Transition to Cashless Society Could Lead to Financial Exclusion and System Vulnerability, Study Warns

“Serious risks of sleepwalking into a cashless society before we’re ready – not just to individuals, but to society.”

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

Ten years ago, six out of every ten transactions in the UK were done in cash. Now it’s just three in ten. And in fifteen years’ time, it could be as low as one in ten, reports the final edition of the Access to Cash Review. Commissioned as a response to the rapid decline in cash use in the UK and funded by LINK, the UK’s largest cash network, the review concludes that the UK is not nearly ready to go fully cashless, with an estimated 17% of the population – over 8 million adults – projected to struggle to cope if it did.

Although the amount of cash in circulation in the UK has surged in the last 10 years from £40 billion to £70 billion and British people as a whole continue to value it, with 97% of them still carrying cash on their person and another 85% keeping some cash at home, most current trends — in particular those of a technological and generational bent — are not in physical money’s favor:

Over the last 10 years, cash payments have dropped from 63% of all payments to 34%. UK Finance, the industry association for banks and payment providers, forecasts that cash will fall to 16% of payments by 2027.

In 2017, there were 13.2 billion debit card payments in 2017, compared to 13 billion cash payments, knocking cash down to second place in the rankings for the first time ever.

The number of LINK ATM cash withdrawals in 2018 fell 5% from 2017, the total value of cash withdrawn fell 3.5%. One obvious reason for this is that ATMs — or cashpoint machines, as they’re termed locally — are disappearing at a rate of around 300 per month, leaving consumers in rural areas struggling to access cash. Banks want to drive consumers toward alternative payment methods that are cheaper and easier for the banks to manage and offer more succulent fees than cash.

The decline in access to ATMs is just the tip of the iceberg. Lessons from Sweden and China suggest that the issue of cash acceptance by merchants and retailers represent an even greater threat than issues around cash access.

Use of contactless cards in the UK grew 99% in 2017, to 4.3 billion payments. It’s particularly popular among the 25-34 age group, as too are mobile payments. By the end of 2017, nearly 119 million contactless cards had been issued in a country of just 66 million people.

Things could soon get even worse for cash. The report identified eight factors that could further dampen its use:

  • Increased acceptability of cards.
  • Shops and others stop accepting cash.
  • Increased use of online shopping.
  • Increased use of cards, mobile apps etc on public transport.
  • Problems and costs of processing and banking cash for retailers, especially as it becomes less common.
  • More of UK covered by broadband and mobile connectivity.
  • Accelerated closure of bank branches and ATMs.
  • New innovative services that make digital payments even easier, such as biometrics.

By contrast, the authors could only come up with four factors, albeit potentially significant ones, that could drive up cash usage:

  • Consumers losing faith in digital payments because of repeated systems failures.
  • Increased consumer concern over privacy.
  • Significantly negative interest rates.
  • Major economic crisis.

Financial Exclusion and System Vulnerability

The UK isn’t alone in facing this challenge of dwindling cash use. Across many advanced economies, from Sweden, Denmark and Finland to the Netherlands, Canada, France, and the United States, cash usage has fallen well below 50%. There are some important exceptions, of course, including Germany, Austria, Italy and Spain, where cash still accounts for over 80% of point of sale purchases.

But where cash usage is falling fastest, major risks are already becoming apparent, including financial exclusion and system vulnerability.

“There are some serious risks of sleepwalking into a cashless society before we are ready – not just to individuals, but to society,” said the review’s chair, former UK financial ombudsman Natalie Ceeney. “We identified risks to the viability of rural communities, the loss of personal independence and increased risks of financial abuse and debt.”

Of respondents to the Review’s survey, 47% said they would struggle to live without cash. While 34% of respondents appeared to be comfortable with the prospect, there is a clear danger of millions of people being left behind, especially the most vulnerable. The elderly are widely perceived as the most reliant on cash, but the authors of the report found that poverty, not age, is the biggest determinant of cash dependency.

There’s also the risk of system vulnerability. Recent IT failures in the UK, from Visa’s day-long outage last June to TSB’s never-ending IT nightmare upgrade, have left chaos in their wake. When a digital or online system goes down cash becomes the automatic fall-back for consumers, since it’s both widespread and works without power or internet. But the less it’s used, the less effective it becomes as a back up. Even now, there’s not enough cash in all the right places to keep a cash economy working for long if digital or power connections go down, warns the report.

“It’s no longer good enough to see cash as just a commercial issue. It needs to be treated as a core part of the UK’s infrastructure,” says Ceeney. “We can’t wait long for action. Once infrastructure has gone, or communities have been harmed, rebuilding is very hard. But if we act now, we can take steps to stop harm happening, and prepare for a world of lower cash, without societal and economic damage.”

To that end, the report makes five recommendations for ensuring cash’s continued survival for the foreseeable future, as well as eventually including everyone in a society where digital payments dominate:

Guarantee consumers access to cash. Consumers should be able to get cash wherever they live or work. Crucially, this is about access to cash, not just access to ATMs, as the authors see “huge potential for new ways of providing cash access which could both widen access and help keep the high street alive.”

