Talk of forcing us into a cashless society has been around for decades. It’s very easy to tune it out as old news, something that’s going to remain a statist pipe dream forever.
But it’s time to take this very, very seriously. The stage has been set. We’ve got central-bank desperation. Negative interest-rate policies. A police/surveillance state in which cash is more important to the authorities than any actual crimes committed. And the increasing ruthlessness of first-world states everywhere. We’ve got an atmosphere in which the desire for privacy is itself considered a sign of criminal intent.
Now the faux-intellectual case for complete government control and surveillance of transactions is being promoted so rapidly and universally it seems a coordinated effort. The economic noise just ramped up again upon publication of superstar economist Kenneth S. Rogoff’s The Curse of Cash, in which (I have not personally read it but have repeatedly heard) he agitates for elimination of all cash over $10 bills, forcing all but latte-level transactions under government scrutiny — or into Outlawry.*
J.D. Tuccille has has an excellent overview of the positions on both sides. (His article is a real linkfest, so set aside some time for it.)
Oddly enough, both the pro-freedom side and the pro-government side view the basic situation in the same light (though of course they draw wildly different conclusions from it): cash enables privacy; cashlessness enables government control.
This issue, like “gun control,” is a watershed. This issue, like “gun control,” has been around a long time and is easy to get complacent about. This issue, I’m thinking, is going to be one of the two key turning points for freedom-vs-statism in the years ahead.
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* Fortunately, the majority of Amazon reviewers so far are heatedly on the side of the angels. Although the book is getting huge buzz in the financial mainstream press, it seems the general economically literate public is Not Amused.
Everything you say is true, with the slight exception of “. . . one of the two key turning points. . .” – I would add state funded / mandated “education” to the list – but there’s a deeper issue you haven’t addressed. If the notion of “limited” government is going to have even the faintest prospect of success, it is essential to deny such government any involvement in the provision of money beyond whatever role it may have in any other contractual relationship. A very good, succinct discussion of the issue can be found at:
http://www.martindurkin.com/blogs/time-privatise-money-future-civilisation-depends-it
A few short excerpts:
Frederick Hayek rightly describes `the government monopoly of the issue and control of money’ as `the source and root of all monetary evil’. Allowing governments to control currency is like putting a drunk in charge of a brewery. With grim inevitability, our money will be debased. And in the process, the very thing that makes capitalism work, the very mechanism which has delivered prosperity to so many people, will be handicapped and put at risk. As von Mises argues, `In a social order that is entirely founded on the use of money and in which all accounting is done in terms of money, the destruction of the monetary system means nothing less than the destruction of the basis for all exchange.’
. . .
Private money would be more reliable in the same way that a privately made Toyota is more reliable than a State-produced Trabant. Hayek argues forcefully against `the suggestion that government, which only profits from excessive issues [of money], can be trusted more than a private issuer whose whole business depends on his not abusing that trust. Does anyone really believe that in the industrial countries in the West, after the experience of the last half century, anybody trusts the value of government sponsored money more than he would trust the money issued by a private agency whose business was understood to depend wholly on its issuing good money?’
. . .
They pass laws forcing us to use dollars and pounds because they know that if we had the choice we would not.
It is time to lift the prohibition on private money. As Hayek says, `the reform proposed is not a minor technicality of finance but a crucial issue which may decide the fate of free civilisation.’ [emphasis in original]
Everything you say is true, with the slight exception of “. . . one of the two key turning points. . .” – I would add state funded / mandated “education” to the list
Oh, I 100% agree that government education was and remains a coup against freedom and free-thinking. If we could do away with one aspect of government overnight, that’s certainly the one that should go first (as it would eventually lead people to recognize the nature of the remaining aspects).
When I spoke of turning points however, I was referring strictly to — dare I use the word — triggering events. And triggering events only. Not to the overall harm done by any particular thing, even though the harm of government schooling, victim-disarmament, and going cashless are all immense.
I can happily report that in Prague, to say nothing if elsewhere, the Czechs use cash for everything short of houses and cars, and sometimes even for those. Bankomat machines (ATMs) are everywhere, but ourside of the city centre you will still have a difficult time finding a business which takes cards. The lads down at the Secondhand Speakeasy still do all their business out of a cash-box and a bunch of old candy-jars full of coins.
Bring back the $500 and $1,000 bills!
IMHO to have real freedom requires the ability to own your own property (money is property) otherwise we are only wards of the state, something our government today has achieved (and is growing) for a large percentage of our population. Is share cropping much different than slavery, I’s reckon it depends on one’s master/landlord, doesn’t it!
