistake, we live in the era of “Big Brother.” Digitized money, eliminating the use of the good ol’ greenback… this eliminates choice and freedom. You will be subject to the government on all economic transactions, which is quite a distance from the belief of the founders. Paying your neighbor $25 to mow your yard? He may be subject to taxation, Social Security withholding, etc. Is this the future we want?
When Russians can hack into the Democratic National Committee and the Chinese can hack into our banks on a daily basis……are we supposed to believe our money is safe in the digitized banking world?
“The world has changed, clearly it’s not the 80’s and 90’s anymore.” Sometimes that can be a good thing. Technological advances allow us to open our doors, secure our homes, and find our children, all through a cellular phone. But a cashless society should not be the goal of America’s banking system, because it will undermine the freedom that Americans are supposed to enjoy.
If you want to ensure that no matter what decisions are made by government, your money is completely protected against market losses, call us now. You can have those good ol’ greenbacks in a place where they will never be subject to market risk, and have the ability to grow at the same time. Contact your advisor today at 877-912-1919.