Monday, May 25, 2015

The Cashless Society Debate

As technology moves forward it enables the opportunity to do things in new ways. The arrival of digital currency and the ability to use digital currency on mobile phones is a clear example where technology is changing the way people access and use their money.

Along with this change will come the inevitable debate on whether the change is good or bad. Some will see the change as a great thing that makes it easier for more people to use and access money anywhere in the world. Others will see efforts to move towards a "cashless" society as a potential attack on personal freedom and property rights. Let's explore it .
For this discussion we will use two recent articles that relate to this topic. Below is a link to each article with a few quotes from each article just below its link. Aftter that are a few added comments.

Russia Today:  Cashless Denmark: Should Total e-Commerce Be Embraced?

"With Denmark moving towards a completely cash-free economy there has been a heated debate between the experts who think it’s a natural thing caused by technological development and those who warn that total traceability has a dark side.
The Danish government has proposed that certain businesses such as petrol stations, restaurants and clothes retailers should no longer be legally required to accept cash. Moreover, a third of the Danish population already uses a mobile payment app when making transactions."

"Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms, writes Jim Leaviss."

"A proposed new law in Denmark could be the first step towards an economic revolution that sees physical currencies and normal bank accounts abolished and gives governments futuristic new tools to fight the cycle of “boom and bust”.
The Danish proposal sounds innocuous enough on the surface – it would simply allow shops to refuse payments in cash and insist that customers use contactless debit cards or some other means of electronic payment.
Officially, the aim is to ease “administrative and financial burdens”, such as the cost of hiring a security service to send cash to the bank, and is part of a programme of reforms aimed at boosting growth – there is evidence that high cash usage in an economy acts as a drag.
But the move could be a key moment in the advent of “cashless societies”. And once all money exists only in bank accounts – monitored, or even directly controlled by the government – the authorities will be able to encourage us to spend more when the economy slows, or spend less when it is overheating."
. . . .
"In this futuristic world, all payments are made by contactless card, mobile phone apps or other electronic means, while notes and coins are abolished. Your current account will no longer be held with a bank, but with the government or the central bank. Banks still exist, and still lend money, but they get their funds from the central bank, not from depositors.
Having everyone’s account at a single, central institution allows the authorities to either encourage or discourage people to spend. To boost spending, the bank imposes a negative interest rate on the money in everyone’s account – in effect, a tax on saving."
My added comments:
In these two articles we see why this topic is likely to generate heated debate. One article simply explains that the Danish government is putting forward a proposal "that certain businesses such as petrol stations, restaruants, and clothes retailers should no longer be legally required to accept cash."
That sounds innocent enough and by itself would probably not generate much debate. 
But notice the second UK Telegraph article where the author jumps on this proposal to promote the outright banning of the use of cash. That would be controversial enough, but the author is only getting started. He goes on to recommend that private bank accounts should be abolished and people only allowed to have accounts at government controlled banks or the national central bank. And that's not all. He says doing this would allow "the authorities to encourage us to spend more when the economy slows, or spend less when it is overheating." And if you want to try and save your money at a time when the authorities want you to spend your money, he advocates that "the bank imposes a negative (interest) rate on the money in everyone's account -- in effect, a tax on saving."
This second article is where you see people start getting upset about an attack on personal freedom and property rights. It's all about who gets to decide how and when your money is used or saved. Since the western hemisphere is founded on the idea of personal property rights and protection of individual human rights, it should not surprising to see the comments posted at the bottom of this UK Telegraph article
I am not sure I have ever seen a series of comments so one sided in opposition to the author's article ever. As I write this I there are over 3,000 comments on this article almost all in opposition to this idea. Many are in angry opposition.
Normally I avoid stating my own opinion as much possible since this blog is devoted to the presentation of relevant news and the opinions of experts. In this case, this seems very simple. It seems to me that anything forced on people by law that restricts their access to their own personal property and/or allows the arbitrary confiscation of it without due process of law is a very bad idea. The way to attract public support is to simply provide the free choice to people to use or not use the new technology. Then make the product so compelling and helpful to the consumer that he will choose to use it because it's the better option. The consumer will want to choose it. That is how a competitive free market works. 
There is no logical reason to force people by law into a "cash only" system completely controlled by the government. It will be bitterly hated by the overwhelming majority of the population and will eventually fail as totalitarian style efforts in history have shown repeatedly. People want to have the freedom to choose to do as they please with their personal property. If presented to the public in the proper way (as an option people are free to accept or reject) the new digital cashless technology has great potential. If forced on people by law with no ability to choose, it is destined for disaster in my view. I think we will see the free choice option prevail because restricting access to people's own money would lead to massive loss of confidence in the present system. It would lead to the unintended consequence of people moving their money out of the system as quickly as possible.

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