Take steps to keep cash accepted, whether by a local coffee shop or a large utility provider. If shops and service providers stop accepting cash, the economics of processing it will collapse. This will trigger a domino effect where the costs for the remaining cash businesses climbs and cash use quickly fades, eventually leaving those who rely on cash excluded from those services. Fifty-one percent of survey respondents said it is a good idea to force businesses to accept cash, while just 24% were opposed.

Implement radical change to the wholesale cash infrastructure. This means transitioning from a commercial model to more of a “utility” approach that can help reduce cash handling costs for businesses and banks, as recently proposed in Sweden.

Government, regulators and the industry must make digital inclusion in payments a priority, ensuring that solutions are designed not just for the 80%, but for 100% of society.

A clear government policy on cash, supported by a joined-up regulatory approach which treats cash as a system.

Even on the off-chance that the UK government and financial regulators will take the recommendations on board and turn them into speedy action, they’re going to have their work cut out given the forces stacked against physical money, including some of the world’s most powerful financial institutions, credit card companies and tech giants. By Don Quijones.

Well-connected investors started smelling a rat 10 months before the first disclosure. Read…  Balance Sheet “Error” Wreaks Havoc on UK’s Fastest Growing, Most Popular Bank

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  68 comments for “Transition to Cashless Society Could Lead to Financial Exclusion and System Vulnerability, Study Warns

  1. Tinky
    Mar 14, 2019 at 1:17 pm

    There’s a small, independent pizza place that I like to visit when I am in Amsterdam. The last time I was there, I was caught by surprise when I was told that they no longer accept cash.

    I pressed an employee about the choice, and her response was essentially that it’s safer, and easier to process. I asked her if the shop had ever been robbed. Her response was “No”. I asker her if it had occurred to her that some people value anonymity, and might prefer not to leave an electronic trail of their whereabouts. Her response was “No”. Finally, I asked her if it had occurred to her that some people don’t even have bank or credit cards. Her response was a shrug of the shoulders, and “It wasn’t my idea”.

    While it is almost impossible to imagine making a meaningful impact on such as issue through individual actions, I intend to make a point of challenging any businesses that choose to go cashless, including making them aware that I will avoid them in the future. I have also chosen to use credit cards other than VISA, given that they pay lump sums to bribe businesses into going cashless.

    • Wisdom Seeker
      Mar 14, 2019 at 2:13 pm

      Agree. Visa’s business practices are demonstrably anti-competitive and ought to be illegal. Just because “cash” isn’t a corporate tranaction scheme doesn’t mean it isn’t competition for Visa.

    • Hugs
      Mar 15, 2019 at 6:38 am

      Most places lose the most money from insider theft. Usually reporting an inside theft where no money can be recovered has negative benefits to the business. Anonymity is now one of degree. We are starting to leave the information age for something else but we are still in the information age. Personal data such as spending tied to an address, age, and so forth is a valuable commodity and is being collected, packaged, and sold to anyone that will pay for it.

  2. SocalJim
    Mar 14, 2019 at 1:27 pm

    I frequently use cash because it give you privacy. Am I the last one left that cares about privacy? Who wants every purchase you make tracked?

    • Voornaam
      Mar 14, 2019 at 4:26 pm

      Not at all. Ask greek guys about it (hint: capital control).

      Once all your money is in the bank, you’re just a slave to the system. Cash buys you back a little, although inflation is a hidden tax.

      But negative rates is becoming a reality in EU. That is fuc**ed up.

  3. KPL
    Mar 14, 2019 at 1:31 pm

    It is said that people get the government they deserve. Looks like it applies to privacy issues and financial system too.

    • Unamused
      Mar 14, 2019 at 5:17 pm

      =>It is said that people get the government they deserve.

      That should frighten you.

    • Mar 14, 2019 at 5:45 pm

      That was Jean Sartre (people get the government they deserve).

      He was angry at his fellow Frenchmen for living under Nazi rule instead of fighting to the last man.

      It’s an angry, negative philosophy that doesn’t explain the real world. But they teach it in school, mainly in courses on exostentialism.
      Just to clarify though, not all existentialist philosophy is bunk, I just really don’t like Sartre.

      • TruckMan
        Mar 14, 2019 at 7:05 pm

        Well, since Sartre did f#ck all fighting, and indeed did not aid the Resistance in any way, he’s a hypocrite of the first order. And a coward.

    • Silly Me
      Mar 15, 2019 at 7:28 am

      And what exactly do you think they could do about their government?

      Please, advise.

      • GuiriCateto
        Mar 15, 2019 at 11:31 am

        They can be singing songs to

        “Oh you uselessness you no good, poor slave he got no food

        And we livin on the street in poor slave neighboorhood.

        Oh you uselessness takin evrythin , poor slaves in the bins

        And we countin every cent an payin for your sins”

        They likin this and they throwin you some change, then they find they got soome coonscioussness an they starting feeling reely guiltrippin about their social grace equality story an they all givin fifty lashes to each other and leavin you in peace.