To be honest I pay more in property tax than I ever did when I just rented so it feels like the landlord is my government.
“The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of Government.” Federalist #10
When government no longer protects property rights is it not time (way pass today IMHO) for this consideration;
“…Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security…”
trying2b-amused articulates very well an important component to the philosophical underpinnings of this issue. I fully agree with that position.
I haven’t yet gone through Tuccille’s article (thanks for the link), but I will offer another argument against the elimination of large bills. As others have noted, the ultimate result of this would be a diminution, if not complete loss, of personal freedom. However, in the short term I think the primary driver of this idea is our current economic doldrums and the inability of central banks worldwide to engineer a recovery. They cannot understand why near-zero interest rates and endless “stimulus” programs (i.e., government purchases of financial assets) haven’t jump-started the economy. They are so thoroughly inculcated in the idiocies of doctrinaire Keynesian theory that they cannot conceive of any other approach. And so, when zero interest rates don’t work, then we must have negative interest rates. Yes, that’s the ticket! More leeches! All supported by soi disant “experts” such as Rogoff, Picketty, Krugman and their ilk with their abstruse theories bolstered by incomprehensible mathematical formulae, and such raving lunacy as negative interest rates and the “paradox of thrift”. And when people don’t respond as our betters expect, we must be forced to do so.
This, then, is the immediate goal of those who would abolish large-denomination bills: force people to keep all of their wealth in banks where they can be charged a fee (“negative interest”) on their deposits; no more keeping cash under the mattress or in a safety deposit box. And the negative yield will force people to spend their money rather than saving it. This is supposed to be “stimulative”, as if consumption (rather that production) is the driver of economic growth (yet another idiocy of Keynesian theory).
But that money won’t be spent on consumer goods as our betters desire; much of it will be used to purchase something which (it is hoped) will hold its value. We are already seeing some of the results of that: a financial asset “bubble” (stock and bond prices are at irrational levels), and a general shift to riskier assets where the yields are higher (although not high enough to adequately compensate for the increased risk). Unfortunately (from the government’s perspective) I expect that more and more of that wealth will find its way into gold, silver and other “hard” assets.* The hoped-for stimulus will fail to materialize, at which point we will move on to Phase 2: capital controls, forced investments by our IRAs, outright confiscation, and eventually devaluation. All of that will likely occur anyway, whether or not we eliminate large-denomination bills, but the process will be much more efficient if the government first obtains absolute control over all our wealth.
Frankly, I can’t see any good outcome. Our economic system needs a “hard reset”, which unfortunately won’t occur before a massive collapse. Buckle up. We live in interesting times.
* Negative interest rates provide a neat riposte to those who disparage gold because it doesn’t provide any current yield. Well, neither does cash, or even short-term government securities, Bubba!
@Claire September 8, 2016 7:14 am
>And triggering events only.
Understood. Although I can envision scenarios where state “education” provides a “trigger event” in the sense you mean, e.g. forcible suppression of home schoolers, I agree that the likelihood of such related to guns or cash is considerably greater under current conditions. However, if I had the choice of “do[ing] away with one aspect of government overnight”, I would choose the government money monopoly, on the grounds that eliminating that would abate government control of education much faster than vice versa. Also, I have long thought that freedom advocates in general greatly underappreciate the degree to which government control of money enables and is necessary for government control of everything else.
Another great comment by trying2b-amused. I fully concur.
I guess it’s time to start mining Bitcoins, whatever the hell mining Bitcoins is.
As the character Malcolm Reynolds said: “Come a day there won’t be room for naughty men like us to slip about at all.”
Laird, thank you for the kind words, and I’d say you have a solid grasp of the situation yourself, especially as regards the present Keynesian dementia. On that subject, here’s something you might find interesting:
https://mises.org/sites/default/files/Failure%20of%20the%20New%20Economics_3.pdf
N.B. This is a large (22MB) scanned book PDF, although it is quite readable compared to many such. As Antonius Aquinas at http://www.acting-man.com puts it in John Maynard Keynes’ General Theory Eighty Years Later:
Readers who lack the patience to face the superficiality, boredom and endless contradictions of the original text [Keynes’ The General Theory of Employment, Interest and Money] may want to check out Henry Hazlitt’s extensive critique The Failure of the “New Economics”, which makes the exercise a lot more interesting and entertaining. As an aside, putting quote marks around “New Economics” was entirely legitimate. Most of what Keynes wrote had already been propagated by a long line of interventionist cranks who preceded him, refuted by their contemporaries.
