Talk about a possible “cashless society” has been around for years. The crucial question for our economic well-being is whether we evolve away from the use of cash voluntarily (which will happen if superior alternatives are developed—such as something along the lines of Bitcoin) or involuntarily, as the result of government compulsion.
I don’t know the current status of Bitcoin and other private digital currencies, but various governments are taking significant steps to curtail and, in some cases, put an end to cash. Yesterday, Larry Edelson of the Martin Weiss group of market commentators posted a thought-provoking article, “Cash is on its Death Bed.” Spain and Italy have banned cash transactions above certain relatively modest amounts. Former UK Prime Minister Gordon Brown is calling for the abolition of cash transactions. Denmark, too, is making moves to convert economic transactions to an electronic format.
Here in the States, we aren’t as “progressive” as the Europeans, but Louisiana has banned cash payments for second-hand merchandise. Apparently they want to be able to identify revenues generated from flea markets, pawn shops, etc., to make sure the state gets its cut of tax revenues.
Why is this trend picking up steam and what does it portend for us?
The driving force behind the move to ban cash is that governments are desperate for more revenue. Progressives on both sides of the Atlantic bemoan economic activity that escapes the watchful eye and grasping hand of the taxman. A few years ago, Gene Sperling, an economic adviser spoke for President Obama when he declared a need for a “global minimum tax.” Last year, French economist Thomas Piketty’s book, Capital in the Twenty-First Century, thrilled proponents of bigger government with its recommendations that governments around the world gather and share detailed information on the amount, location, and uses of individual wealth to facilitate taxing more of it. Very simply, by being able to keep track of where wealth is, it will be easier for governments to tax it.
We’ve come a long way from the days of our founders when Thomas Jefferson declared in his first inaugural address that government should leave Americans “free to regulate their own pursuits of industry and improvement, and … not take from the mouth of labor the bread [income] it has earned.” First, we gave the federal government the right to tax income, which has resulted not only in a great transfer of wealth from private, productive enterprise to public, wasteful programs, but also has shattered our privacy. Second, the feds took additional wealth from us by forcing us to use depreciating fiat currency instead of sound money. And now they’re flip-flopping and moving to ban the use of the fiat money that their legal tender laws have been forcing us to accept and to push our economic transactions into the digital realm where they can be monitored in real time. (As a sidelight, this should stimulate the development of private alternative currencies, and, in turn, likely stimulate government policies to monitor or suppress such alternatives.)
It seems to be more than coincidence that the push by government planners and elitists to abolish cash, and so force everyone to keep their liquid wealth within heavily regulated financial institutions, is picking up steam as we enter a period in which interest rates are beginning to turn negative. Edelson reports that JP Morgan has begun “to impose negative interest rates on customer funds in excess of $250,000.” In effect, forced savings is being used as a new source of tax revenue, as an indirect tax, today on the rich, tomorrow on all of us? This lucrative scheme has the potential to funnel billions of dollars from private citizens to the government and the financial institutions with which Uncle Sam has such a cozy relationship.
Here’s another way in which individuals are going to be rendered economically vulnerable: Edelson reports that the IMF is moving to make its Special Drawing Rights (SDRs) the new, post-dollar global reserve currency. He also wrote that the World Bank is working on its own money substitute. If you think the Federal Reserve has been injurious to our economic health and freedom, lots of luck ever trying to rein in those multilateral institutions.
It seems clear that elite political planners, whether elected officials, central bankers, or unelected officials in multilateral, supra-governmental bureaucracies like the IMF, are striving to dramatically increase government supervision and control over economic activity. By forcing everyone to transact business through the financial system, government is paving the way to regulating how much we spend and where we spend it. What F.A. Hayek called “the fatal conceit” tragically persists. The would-be lords of the economic universe still haven’t learned the crucial lesson from failed socialist experiments—that central planners cannot possibly have enough specific knowledge to coordinate the economic activity of millions of human beings. Government schemes to abolish cash will reduce not only our freedom, but also our standards of living. Welcome to the progressive planners’ brave new world.
Editor’s Note: This column previously appeared in Forbes.com.
Get your copy of Mark Hendrickson’s excellent: Problems with Piketty: The Flaws and Fallacies in Capital in the Twenty-First Century
The Moral Liberal Contributing Editor, Mark Hendrickson, is Adjunct Professor of Economics at Grove City College, where he has taught since 2004. He is also a Fellow for Economic and Social Policy with The Center for Vision & Values, for which he writes regular commentaries. He is a contributing editor of The St. Croix Review, sits on the Council of Scholars of the Commonwealth Foundation, and writes the “No Panaceas” column in the Op/Ed section of Forbes.com. Mark’s published books include: America’s March Toward Communism (1987); The Morality of Capitalism (editor, 1992); Famous But Nameless: Inspiration and Lessons from the Bible’s Anonymous Characters (2011); and God and Man on Wall Street: The Conscience of Capitalism (with Craig Columbus, 2012). Mark Hendrickson’s Archives at The Moral Liberal.