        Well, maybe this don’t work and they just puttin you in jail….hmmm.

      • KPL
        Mar 15, 2019 at 2:14 pm

        If only I knew. But one thing I felt people can do. Don’t vote! Since you have to select rotten eggs anyway, why select at all? No one gets the minimum votes. So no one is elected. No government. How it will end I do not know but this might be a good start to ensure people are not stuck with these rotten eggs!

        • Debt Wazoo
          Mar 16, 2019 at 3:47 am

          The most important datum to emerge from an election is not which candidate got more votes.

          It is what proportion of the citizenry showed up to vote.

          Turnout is the point. Every election is a referendum on the legitimacy of the system to which it belongs.

  4. Dano
    Mar 14, 2019 at 1:55 pm

    I can see it now, we go “cashless” in the US, and some “domestic terrorists” take down several of the main power trunk lines leaving a few major dams. Poof! The entire economy sinks at once and makes 08/09 look like a picnic. JIT deliveries cease, and depending on the season pp start dying of heat/cold while Treasury & the Fed try to figure out how to redistribute cash again.

    • Mar 14, 2019 at 5:45 pm

      If power goes out, the economy goes out. Payment methods are the lesser problem.

  5. cesqy
    Mar 14, 2019 at 2:04 pm

    My visits to the local casinos have become the major activity that keeps me using ATMs and cash. I have found that pocketing and rat-holing the green and black casino chips from my hard fought blackjack winnings keeps me from putting cash into a mathematically designed machine….guaranteed to take my money. I also think it’s harder for the casino to figure out if I’m winning or losing at the card tables since I bank the chips at home and use them on return. On the other hand, my monthly bills are slowly evolving into paperless emails, and my wealth (money) is just an account balance that shrinks or expands on a digital screen.

    • Debt Wazoo
      Mar 16, 2019 at 3:51 am

      Overpay your bills with cash.

      I’m not kidding. Walk over to your electric company’s office and hand them six months of average bill, in cash.

      Yes it’s a hassle and it makes you look like a drug dealer, but you only have to do it twice a year.

  6. Wisdom Seeker
    Mar 14, 2019 at 2:19 pm

    I question the integrity of any study that gives such an unqualified statement: “Ten years ago, six out of every ten transactions in the UK were done in cash. Now it’s just three in ten. And in fifteen years’ time, it could be as low as one in ten”

    The truth is that no one has any idea how many transactions are done in cash, because there’s no need to report many of them. You can’t measure them. Children’s allowances and other gifts to family, the office coffee fund, buying lunch for a colleague at work, and so on.

    And when the internet is down, the answer is “nearly all of them”.

    • TruckMan
      Mar 14, 2019 at 3:15 pm

      The reality in the UK is that the economy is going underground, where all transactions are in cash, and nobody’s telling survey takers or the Government anything about that, obviously. I was there for a couple of months two years ago, and paid cash for everything, including apartment rental. I shared the building with two Brits, a Belgian, and an Italian. We all paid cash for everything, we all had respectable jobs, there were legal agreements for the tenancy. The landlord was an Australian working in Africa. None of us paid any taxes either, legally in my case. If you try sorting out a bank account when you live in a different country, it’s now a nightmare, as any of my well-traveled friends will tell you. The solution is cash. Government and large company bureaucracy is now way beyond common sense.

    • Mar 14, 2019 at 5:33 pm

      All this data is survey based – like most economic data. These surveys are done year after year. So you can compare the current year to some prior year.

      • TruckMan
        Mar 14, 2019 at 6:24 pm

        Nobody’s sending surveys to anyone living outside the system, and many aren’t responding honestly. It’s the illusion of extensive and neatly arranged data that isn’t actually measuring what’s happening.
        The report mentioned at the beginning did one online survey, which is highly unlikely to have been completed by anyone dodging the system. That UK online surveys are unrepresentative has been stated clearly by the marketing board’s own research group in its report on the UK 2015 GE.
        And as for how results are presented
        https://www.independent.co.uk/news/uk/politics/official-statistics-honest-problems-trust-poll-survey-a7601966.html

        • Bankers
          Mar 14, 2019 at 7:37 pm

          The shadow economy is what 10 to 20% in UK so the figures are not going to be too far out for that.

          The research is “independent” but clearly there is some “partnership” involved, however it is not openly government authored either.

          The trends however are towards cashless, and the report does raise the main issues, which I think deserve consideration no matter what the survey results give (but with the wider knowledge of cashless increasing continuously).

      • Wisdom Seeker
        Mar 15, 2019 at 3:37 pm

        “you can compare the current year to some prior year.”

        No. That’s exactly how pollsters have been getting elections wrong. People don’t communicate the way they did 10 years ago. How was the survey conducted? Paper mail? Landline phones? Cell calls? Cell messages? Email? Facebook messages? Nothing is the same as 10 years ago. Any fixed-methodology survey will return skewed results after 10 years, because the demographics of the respondents won’t be the same. And if the methodology has changed you can’t trust anything they say.

