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Is a cashless society on the cards?

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http://edition.cnn.com/2014/07/02/business/is-a-cashless-society-on-the-cards/index.html?iid=article_sidebar

 

An interesting article about the decline of paper currency in civilized society. One can surmise that the absolute end of physical paper/metal currency is not far off. The technology is now ubiquitous and the advantages are palpable.

 

As I discussed in an earlier post, this has wider economic implications as it is the first step in greatly reducing or even eliminating a government's ability to harm anybody with currency inflation. If nobody actually carries any physical currency, then the whole of our liquid net worth--every last penny--is stored in computer memory somewhere, which can be rapidly manipulated and quickly traded out of any particular currency instantly and automatically, making the currency your savings is denominated essentially meaningless. The existence of this phenomenon would in turn make intentional currency inflation self-defeating for any government that tried it.

 

 

 

 

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Except that governments that inflate their currency usually control the exchange rate. The absence of paper money, which can be exchanged on the black market, would make that control absolute.

 

This is an aside, but how would a government control the exchange rate? I can see them simply making the purchase of foreign currency illegal for their own citizens, but that would stop trade altogether, not affect prices.

 

Anyhow, I used foreign currency as an example, but any sort of investment instrument could do the same job. If a government wanted to force its citizens to stick with their holdings in their currency, they'd need to basically stop trade altogether.

 

I suspect in the future (present?) currency inflation is only going to be looked at as a way for governments to write down their sovereign debt in a granular way. Sort of an international Chapter 11 of sorts--and it applies specifically to the government of a country, not to the country itself...

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This is an aside, but how would a government control the exchange rate?

With a law that gives the government the right to set the price of foreign currencies, and bans their sale at any other rate. You're really not aware of price controls?

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I can see them simply making the purchase of foreign currency illegal for their own citizens, but that would stop trade altogether, not affect prices.

 

Anyhow, I used foreign currency as an example, but any sort of investment instrument could do the same job. If a government wanted to force its citizens to stick with their holdings in their currency, they'd need to basically stop trade altogether.

 

I suspect in the future (present?) currency inflation is only going to be looked at as a way for governments to write down their sovereign debt in a granular way. Sort of an international Chapter 11 of sorts--and it applies specifically to the government of a country, not to the country itself...

In the other thread, you've spend several pages boasting about how well grounded in reality you are. And yet, you post theories contradicted by reality quite blatantly.

There are ACTUAL, CURRENT, REAL governments which force their populations to trade in the local currency and importers and exporters to exchange their money at a rate set by the government (which is a fraction of the black market value of foreign currencies). The only recourse citizens of these actual, real countries have is illegal transactions on the black market, where they use paper currency. Without paper currency, they would be reduced to bartering. You can't use electronic currency in illegal transactions, it's too easy for the government to trace.

Why are you not aware of this? It's the everyday reality of millions of people, who are faced with the consequences of the very theories you're hawking.

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The notion of going cashless has been around for over 30 years. Like articles worded to bash gold as being a barbaric relic, articles like these are run periodically to run it up the flagpole, so to speak, to see which way the public wind is blowing, as well as to keep the issues from passing away from sheer neglect.

 

Considering computer system compromises, such as the likes of the more recent Target and Home Depot, should make people more leery about reliance on technology alone, especially with an issue as important as money is.

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I think the advent of smart phones replacing credit cards is going to be the nail in the coffin for physical pieces of paper and little bits of metal as a temporary store of wealth.

 

A fully-computerized financial society means every citizen can enjoy the knowledge of smart financial people who were never hurt significantly by inflation because they knew how to trade around it. This has vast implications for domestic policy.

 

Whatever will the right-wing conspiracy theorists do without the boogieman of "inflation"?

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The boogieman of inflation is not going to go away with an adoption of a cashless economy. Conspiracy theorists (right-wing or otherwise) shortcut the method of identification in their attempts to understand the underlying cause(s) of it, and folks who pass those conclusions on give legs to their explanations.

Edited by dream_weaver

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I've argued pretty extensively that technology in general--part of which is a cashless society--will do exactly that. Another thread though...

 

The tl;dr on that thread is that, there might be inflation in the future, but technology will remove its ability to hurt anybody (which itself will reduce its advantages to governments who try it, which in turn will probably make it go away only because there's no reason to do it).

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Technological advances have certainly influenced productivity, which in turn can mask inflationary policy. The keynote speaker which has yet to surface deals with the mathematics involved - I think. When doing the math, it is important to identify and keep clear the what that one is counting. A cashless society simply moves the abstraction of money further away from the perceptual level, thus making the reduction of money to the perceptual level that much more complex. What it does not remove is the placing of the what outside the sphere of a philosophically subjective influence.

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Technological advances have certainly influenced productivity, which in turn can mask inflationary policy. The keynote speaker which has yet to surface deals with the mathematics involved - I think. When doing the math, it is important to identify and keep clear the what that one is counting. A cashless society simply moves the abstraction of money further away from the perceptual level, thus making the reduction of money to the perceptual level that much more complex. What it does not remove is the placing of the what outside the sphere of a philosophically subjective influence.

 

Powerful stuff.

