“Cash Must Not Be Made the Scapegoat”

In the War on Cash, a rare defense of physical money by an ECB Board Member.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

The proposed EU-wide cash restrictions could come into effect as early as this year. But defenders of physical cash have an unexpected ally in their struggle: Yves Mersch, a member of the European Central Bank’s executive board. In a speech hosted by the Bundesbank last week, the Luxembourgian central banker exalted cash’s value as legal tender and heaped scorn on the oft-heard argument that its anonymity only helps criminals.

“Protection of privacy matters to all of us. Privacy protects people from the risk of a surveillance state and thought police,” he told his audience. “No particular link can be established statistically between cash and criminal activities. The focus must be on the fight against crime. Cash must not be made the scapegoat.”

One of the world’s biggest issuers of notes and coins, the Bundesbank was a fitting location for a speech on the virtues of physical money. In total, €592 billion of the €1.1 trillion of banknotes in circulation at the end of 2016 were issued by the Bundesbank.

Judging by recent statements, the Bundesbank wants to preserve this arrangement. Bundesbank president Jens Weidmann, who is hotly tipped to replace Mario Draghi as ECB president in 2019, has warned that it would be “disastrous” if people started to believe cash would be abolished — an oblique reference to the risk of negative interest rates and the escalating war on cash triggering a run on cash.

That didn’t stop five national governments — Cyprus, Bulgaria, Belgium, Portugal and Denmark — from approaching the ECB last year to consult on measures to limit the use of cash, according to Mersch. Meanwhile, Sweden is widely regarded as the most cashless society on the planet. “No cash accepted” signs are a common sight in shops and eateries as payments go digital and mobile, Bloomberg reports. A full 36% of the population never use cash, or just pay with it once or twice a year.

But the pace at which cash is vanishing is beginning to worry Swedish authorities. If it disappears too quickly, it could be difficult to maintain the infrastructure for handling cash, one Swedish official warned. Most of the country’s bank branches have stopped handling cash altogether and many shops and restaurants now only accept plastic or mobile payments. As a result, many people who struggle to navigate the digital system, in particular the elderly, are finding themselves increasingly locked out of the country’s payment system.

This dystopian trend underscores one of the oft-ignored benefits of physical cash: its universality. “The easy accessibility to cash, especially for the elderly, the socially vulnerable or minors, allows people to participate in society and, for example, allows children to learn how to handle money,” said Mersch. “In particular, when socially vulnerable people use cash, they face none of the barriers involved in applying for a credit card or, despite all their efforts, opening a current account.”

Mersch’s speech at the Bundesbank was not the first time he had publicly defended physical money. In an April 2017 article for Project Syndicate titled “Why Europe Still Needs Cash” he lambasted advocates of a cashless society, which he divided into three main camps:

The first camp, the alchemists, wants to overcome the restrictions that the zero lower bound (ZLB) imposes on monetary policy. The second, the law and order camp, wants to cancel the primary means of payment for illicit activities. And the third camp, the fintech (financial technology) alliance, anticipates major business opportunities arising from the elimination of the high storage, issuance, and handling costs of cash that the financial industry currently faces.

But most of the arguments for going cashless wilt under scrutiny, Mersch says. Negative interest rates, which “should be understood as a specific non-standard monetary-policy instrument” (i.e. a short-term emergency measure), have worked without triggering a massive flight to cash, he says. Meanwhile, harming the decent majority of people who continue to use cash in order to punish a misbehaving minority would be like “cracking a nut with a sledgehammer – and breaking the table it is on in the process.”

Ultimately the most pertinent argument against imposing a cashless society in Europe is that most people don’t want it. In the summer of 2017, 95% of respondents to a European Commission survey said they were opposed to a cash ceiling at EU level. Less than 1% of the more than 30,000 people consulted were able to think of a single benefit of the EU unleashing cross-regional cash limits.

There are plenty of reasons to worry about living in a cashless (or “less cash”) society, including the vastly increased power it would grant to political and monetary authorities as well as the near-impossibility of ever escaping from the clutches of the banking system or central banks’ monetary experiments.

If anything, recent efforts to make it harder to use cash in Europe are having the opposite effect. According to data cited by Mersch, growth in overall demand for cash is outpacing nominal GDP growth.

In the last five years, the average annual growth rate of euro banknotes was 4.9% by value and 6.2% by piece. This rise includes denominations that are predominantly used for transactions, rather than for savings.