        Finally, one can be particularly suspicious of a survey in the UK just now, because of Brexit. The establishment side has vested interests favoring cashless (for everyone else)… and the prudent are quite likely stockpiling cash to muddle through the transition.

      • Debt Wazoo
        Mar 16, 2019 at 3:56 am

        If I were invited to fill out a voluntary survey that asked the number of transactions my business engaged in last year I’d pitch it in the recycle bin and go fishing.

        Seriously, that’s a lot of work. Most business’ books don’t work that way. Even double-entry accounting doesn’t work that way; a single purchase/sale may or may not result in more than one ledger entry. The number of ledger entries doesn’t matter, the totals do.

        Nobody’s going to answer a survey like this accurately unless they’re legally required to. But unlike filing taxes, you aren’t required to do this.

        Even in an audit the auditor does not give a flying fuck whether you had 10,278 customers or 10,277 customers as long as they know the totals.

    • Debt Wazoo
      Mar 16, 2019 at 3:52 am

      This is a really good point.

      Even tax records tell only the total amount, not the number, of revenue transactions for a business.

  7. Mar 14, 2019 at 2:42 pm

    I use a couple businesses locally which discount for cash, or checks. They get dinged on the CC fees, so they prefer checks?

    • Debt Wazoo
      Mar 16, 2019 at 4:01 am

      If they give you a discount for checks they’re honest.

      I had a great mechanic a while back who gave me a big discount for paying cash. Then I noticed that he owned a coin-op laundromat that made customers use giant bags full of quarters instead of tokens. And a car wash whose credit card swiper had been out of service for at least four years. And at least one other conspicuously cash-intensive business.

      Most people who are pro-cash (like me) are honest. But “discount for paying cash” always means one thing, and people gotta knock that shit off. It gives the politicians more ammunition for the pursuit of their cashless fantasies.

  8. van_down_by_river
    Mar 14, 2019 at 3:00 pm

    The camel has put his nose inside the tent and it’s only a matter of time before we are cashless. Once we move to cashless every purchase will be subject government and banker scrutiny. Good luck keeping your weekly visit to your favorite cat house a secret. Also you gold bugs are out of luck when the government makes gold illegal again, you won’t be exchanging it under the table, gold will not be exchangeable and as such will lose most of its value.

    • Lion
      Mar 14, 2019 at 9:37 pm

      Very good point on Gold. I think many would say this could never ever happen, but I would not be surprised to see the Fed someday create a “New Fed” note and call all of the older notes.

      • Mar 15, 2019 at 11:10 am

        There will a reverse “stock” split in cash, while the monetary base contracts, I’ll give you two twenties for that hundred..

    • robt
      Mar 14, 2019 at 10:52 pm

      Cash will never cease to be used, and gold has never and will never lose its value. It IS money.
      As to the following comment by Lion, the US dollar has inflated to approximately zero twice in its history to be replaced by new money. As has happened innumerable times in history in many countries, when it happens next time with the US dollar they will either knock a large numbers of zeros off the exchange rate relative to some other currency or gold and reissue it as a ‘new dollar’. Your car will cost 300 dollars again instead of 300 million or billion.

      • ZeroBrain
        Mar 15, 2019 at 3:04 am

        You didn’t deal with his point – when gold is made illegal, it cannot be exchanged without great risk. As such, its utility during such periods is limited to acting as a secret store of value. You’ll have to wait for the downfall of the government that makes it illegal before you get your payoff and that might take a while.

        • Bankers
          Mar 15, 2019 at 6:16 am

          By the time the US dollar becomes pegged to an outside currency (so allowing open rate setting) the US admin is not going to be taken as seriously as now, which I think would mean a strong underground economy would already be at work. Confiscation of gold I think would be seen as desperate, the world is not working to a gold standard now so the US admin would not have balance of payments as excuse for an action of national priority. Even adjustments to an SDR commitment would not include private gold I think. So the most likely would be a drive to outlaw the use of gold in trade as of criminal incentive, similar to asset forfeitures. However the ambition at that stage would not be to project a new dollar as a rising currency, it would be to try to justify and pay for whatever authority had taken charge – anything of value might be targeted. It is dystopian, but not so much as to be exageration if you look at the example of other countries now even.

          Crypto currency might or might not fare better, it is traceable (especially if the web was constrained) but is easily transferable to a foreign market ( if one still existed in crypto) for use there, as by the time these sort of restrictions were in play there would likely be controls on trade in goods also, so non physical exports (crypto) might not be as well valued as now is the case with say capital flight using it.

          A certain amount of gold could be carried out of the country if a choice to leave was made, or be already vaulted abroad. The internal market in gold would be effective because there is a global market for the metal, and so it would be used for illegal crossborder payment systems and clandestine imports.

          So I think gold remains one of several diversifications that are worth considering if anyone is contemplating adverse scenarios.

          Just my thoughts and anyone is free to completely disagree.