 

Where can I buy some?

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Bill Gates annual letter really promotes e-banking from the altruistic angle. While it may reduce some of the costs associated with borrowing money, I would submit that it won't do much for the issue of poverty overall.

 

I think it will help, actually. This is basic infrastructure which we take for granted here coming to people who don't have it.

 

It will absolutely cause a lot of new problems though, and corrupt governments are going to mess things up in a lot of ways.

 

But in aggregate, I think it will help. Hundreds of millions of people gaining a bank account and trading with money can only be a good thing in the long run.

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It will absolutely cause a lot of new problems though, and corrupt governments are going to mess things up in a lot of ways.

This would be one of the reasons why I think, as in education, that money is too important a matter to be meddled with by government.

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This would be one of the reasons why I think, as in education, that money is too important a matter to be meddled with by government.

 

I don't think a computerized banking system changes that one way or another. The cleptocracies of Africa are doing just fine the old fashioned way. Technology will change the rules for them, but the overall risk is probably about the same.

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I don't think a computerized banking system changes that one way or another. The cleptocracies of Africa are doing just fine the old fashioned way. Technology will change the rules for them, but the overall risk is probably about the same.

Agreed. The Gate's story struck me of interest here because of the financial resources behind forwarding the idea.

 

Incidentally, the story that led me to this one was here, if you're interested.

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Another InfoWar's peice: Feds Urge Banks to Call Cops on Customers Who Withdraw $5,000 or More. If memory serves correctly, the previous line in the sand was $10k.

 

Alex Jones, of InfoWar's provides links to Sovereign Man's Simon Black's Justice Department rolls out an early form of capital controls in America and SHTFplan's Mac Slavo's Government Orders Bank Tellers To Alert Police About Your Cash Withdrawals: So They Can “Seize the Funds… Investigate”

 

While I do not consider myself a conspiratorial collaborator, echo's of Francisco's speech at Taggart's wedding come to mind:

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

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The dollar figure in reporting rules vary. So, for instance the bank will report transactions over a certain dollar amount (say $10,000), but will also report smaller transactions if the aggregate over a period (e.g. 15 days) adds up to some higher number (say $30,000). 

I believe the lower $5,000 line is for instances where the bank has some other reason to suspect the transaction is being made to circumvent the higher ceiling, or if the bank suspects money-laundering, or has reason to suspect the transaction has "no apparent lawful purpose".

 

While I agree that this is intrusive, the Alex Jones web-site seems to be making news out of something that's been around for decades. I wouldn't trust their reporting.

 

For an overview of the rules, check this link.

Edited by softwareNerd

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Alex Jones, then, is trying to put a fresh face on old news.

Pretty much. 

 

The various rules around cash highlight that governments dislike cash. More accurately, governments dislike anonymous and untraceable transactions. In countries where tax-evasion is accepted as a routine way of conducting business, cash is the key enabler. Mostly its a good thing, because it allows people to circumvent some very suffocating laws. So, for instance, if someone wants to buy a house in these countries, they might pay 20% or more in the form of cash. Tourists wonder why businesses in these countries are some resistant to credit-cards. It is not just the 2% credit-card fee; if the revenue is shown on the books, it is subject to tax, but if it is in cash, the numbers on the books can be lower than the actual amount received.

 

The government doesn't like things like bit-coin for the same reason. It isn't about the ability to inflate, but about anonymity. From the perspective of governments, they'd like all transactions to be electronic but traceable by the authorities.

 

On these laws, just yesterday, NPR had a story about how the last few western banks are shutting down their Somalia businesses because of the ambiguity in the rules. One never knows when the government will decide to fine them for some transactions; it's just not worth the risk. So, what happens to the billion dollars that ex-pat Somali's send home each year? It goes underground. You walk into a Somali store in Minneapolis and, speaking the language, you hand over cash and tell the person who should receive it. A few days later, someone hands over cash to that person in Somalia.

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Uncle Sam sez:  Dollars are not a commodity, everything else is.  His logic is simple and unassailable:  the barrel of a gun.

 

You will count all your transactions in dollar values, whether you use actual greenbacks or not.

 

Sorry.

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Governments have always disliked the anonymity of cash.  Now, central bankers and statist economists have another reason to dislike cash: the perceived difficulty of diluting its value.

 

Some European countries now have negative short-term interest rates, but at some point people could take their money out in the form of cash, to avoid paying the negative rate. So, some mainstream economists and policy makers have been complaining about cash and wishing it could go away. The Wolf Street blog is a bit over-the-top, but here's a post that collects some quotes on cash.

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Jack Ma enters the fray with a certain sense of irony. The Chinese government is finding a private citizens entry into the financial fray disruptive. An excerpt from Jack Ma’s Giant Financial Startup Is Shaking the Chinese Banking System:

Ant Financial Services Group, founded by Chinese billionaire Jack Ma, has become the world’s biggest financial-technology firm, driving innovations that let people use their phones for buying insurance as easily as groceries, enabling millions to go weeks at a time without using physical cash.

That success is also putting a target on the company’s back. China, even more than the U.S., is now under pressure to reckon with the disruptive power of a financial-technology giant.

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