In other words, despite the preponderance of digital alternatives, most Europeans do not seem ready to give up notes and coins just yet. According to Mersch, they have nothing to worry about: printed euro banknotes “will retain their place and their role in society as legal tender for a very long time to come. There is no alternative to euro cash.”

It sure would be nice if he’s right. But many very important people, institutions, and companies — especially those that process electronic payments and take their cut on each transaction — think differently. By Don Quijones.

What happens if cases like this prove to be the rule rather than the exception? Read…  On Closer Inspection, Debt of Bankrupt Spanish Construction Firm Grows Four-Fold

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  40 comments for ““Cash Must Not Be Made the Scapegoat”

  1. hendrik1730 says:

    A “cashless” society has only 1 purpose : full financial control of the population. At any moment, you can lose control – and posession – of all your savings – for your “own good”, “of course”. You can be cut off from your life-time savings ( Cyprus, Greece ) without any wrongdoing on your behalf. It has NOTHING to do with “controlling criminals” ( read : politicians, bankers, oligarchs, magistrates, … ) – it has EVERYthing to do with controlling ( and ripping off ) US, the PEOPLE.

    • KPL says:


      “A “cashless” society has only 1 purpose : full financial control of the population.”

      Yup! Ask Cypress and Greece!

      More and more it looks like we need to dismantle the existing system that can no longer be called democracy

    • EH says:

      Please pardon my ignorance, but what happend in cyprus and greece?

  2. KPL says:

    “As a result, many people who struggle to navigate the digital system, in particular the elderly, are finding themselves increasingly locked out of the country’s payment system.”

    If capitalism were to do its job, I would expect some entreprenuer in Sweden might use allowing cash as a transaction medium to create a competitive advantage (if business opportunity exists- may be in products catering to the elderly) and others will follow suit. Once this is successful it is likely to spread.

    How do you create a propaganda machine about the evil of a all digital society?

    • Jack says:

      “How do you create a propaganda machine about the evil of a all digital society?”

      If you find out KPL, please sign me up.

  3. Bobber says:

    This has nothing to do with criminal activity. It is about central bank control over your savings rate. They should outlaw cash only if they also outlaw negative interest rates.

  4. Petunia says:

    As I read your article I was also watching Marion Le Pen speaking at CPAC( Conservative Political Action Conference) in the US. Her speech started by saying she supports America first for Americans, Britain first for the British, and France first for the French. This doesn’t sound like the EU is going to be around long.

    • Wolf Richter says:

      Marine LePen is not exactly the most powerful politician in the EU, and not even in France. And her party isn’t either. So it will take some doing before she gets to run the show.

      • d says:

        True, She would however be good as a major player in a Minority government.
        The Eu needs a big shake up particularly regarding Border control, Correctly labeling Illegal Immigrants as such and send them back tio the country they transited to enter the EU swiftly, and the Ever ballooning number of Brussels Bureaucratic Dictators.

        She would do that, and could do that in a minority government.

        Evil people and at the least she is descended from Evil, can also do good.

        Sometimes in the interest of the greater good, much evil must be perpetrated.

        • Wolf Richter says:

          I’m glad she disavowed the antisemitism of her father and some other things he propagated. She is a more palatable candidate than he ever was. And she is trying to move her party into some sort of realm that is more broadly acceptable in France. That improves her chances. But I think it will be tough for her.

        • Petunia says:

          Le Pen attaching herself to the current administration can only be good for her, here and there. They keep replaying clips of her speech so it has made an impact. It went where few dare go.

    • IdahoPotato says:

      Did she also say “French Guiana for the Guyanese”?


  5. Jack says:

    After reading Criminal Capital: How the Finance Industry Facilitates Crime by Stephen Platt, I became aware of just how scarily sophisticated electronic money laundering is these days. It is a spurious argument that elimination of cash will stop money laundering, but people seem to think it’s done as seen in Breaking Bad. I use cash as much as possible as my small protest against cashless.

  6. walter map says:

    You see the advantages: it would amount to financial totalitarianism, controlled by the banks, which would enable the master class to conveniently and efficiently destroy any opposition simply by confiscating their assets. It could be permanent because it would be impossible to mount any challenge. Protest of any kind would be impossible. Resort to barter would remain but could pose no threat.

    And the world is almost there. Complete, practical implementation could be completed in a few months, even weeks. And the evidence seems to show that this is the goal. Your approval is not needed. And your acquiescence can easily be enforced.

    All this makes for a interesting conspiracy theory, but then again, a theory is also a fact, if it is well-supported by the facts.