        • robt
          Mar 15, 2019 at 1:06 pm

          That’s because the point is obvious to anyone who is familiar with societies other than the US or other first-world nations.
          The government making something illegal just raises the price. The black market is the real market. In most countries of the world the currency is worth nothing outside the country and often even inside the country. There is an active trade in both gold, and US dollars, and the penalties are severe, but you can always find what you want quickly.
          These activities are not limited to gold or currencies; people will always trade and get what they need. It’s the market.
          Consider also that there is already a huge underground, i.e. black market even in the States: the cash market for labor and services (and illegal substances or things) that carries severe penalties but millions of people do it. Why the penalties? Because it can’t be taxed.

    • d
      Mar 15, 2019 at 4:54 am

      I am not a gold bug.

      in china on more than one occasion, the: corrupt, money printing, crony government, made payment in gold, illegal.

      On more than one occasion this lead to open revolt and civil war.

      When FDR made it illegal to hold or make payments in gold the black market moved to “Diamond’s”. It was never illegal to make payments in or hold gold in various American territories including the Philippines.

      As a payment tool gold is a pain, as a store it works AS LONG AS it comes at close to the correct price.

      To see the correct price, see the big Bottoms, Browns being the last, and trend line them. Remember that the full gold cycle is VERY long, dont let minor lows and bottoms confused.

      FDR’S gold laws, only ever hurt the little guy, who was foolish enough to hand Gold over.

    • Debt Wazoo
      Mar 16, 2019 at 4:05 am

      > when the government makes gold illegal again, you won’t be exchanging it under the table

      They’ll be fleeing with it, and using it to bribe the border guards of some other country to let them in.

  9. TruckMan
    Mar 14, 2019 at 3:05 pm

    Cash transactions in Canada are still over half of all sales
    https://www.cbc.ca/news/business/bank-of-canada-cash-king-1.4405237
    There is a significant move round here to offer discounts to cash customers, as the merchants are fed up with the CC company fees.
    Cash is still preferred for large value sales between individuals, like vehicles.
    Independent tradesmen are also keen on it; can’t imagine why ;) Seems to get a good discount ;))
    Banks still don’t batt an eyelid when you walk in and ask for over $5,000 in cash.

    • Debt Wazoo
      Mar 16, 2019 at 4:07 am

      > Cash is still preferred for large value sales between individuals, like vehicles.

      Same in the states for cars. I still can’t figure out how people sell used cars to each other in Europe.

      I’ve asked friends who live there and most simply haven’t (I guess they all get soaked by brokers?) and one guy told me about this really awkward situation where they drove the junker-being-sold to the buyer’s bank where the seller watched him ask the teller to perform the wire transfer. What a mess.

  10. robt
    Mar 14, 2019 at 3:20 pm

    There was an interesting recent article about the ‘death of alchemy’, but it was treated as an historical event of scientific enquiry. In fact, alchemy was mainly concerned with creating gold (i.e. money) from lesser materials, or really the age-old human dream of getting something for almost nothing. But alchemy didn’t die: first we came up with infinitely expandable paper money and now electronic ‘money’ with no physical basis at all, just electicity. Concomitant with this innovation is the ‘new’ economic theory of MMT, essentially that the government can create all the money it needs to waste and buy votes, and if inflation (defined as consumer price increases) gets out of hand the government would just tax away the inflated ‘money’ to get things back in order again. The assumption would be that all transactions would be electronic and that physical money would cease to exist.
    It would be amusing to see what people use for money when the power goes off for a few days or longer if the fully realized scheme were implemented. Leftover paper money would surely reappear, then base-metal coins from the piggy bank, then barter, and last to make its appearance would be so-called junk silver, the next-to-last coins to be minted with silver content, and spendable at many multiples of face value. Finally, for the larger transactions, gold coins.
    When systems would be restored, a big re-think on the utility of physical money, even in its debased form, would take place, even with the iPhone generation.

    • Bankers
      Mar 14, 2019 at 7:09 pm

      Cash is probably the last direct claim a citizen can hold on the central bank ( as I don’t imagine transacting shares of government debt is really going to catch on as meaningful to the population) . Once accounts are digital the amount represented there is a claim on a commercial bank, sort of a double unbacked claim because not only is the currency itself unbacked, but the accounting method of banks is fractional reserve, that is to say only a fraction of claims are actually held in the form of currency (or the banking equivalent – central bank reserves). In other words people then become fully captive to the financial system, with government/central bank management/control/arbitrage of that system then becoming a reality removed from more direct accountability.

      It is a profound change of principles I think, not that there are nescessarily many of those left. Look at it this way maybe – the government and CB become “guardians” of the relationship between the public and commercial banks for whenever that might “fail”.

      It opens up a whole new world of justification for central bank policy that is by that point removed from direct customer participation and accountability – the customers problem is with the bank he/she is using, not the central bank. The participation will therefore shift to the remaining avenue, political. It doesn’t take much to imagine how that might all be played off to/on the electorate.

      I don’t expect that any authorities or interests actually are unstatedly pushing for money to return to private solutions in response either, quite the opposite – they are making sure they are offering the greatest facility, or accustoming people to rely on certain facilities that they have control over.