[…] Read it all, including the embedded links. […]
Quibble:
[To be honest I pay more in property tax than I ever did when I just rented so it feels like the landlord is my government.]
I pay property taxes too, and do so directly, writing checks each year instead of having an escrow. [ouch]
When you rented, your landlord paid the property tax on the house, but he did so out of what you paid for rent. (Or he went broke.) The idea that renters escape property taxes is false.
In addition, you also help whatever businesses you spend money at pay their property taxes. So, “Tax businesses, not people” also sucks.
Casino cheques are being used by some people in some places, due to lack of banknotes with a value of over $100.
If they go to completely electronic money, then people are going to be forced to use credit cards or checks for very small purchases. That’s not profitable for the businesses or the credit card companies, so I think they would complain a bit, wouldn’t they? I mean, the processing would exceed the value of the sale.
But…if they eliminate cash, what will cops steal at traffic stops?
If cash is eliminated in preference to electronic funds, it will indeed give government a greater knowledge of what you do and therefore control but I think there is something else also.
Presumably, cash will be “called in” and either a large tax required to convert it to electronic funds or on a certain day, it’s value will go poof,( as all fiat money does eventually). There will still be large chunks outside the system (drug, contraband) that will not be converted. This will have to have a beneficial effect on the “balance sheet”, by decreasing the outstanding FRN, IOUs.
I really don’t understand all the potential consequences of this but I suspect “they” do.
“[T]he net benefit to society from giving up the anonymity of currency holdings is likely to be positive (including for tax compliance).”
This reads as if he gets high with Cass Sunstein and Ezekiel Emanuel
“This reads as if he gets high with Cass Sunstein and Ezekiel Emanuel”
Ain’t that the truth? How many of your friends and neighbors consider paying more taxes to be just a jolly good thing to do?
“But…if they eliminate cash, what will cops steal at traffic stops?”
Don’t fret about the poo deprived widdle coppies, Joel. Remember: They’re already adopting roadside technologies to empty any cash cards we might be carrying. Emptying our debit and credit cards during traffic stops can’t be far behind. (In fact, if memory serves, aren’t cops in some Scandinavian countries already doing something like that?)
I am sure that a small ‘transaction fee’ will then be tacked on to whatever you buy via credit or debit card. Look for this fee to grow over time as the government grows accustom to what appears to be a bottomless stream of revenue.
LarryA,
Totally agree.
Who needs a $1000 FRN when a troy ounce of Au is close enough at current spot price.
“Private money” has existed since recorded history in metals. Three guesses what happens to the “price” of metals when physical currency is outlawed, and the first two don’t count…
Negative interest rates are a boon to the manufacturers of safes; think Japan and Germany, right now. More to come.
Cashless? Which portion of society needs garage and yard sales to supplement income? Or flea markets?
Everybody with plastic? Even kids? Imagine each and every mall rat turned loose with a credit card. Er, uh, better don’t.
I may be wrong, but I vaguely recall that I read that EBT cards are managed by one of the Banksters. (Goldman Sucks? JP Morgue?) They get a rake-off. I venture that the same sort of system would merely be a variant on that existing theme. Probably would have a better computer system than is possible for the government, thinking about the Obamacare problems.
Any fiat “money” or currency eventually reaches it’s actual intrinsic value: Zero.
Money is anything people actually want it to be. There are many possibilities besides barter, and people will find/use them when the incentive is great enough. What they mostly need to get over is the idea that any system must be “official” or sanctioned by government.
Eliminating the “cash” fiat money is not a bad thing at all, really. It’s been a scam and a fraud from the beginning. Now approaching zero or in some cases negative “value.” Put on your thinking caps, people. Let’s figure out a way to get around – or over – this particular mountain.
Thanks for the link, trying2b-amused. I should have read it before but somehow never got around to it; perhaps now I will. But I would commend to you another book, “Where Keynes Went Wrong”, by Hunter Lewis. Also worth a read.
https://www.amazon.com/Where-Keynes-Went-Wrong-Governments/dp/1604190442/ref=cm_wl_huc_item
To add a little yin to the yang…. They’re in a precarious position. They want to squeeze us toward a cashless society, but when they eliminate cash in favor of plastic credit cards issued by Wall Street banksters, they will be in danger of encouraging bitcoin, and even more anonymous forms of digital cryptocurrency. The banksters want to make 3% on every transaction. The government wants to trace every transaction. If they try to herd people away from cash and into credit cards, they’re likely to cause a stampede to bitcoin which has negligible transaction fees and fairly good anonymity for most run-of-the-mill transactions. It’s the cashless economy version of the principle that good money replaces bad money.