Alberto Mingardi  

Cash and freedom

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In 2014, John Cochrane authored this beautiful post in defence of cash. I'm never tired of pointing it to people's attention, as he makes so many important points.

Olivia Townsend has an interesting piece on CapX, in which she comments upon Denmark's dream to become a perfect "cashless society" by 2030.

She forcefully argues that "You do not need to be in possession of aggressively Libertarian views to recognize that a cashless society requires the relinquishing of freedom". Hear, hear.

I'm not so sure, however, that I'm in complete agreement with her conclusion. Townsend maintains that

Ultimately we are the victims of our own demand for convenience. Digital currencies are not being forced upon us; we have an insatiable demand for quicker, more convenient payments and services.

It seems to me that the issue is not of digital currencies being voluntarily chosen by an overwhelming majority of citizens. If that was the case, so be it. I've read that in Sweden many stores simply don't take cash any longer. I am not so sure I understand the rationale of such a move (ideally, you would like to be able to meet consumer demand with as many means of payment as possible, not to say no to some), but if this is a free, spontaneous evolution of culture, driven by the fact that using credit cards is just so much more convenient, I don't see the problem.

It seems to me, however, that mostly we are dealing instead with purposeful political decisions. Outside Nordic countries, people seem to instinctively value cash (for different reasons: among others, its being more "tangible" than the electronic alternatives) and need authorities to "nudge" them, in order to stop relying upon it. Michael of Liechtenstein points out that the abolition of cash will be used "first to facilitate the nationalization of private savings - a sort of legalized theft - and second, to give the state total control over citizens' finances".This might sound all too gloomy, but Liechtenstein's article is well worth reading.

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COMMENTS (6 to date)
mattb writes:

Unfortunately, the link to John Cochrane's post does not work. It looks like it should be .html, instead of .htm at the end.

[Fixed. Thanks for your help!--Econlib Ed.]

Chris writes:

There are several cafes and food trucks in Seattle and San Francisco (the two cities I spend most of my time between) that didn't take credit cards - until they did, and now no longer take cash. I've brought up the topic with a couple of them - the answer in both cases was:

1. Both cash and credit cards have high fixed costs (credit cards less so now with the prevalence of Square)
2. Taking cash has high insurance costs
3. If they were going to start taking credit cards it would only make sense if they completely stopped taking cash

I assume these are the reasons for the same thing happening in Sweden.

ColoComment writes:

"2. Taking cash has high insurance costs"

Not only that, but for a small business like a cafe or food cart, et al., cash also has the regulatory risk of triggering a "structured transactions" investigation.

Well, not an investigation really. The government can (and does) confiscate your money if you happen to have a series of just under $10,000 transactions; it sucks it right out of your bank accounts, and dares you to try to recover it. To do that, the gov. doesn't have to show that you intended to avoid the "suspicious activity report" by the financial institution, rather you pretty much have to "prove" your innocence of any crime.

It works quite like the gov's "civil asset forfeiture" laws that don't require, y'know, actual evidence of personal criminal activity to steal you into penury.

sam writes:

The group of people who are not worried about giving up privacy and control by switching to electronic payments is likely coterminous with the group of people who use Facebook.

Hazel Meade writes:

What we need is some sort of instantaneous digital cash.
Hmmm, what could that be?

JK Brown writes:

The problem with cashless is it makes all transactions synchronous and dependent upon both electricity and network availability, not to mention the servers that contain the "balances".

It is not a bad thing for areas of stable electricity and networks as well as redundant banking servers.

But let any element fail and you are left trying to get by on your good looks. A hurricane, tornado, snow storm, etc., will render you into poverty for a time depending on your survivalist cache. You'll buy no food, ice, beer, lodging, etc., until the services are restored and will be dependent upon the efficiency and kindness of government agencies.

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