      • robt
        Mar 14, 2019 at 11:18 pm

        The status of accounts at a bank would not change. Whether cash or digital – you are an unsecured creditor. The form of the money does not matter – essentially most of the money in existence now is digital anyway, the equivalent of cryptocurrency, and it could vaporize tomorrow. Cryptocurrency is just a derivative of money.
        And yes, there is only notional value to all the physical money in existence – zero tangible value to digital money and the value of paper or base metal in currency and coinage.
        Interestingly, just about the only backed paper would be physical share certificates of corporations with tangible assets and warehouse receipts of allocated physical materials, in other words, commodities. Assuming of course they are really there – it’s all a matter of integrity and trust.

        • Bankers
          Mar 15, 2019 at 2:13 am

          Yes, but physical cash is a direct claim outside of the commercial banking system, and is recognised as effective without further intervention of any kind. Funnily, stocks were at one point pseudo money (wooden stocks of tax receipts from which the term “stock” derives apparently)

          http://globaleconomicanalysis.blogspot.com/2007/06/why-does-fiat-money-seemingly-work.html

          gives some account of that.

        • robt
          Mar 15, 2019 at 1:37 pm

          Bankers, it is a direct claim, but the claim is essentially worthless. The promise of the currency is that it’s legal tender for all debts public and private. Older issues stated that you could exchange it for something tangible of value, such as silver dollars.
          The bottom line is this: if you submit your claim (currency), all they (the Treasury, or central bank) are obligated to give you … is another piece of currency back. That currency could be worth the same amount, zero, and nobody may want to give you goods for it. It’s all about getting the things you need, and the value of currency is based to the most extent, on faith that someone else will take it in exchange for tangible goods.
          Considerations like this may seem extreme now, but most nations in the world have seen their fiat currency go to zero, including the USA. Britain may be the only nation that hasn’t!

        • Bankers
          Mar 15, 2019 at 3:59 pm

          Taken. The only point I am making is that as far as fiat is concerned, cash tends to be the most reliable and private. The pound has devalued to almost a fifth of its value against the dollar over a century, some of those devaluations were deep and abrupt but as far as I know and as you say, it never achieved not having a workable value. I really don’t know how susceptible the pound is now, but I don’t think its existence is threatened by any of the possible events currently on the horizon… might lose a fair bit more value though, all depending.

      • HMG
        Mar 15, 2019 at 1:11 am

        Staying in control is the key to everything.

        ie. Brexit.

        Who is really in control ?

        The people, the authorities or a mystery force ?

        • Bankers
          Mar 15, 2019 at 3:27 am

          Haha, if only they (or it) could talk .

          Short of becoming deeply philosophical I tend to look on it as all ultimately being of its own with various levels at work, each having its importance but never quite the complete control it might pretend. So you have events turning about an absolute and unbridled power that has no form to it but that which is then attempted to be shaped or made of it. If there is control, then it must be the self discipline, civility and a certain respect to agreement on hierarchy or procedue, all of which independently or combined allow for a coordinated evolution. Without those we are back to more basic, some would say more real, recognitions of cause and effect where the common values are maybe more natural but less well organised. Attempts at representation and structure are endless adaptations in trial and error but because the result is what we have then there is no questioning its truth but as a mere historic contemplation. With ucertainty to the the future being by far the greater unknown in any circumstance people will turn to the guidance they are most familiar with as solution when that future seems more threatened, and they will restructure it if it does not meet their needs or expectations. So it is a question of sentiments and appraisals – in human terms those can be very unpredictable, and though attempts at their manipulation even more so it does not stop people trying.

          Well there, you have me philosophising after all, but few enjoy or understand a pantomime as much as the British do, which probably says as much as all the above combined.

        • Debt Wazoo
          Mar 16, 2019 at 4:09 am

          > The people, the authorities or a mystery force ?

          Richard Simmons.

  11. Unamused
    Mar 14, 2019 at 6:32 pm

    People aren’t going to like a system where their money disappears when the internet is down or the power is out, but it’s not as if they’re going to have a choice. In the interest of fairness and transparency, financial totalitarians will no doubt offer plenty of opportunity for critics and complainers to register their opinions before the global financial system is comprehensively and permanently locked down. And they’ll remind you endlessly that it’s really really for your own good, and they can prove it.

    One has to admire how very insidious it is as a system of mass control: Step out of line and your money mysteriously disappears and you become a non-person.

    A lot of people have already bought into it, presumably because it’s ‘convenient’ or because it’s ‘kewl’, which goes a long way towards explaining how the Eloi end up getting eaten by the Morlochs because they be crunchy and taste good with ketchup.

  12. C
    Mar 14, 2019 at 7:31 pm

    Paranoia much? CC overspending leading to consumer debt is a serious issue, but the rest of it sounds like unnecessary panic. Read you on SA.

