For a growing share of affluent consumers in Europe and North America, cash is something of an inconvenient relic. Credit cards and automated bank transfers account for most spending, and ApplePay, PayPal and other alternatives are grabbing a bigger share of the transactions once conducted by cash.
Cash’s value can vanish in a careless moment, or in a fire, or in the washing machine, or to the pickpocket on the crowded street. Credit cards, on the other hand, offer insurance against such risk.
Will paper currency soon be a thing of the past?
But paper currency isn’t going away without a fight. Skeptics Brett Scott and James Rickards are part of a subset of savers who deeply distrust the Federal Reserve and other central banks. They fear deflation, despise profligate governments and hint that they’ll give up their greenbacks and pound notes only if the cash is pried from their cold, dead fingers.`
“’Cashless society’ is a euphemism for the ‘ask-your-banks-for-permission to pay society,’” Scott writes in The War on Cash, an article that spells out the possibility for government overreach.
While governments see cash as tool to grease crime and evade taxes, doing away with cash would come with obvious downsides, Scott says. Privacy would be the first casualty: Because credit card transactions are easily tracked, consumers no longer would be able to engage in anonymous purchases. What’s more, Scott argues, poor consumers who lack bank accounts would be put at a disadvantage if cash were to disappear.
James Rickards, author of recent book The New Case for Gold, makes a similar claim. A cashless society would hurt everyone, not just criminals, he argues. The true danger of all-digital money is that the system would set the stage for negative interest rates. Such a policy is easily avoided by holding cash: If you have $1,000 in cash now, you’ll have the same $1,000 a year from now. But if the US government imposes a confiscatory negative interest rate policy, storing your $1,000 in the bank would leave you with something less than $1,000.
Holding large sums of cash isn’t easy, he acknowledges. “As a practical matter, honest citizens cannot get access to large quantities of cash without being suspected of drug dealing, terrorism or tax evasion,” Rickards writes. Even so, he encourages savers to stash a pile of cash and some gold in a safe, where it will act as apocalypse insurance.
Both critics have a ready target in the form of Harvard economist Kenneth Rogoff. His 2016 book The Curse of Cash urges the US Treasury to remove $100 and $50 bills from circulation as a way to reduce crime, money laundering and under-the-table payments to off-the-books workers. Rogoff insists he’s not engaging in a war on cash, an argument these two critics clearly aren’t buying.