    Now is not the time to panic. You should have done that a long time ago.

    • Tom T says:

      Mr. Map,

      Right you are.

    • Vinman says:

      Another disadvantage to a cashless society is when the next recession rolls around there will be no Jars of change around to fill the gap for many Americans who cash them out in Hard Times . If you look at the mintage numbers of coins in 2009 you will notice the mintage numbers were way down as Americans cashed in there coins to help pay there Bills . Billions of dollars worth of coins came out of there stashes and helped Americans through difficult times . These stashes will not exist in a cashless society

  7. Prairies says:

    I am one of the minority, paying in cash when I can. Huff Po in Canada just reported a news article about a waitress getting hit with a $15,000 tax bill because she didn’t declare enough taxes. Link for reference:

    With all the digital payments the government can track its citizens. I hope the sheeple of the world pay attention and keep cash because the government and banks can block your digital money with the push of a button. But cash in my pocket is cash in my pocket, no power outage or power hungry dictator can change that.

  8. Tom says:

    Who would you rather be behind in a supermarket checkout line….a person paying by credit card, or someone paying by cash? Line seems to move A LOT faster when people pay with cash. Not only that, but banks and government can’t monitor your every move with cash.

    • Jim Mitchell says:

      Eventually, we will all be issued a monthly money card, a food card and a medical card. Step out of line, you’ll be cut off. Food stamp users in California already get a card that is loaded monthly with food and/or money. BTW, when the Oroville California dam threatened to break a couple of years ago, the experts at the Capitol ordered 200,000 people to evacuate and sent them in the wrong direction toward the water. I stayed home with booze, beans, bullets and two thousand in twenties. Any govt will outlaw currency. They’ve done it before.

    • Vinman says:

      Tom I agree I have seen many cash transactions go through through faster than credit or debit cards plus it much easier to pull a few bucks out of my pocket when all I want is a roll and a cup of coffee .

  9. TheDona says:

    The war on cash propaganda is to keep us peasants occupied so we won’t ask about the Panama and Paradise papers. Those offshore bank accounts are where the real criminals hide their money…you know like our politicians, bankers, global corporations, corporate elite, etcetera.

  10. Jon says:

    I go back and forth on this topic. I know it’s bad bc it gives them more control to do whatever they please and that is scary since they are all corrupt. But I pay with my 2% cb cc for everything and never carry a balance and end up getting back like $1,000 every year free.

  11. Nicko2 says:

    One in five have zero net worth, nearly half couldn’t come up with $500 if their life depended on it. The cashless society is inevitable, especially with the advent of universal basic income, which is surely on the way. Regardless, there will always be offshore tax havens and much of the developing world will use cash for many decades to come.

  12. Realist says:

    Hmm, a cashless society would have made “Operation Cyprus” so much smoother, levaing the ordinary plebs to wonder even more about what did just happen to them ….

    The control over people by banks, card companies, government agencies, central bankers etc is the ultimate goal for those yearning for the removal of cash. Think of the profits made possible and the possibilities brought by the ability to shut down a persons entire financial existense with a mouse click ….

    One day in a bank near you, “sorry, you can’t get a loan becase you stop too often on Friday evening for a beer …”

  13. Vinman says:

    From a Biblical stand point you need a cashless society for the mark of the Beast to exist . Yes there would be no privacy at all . Now imagine not being able to buy or sell or pay your taxes without the mark of the beast . It would be very difficult, if not impossible to feed, clothes or house yourself and your family .

  14. Vinman says:

    From a Banking point of view once they go cashless it would end all Bank Runs and they could let interest rates go negative so you end up psying the bank interest instead of them paying you interest .

    • Jon says:

      THIS. THIS right here. This is one of the main things they are trying to do. Negative interest rates. They will come one day, and we will either need to buy a home, invest in stocks or get screwed by negative rates in our bank accounts.

  15. ML says:

    It’s an age thing, surely? Most of my younger friends use contactless – card payment – for even the most miniscule items eg £0.90 for a packet of crisps in the pub, or a couple of pounds for a newspaper in the shop. Whereas I pay cash. Mind you the friends tell me they get a shock when they check their bank statement and discover how much has expenditure has gone in dribs and drabs.
    Whereas all I get is the feeling that the £200 in bank notes that I had in my pocket a few weeks ago is down to a tenner.