    • Bankers
      Mar 14, 2019 at 7:52 pm

      Maybe, but we’ve watched ATMs closed down in Greece for example, it’s not that far away. In fact I remember the military shipping in cash to Cyprus to keep payments. If this had gone on in a cashless society who knows how it would have looked. So paranoid not I think, just a sensible look at where we are headed to take stock of the vulnerabilities being created.

    • robt
      Mar 14, 2019 at 11:39 pm

      Most of the time everything is OK. Once in a while, maybe every 10 years, not always in the same form, things happen.
      Collective amnesia or ignorance tends to leave many people, but not all, unprepared.

  13. Cyclops
    Mar 14, 2019 at 9:19 pm

    Underground economy is always based on cash ecxept for barter.

    Government want to tax the substantial underground economy which is why the big push in those countries!

  14. William
    Mar 14, 2019 at 11:11 pm

    If they, the PTB, remove cash, govt promissory notes in physical form, the underground economy will simply find a replacement, something the authorities wont be able to control, imagine drugs became the new cash and people transacted in ounces of whatever drug became the most popular, they can’t control that now, let alone if it became a form of underground money, so you can all be assured that cash, govt promissory notes in physical form, will never ever be completely removed because it in the interests of the PTB to make sure it doesn’t.

  15. Ralph Allan
    Mar 15, 2019 at 1:48 am

    The fiction novel ‘Madonna And Child’ lays out a detailed plan for any nation which desires to eliminate cash. The story also reveals the totalitarian control that follows when the fuel and food and desires the populous purchases are digitised and digested by the those that would control your every waking moment. It also shows, as your readers have exposed in the comments section, the fundamental
    ‘electric’ vulnerability of any scheme to eliminate cash money.

  16. Leser
    Mar 15, 2019 at 3:53 am

    I can’t find the quote now but I remember reading years ago a statement from some neocon type saying his vision was for all citizens to have RFID chips implanted holding wallet, ID/passport, health insurance, etc. If a citizen misbehaves, the government just turns off that chip, turning the troublesome citizen into a useless pile of tissue.

    • stan6565
      Mar 16, 2019 at 11:23 am

      Not necessarily useless.

      The non-compliant ones can first be summoned to an adjustment center, where their organs can be stripped off first. The supporting financial transaction of course to be handled by the “cashless” infrastructure provider.

      Then the chip can be switched off.

  17. d
    Mar 15, 2019 at 5:05 am

    pretty close to where china is now, they link your dna, social number, and Social credit score, get a bad score and in the major centers, you cant even get on a bus.

    They intend to take this system, national.

  18. Iamafan
    Mar 15, 2019 at 6:03 am

    Yet there is more than 17 trillion dollars in circulation most in $100 bills and overseas.
    I wonder how drug lords can get paid without cash.

    • Iamafan
      Mar 15, 2019 at 6:04 am

      Missed a decimal point. 1.7 trillion correction.

    • Leser
      Mar 15, 2019 at 3:59 pm

      Ah that old chestnut with the drug dealers we must fight. The big rollers in this sector work with highly trained specialists working behind respectable facades in London, Singapur, Manila, and a few other places. They work with ones and zeros, shell firms, bank transfers. Cash is the last thing they need. That story is just for you to buy into the war against cash.

      You’re thinking perhaps of Pablo Escobar famously burying mountains of cash. That was when he was still a newbie and before he got introduced to the right people.

      • robt
        Mar 16, 2019 at 7:12 pm

        Warning: in ‘Narcos’, second season, he sent someone to get the buried cash and it had all rotted.

  19. raxadian
    Mar 15, 2019 at 10:33 am

    If Brexit happens one of the consequences is supposed to be an exodus to cash to avoid trouble.

  20. Ishkabibble
    Mar 15, 2019 at 11:22 am

    Older commenters here remember a day before debit cards, online banking and other digital means of paying for things. Credit cards and checks, OTOH, have been around for as long as I can remember, but my point is that there was a relatively-recent time when cash was, if not king, a very widely used means for buying, selling, lending, etc.

    For example, I remember getting my paycheck “cashed” every week at a bank in which I had a minimal savings account. I didn’t need a “budget”. I spent only what I absolutely needed to spend for the necessities of life and did not spend the rest. My pile of cash at home grew bigger. My one and only security measure was that I did not mention the size of my pile to absolutely anyone, including the government.

    From the information I “voluntarily” provided to the Internal Revenue Service each and every year that I was employed, “the government” knew how many federal reserve notes (FRN) I had been given by my employers, but the government only had an educated guess about how many of those FRN I had spent, or, at least as importantly, for just exactly WHAT I had spent it.

    Each month I drove around to the local power company office, etc. to pay cash for services that they had provided for the past month and was given a receipt for payment.

    I paid for my groceries, gasoline, vehicle maintenance, etc. etc. in cash. My parents told me that they had done the same for their entire lives.

    But times changed. Banks started providing the “service” of accepting payments for businesses. They INSINUATED themselves “in between” me and those businesses; so now it was just one trip to the bank to pay all those bills both in cash and as “withdrawals” from ones savings or checking account. How nice. How convenient!

