Ken Rogoff’s new book “The War on Cash” details how wonderful it would be if cash was totally or nearly totally banned, with all transactions being made electronically. He thinks it would eliminate crime. I have stated this before, but you can’t eliminate crime by eliminating cash. Other forms of currency will be substituted, and this will have unintended and unforeseen consequences. Yes, it will drive up the price of crime, but it will certainly not stop it or probably even slow it down much.
Ron Rimkus, CFA, has a piece at Seeking Alpha that details the real motives behind this move, and the real harm it causes non-criminals, and he thinks about his mom as an example:
In short, … a cashless society would enable central banks to produce negative interest rates at any level.
If a -1% rate doesn’t do the trick, maybe -5% will. If -5% doesn’t cut it, perhaps -10% will. In fact, there would be no limit to how low negative rates could go.
In essence, a cashless society gives governments an extraordinary new power: the ability to tax wealth – including my mom’s, even though she is not “wealthy.”
In practice, if the world converted to a cashless society, Mom could still choose what she buys, how she invests, what she does with her money. But she would lose the freedom to withhold her money from the banking system.
What is best for savers is high interest rates. What is best for borrowers is low interest rates – or maybe the ability to default with little or no consequence. What is best for banks is having more transactions performed through the banking system via credit cards, debit cards, or other bank-sponsored payment methods. What is best for governments is for every transaction to be monitored and every possible tax dollar collected. What is best for central banks is to fully control the money supply so that they can create negative rates at will. What is best for politicians is to grow the economy regardless of how costly their policies are.
What is best for my mom is to be able to save her hard-earned money without it being unduly depleted by inflation, taxation, or bail-ins. And, maybe, to be able to opt into or out of the banking system by her choice.