    • Jack says:

      Exactly ML, how can budget effectively when you have so many transactions? I gather that contactless payments don’t come off your account until 2 or 3 days later. Like you, I withdraw my spending budget in cash and once it’s gone, it’s gone. There is a clear correlation between rising personal debt and rising card use. The guy in front of me at Tesco the other day paid 20p with his card. Give me strength…

      • Vinman says:

        It is true it is much easier to take money rout for the week and make decisions on what you really need so as to stretch the money out to the next payday. It must be really tough for people to keep track of there purchases when they are using there cards for everything including a 20 pence purchase (lol).
        We now have vending machines at work that you can use credit and debit cards . It would be really easy to have a big tab at the end of the week if you use your card every day at these machines . Also one of these machines must have been hacked one time as the machine was showing $650 for a couple dollar purchase .

  16. Burny says:

    I see a heavy technological risk associated with cashless future. What happens in case of power (and internet connection) going off?

  17. Setarcos says:

    There appears to be a clear consensus among the posters concerning the propoganda around eliminating cash to prevent criminal behavior. So let us examine the folks in the US who are promoting it and consider their other policy positions…

    Lawrence Summers is one.

  18. Setarcos says:

    A glitch at Chase this week allowed people to view account information for other clients. Not very reassuring within the context of forcing electronification of $.

    Capitalists want your $, but he sometimes slumbers. The supposed do-gooders want much more and they never grow weary.

  19. Ensign Nemo says:




    OK, I’ll explain why this is a horrible idea one more time.

    Look at Puerto Rico.

    Hurricanes Irma and Maria hit five months ago.

    1.6 million people lost power.

    On February 14, 2018, which is ten days ago, there were still 343,000 people without power.


    One island sustained that sort of damage.

    With a fully functional society on the continental USA sending in repair teams, it will still take more than half a year to fix the mess.

    What if we have another Carrington Event?


    People will starve to death if the entire economy is transferred to cyberspace, and cyberspace then ceases to exist.

    It’s extremely dangerous to make the entire economy depend on a functioning electrical grid and internet access. Those two things can be denied by disasters or sabotage, including hacking.

    It’s also insane to give hackers potential access to every single financial transaction on the planet Earth.

  20. Vinman says:

    After a Carrington Event the Amish will be in the Best Position to survive it . You may want to relocate just outside of Amish country and join there ranks if such an event were to occur.

  21. RBHoughton says:

    This is a warning – something that we rarely get these days- against the advent of the cashless society. We have been here before when the government removed gold and silver from circulation for its own use and we accepted their paper money equivalent on the specious argument it was more convenient to carry. How foolish we were then. Don’t let us do it again.

    The threat now is to remove cash entirely from exchange. Your savings will be kept in a bank of your choice. You will use your cards or phone to buy and sell and your bank balance will be increased / reduced accordingly. That’s what the financial industry is selling today and its sounds great, right? Apple Pay and the rest are quite convenient and they often pay a discount to get you on board too. The canny Scandinavians are doing it already – what could go wrong?

    Well, here are two things that will go wrong.

    Firstly, we have heard bankers talking about negative interest rates. They would like to charge you for holding your cash. Once negative interest rates are approved your balance will diminish day after day and you’ll be persuaded to spend what you have before the bank eats it all. It gets worse.

    Remember the financial difficulties of Cyprus and Greece. One of the solutions proposed then was to have every account holder contribute to the bank’s investment losses. They invented a nice name for it – bailing in. Everyone knows that the bankers have refused to be regulated properly since 2008 and our political representatives have agreed. So, its just a matter of time before they cause the next financial depression and your savings will be called into contribution.

    If you allow this to happen your only recourse will be physical gold and silver coins (there is already a rigged market in paper gold and silver) or the blockchain which is still under construction. Take care of yourselves. Our masters have created a cold and heartless world.

  22. JustNobody says:

    Cash has almost disappeared. Very few people use cash it’s all plastic. I still use cash for everything. Keep most of it in my safe, because I hate banks. They don’t have your money, go ahead try to withdrawal a large sum of money they don’t have it. All this plastic and digital money has done is allowed them to print money without having to actually print it. It’s just numbers in a computer now. The safest place for your money is in your possession. Everybody thinks there going to get robbed. I walk around with five, ten Grand in my wallet all the time and have never been robbed. Fear is a grand illusion used for control.

  23. breamrod says:

    when the mark of the beast is brought forth it will have an little apple logo on it and people will love it! Cash use is down to about 2 or 3 people in 10 at the grocery store where I shop.

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