    Then times changed ever more rapidly to what we experience today. Banks are “in between” (involved in) the vast majority of “transactions” — in other words, more intimately involved in everyday human behavior.

    But it is still possible, even in this day and age, to cash ones check every week, save cash, pay in cash, etc., just like the good old days.

    There were infrequent “financial crises” in the past, but legislation passed to prevent their recurrence was rescinded, and now they’re becoming more and more frequent, almost like clockwork.

    Investors are upset. Investors don’t want to “lose” their “money”. Investors want certainty. Investors want “return” on their investments.

    Investors have come up with a fantastic solution to their problems — to their uncertainty– that will bolster their “confidence”. BAN CASH.

    After that happens, TBTF banks and their investors MUST then be “in between” (intimately involved in) ALL transactions. You won’t be able to buy anything without a bank being involved. Banks and their investors will become a “necessity of life”. And necessities of life like food, water, shelter and “TBTF” banks will HAVE TO BE PAID FOR. And so, “naturally”, we will have to pay banks to keep our “money” there and pay for bank “services”.

    To sum up, we are being told by the Elite owners and investors in the TBTF banks that only when Their TBTF banks are inextricably, permanently, “in between” all transactions, and government “authorities” know exactly how and on what every single individual in the human race is spending their money, will investors’ “confidence” in the financial system be restored; the “financial crises” ended and human Utopia finally be reached.

    Wake up, fellow herd members. This is serious, life-threatening stuff. Somehow we’ve got to do something to stop the Elite from banning cash. There is no better, simpler way to do that than by withdrawing as cash as much digital money as possible from banks and investments and using that cash as much as possible to conduct all transactions. This bone–simple act will send a strong, unmistakable message to the Elite that they cannot ignore– that people do not want an Elite “managing” our daily lives. Use it or lose it, folks.

  21. Wisdom Seeker
    Mar 15, 2019 at 3:52 pm

    One of the fundamental logical errors is to assume that if people use cash less, that inexorably leads to “cashless”. But that’s not how people behave.

    People today use horses less. But we aren’t horseless. There are still some situations where horses are better than cars.

    People today use boots less. But we aren’t bootless. There are still some situations where boots are better than shoes.

    People today use mail less. But we aren’t mail-less. There are still some situations where mail is the best way to send something.

    There are situations where electronic transactions are safer and more convenient than cash ones, so we use cash less. That doesn’t mean we’re ever going to be cashless. And if cash were to be banned, alternatives would be found because whenever legal prohibitions get in the way, people will figure out a new way to do what they want to do. There are any of dozens of commodities (not just gold or silver) that can be traded like cash. During wartimes it is often tobacco products or alcohol. Ages ago it was spices. Who knows what it will be next time?

    But if you oppose those attempting to ban cash, be sure to find out who they are, and make sure your retirement account isn’t financing them! VISA, Mastercard, the major banks… hard to avoid their investment lures, but it’s possible.

    • Ishkabibble
      Mar 15, 2019 at 4:47 pm

      In this day of instantaneous communication, I can easily imagine nations conducting “trade” without the use of any kind of “money” whatsoever. For example, the leaders of two nations could decide to “trade” a supertanker full of oil for a super-container-carrier full of say cars or other manufactured goods.

      These vessels agree to reach each other’s ports of entry between two dates — say within the first week of April. The progress of each ship is monitored via GPS by both parties and, sure enough, both ships arrive in the two ports on the same day.

      Crews of inspectors examine the cargo of the two ships. Both trading partners agree that the other has, upon initial inspection, tentatively fulfilled their part of the barter and the “trade agreement” has been honored by both sides.

      The vessels are emptied to an offloading area or tank farm, etc., confirming the compliance of both parties with the original agreement/contract. Hands are shaken.

      The vessels are released to begin their journey back to their home ports.

      Both trading partners are happy and ready to “trade” again in the future.

      No money and no banks involved in the “settlement” of this transaction.

      But did the trading partners “own outright” the cargos that they traded? If the answer is yes, then no problem whatsoever. Deal done. If the answer is no, that could complicate the transaction. Therefore, it would be best to own outright before the trade of goods takes place.

      BTW, last summer my neighbor and I traded some vegetables for some mechanical work on a lawn-mower engine. Both of us are happy with the “trade”. Don’t tell the government, OK?

      • robt
        Mar 16, 2019 at 7:08 pm

        But money was invented to avoid this sort of thing, athough in some parts of the world a couple of cows still buys you a wife.

    • Debt Wazoo
      Mar 16, 2019 at 4:16 am

      > People today use horses less. But we aren’t horseless.

      We aren’t, but most of our road system is, and it sucks for the Amish.

      Methinks yee’ve misseth the pointe.

  22. sierra7
    Mar 16, 2019 at 12:12 pm

    The conduct of the “rich” and their treatment of the “impoverished” will determine when the guillotines will roll……..attempting to go completely “cashless” will create instantaneously a large black market. Governments and businesses would not want that. It would cut out more revenue for both. Recall FDR’s words (paraphrase) “I am a traitor to my class; I saved the rich from themselves.”

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