This morning I received a concerned email from a fan who had seen a post on Facebook about how COVID-19 was being used to usher in a dystopian "Cashless Society" and wanted to know if they should buy Bitcoin to protect themselves. As a crypto enthusiast, I will be the first to tell you that I am indeed concerned about the government abusing the money supply and I always am excited when new people want to be involved in crypto. At the same time, I want people to become involved in crypto after making a rational informed decision, doing their own research, and properly evaluating the risks. Jumping into crypto out of fear without understanding how crypto works is a recipe for disaster.
As businesses refuse cash to fight the coronavirus, I can understand why some people believe that this is a sign of a greater plot to ban cash and lockdown civil liberties and economic freedom. Although I understand that concern, I believe that the viral post currently circulating on Facebook grossly exaggerates the situation, makes unfounded assumptions, and does a better job of promoting paranoia than it does of offering tangible solutions. In this post, I want to go point by point and provide a rational response to all of the claims in this Facebook post. Given that this is a viral post, I'm not sure exactly who created it, so I won't be able to give a proper citation. The first part of the post details all the things we will miss out on by having a cashless society, so I'll cover them first. The original article's points are denoted with an * and bold text; I have made no effort to correct the OP's grammar or change the post in any way.
*HERES WHAT NO CASH ACTUALLY MEANS:
*A cashless society means no cash. Zero. It doesn’t mean mostly cashless and you can still use a ‘wee bit of cash here & there’. Cashless means fully digital, fully traceable, fully controlled. I think those who support a cashless society aren’t fully aware of what they are asking for. A cashless society means:
* If you are struggling with your mortgage on a particular month, you can’t do an odd job to get you through.
This point is completely wrong and makes the assumption that a cashless society is equivalent to prohibiting self-employment. Even assuming that we had a 100%, centrally issued, digital currency, there's nothing to prevent you working for your neighbor or mowing your lawn. Even today, we can easily receive non cash payments through services like Cash App, Zelle, and the various cell phone payment applications.
* Your child can’t go & help the local farmer to earn a bit of summer cash.
By definition, if we don't have cash, then a child could not receive cash for working. However, this does not mean that they couldn't receive payment in exchange for working for a farmer. They could still be paid via electronic means, a share of the produce, the parents could receive the payment on their behalf, etc.
* No more cash slipped into the hands of a child as a good luck charm or from their grandparent when going on holidays.
This point is closely related to the previous point. True, a child wouldn't be able to receive an actual dollar bill. However, they could still receive a gift card, check, money order, or perhaps at some point, even a scannable QR code that would instantly deposit funds from their grandparents' account into their account.
* No more money in birthday cards.
See the previous two points.
* No more piggy banks for your child to collect pocket money & to learn about the value of earning.
This point is partially correct. If we don't have a physical currency, then obviously a piggy bank would be irrelevant. At the same time, just because we don't have a piggy bank doesn't mean that we can't teach children the value of earning. Trust me, children these days are experts at technology, and they all know how to acquire virtual currency in their favorite video games. They understand the importance of saving their credits to buy power-ups, special weapons, and different skins for their favorite characters. If they can understand this, then it's a simple transition to show them how a bank account works.
* No more cash for a rainy day fund or for that something special you have been putting $20 a week away for
This argument confuses form with function. Just because I don't have some paper currency and copper coins sitting in a cookie jar doesn't mean that I don't have a rainy day fund. In fact, it's even easier to automate saving with online banking. I could simply set up an additional savings account labeled “rainy day fund”, and automatically transfer $20 every paycheck
* No more little jobs on the side because your wages barely cover the bills or put food on the table.
This argument makes a pretty big leap by assuming that once we have electronic payment methods, we will suddenly be barred from taking a side job. Even in the event of a completely cashless society, individuals would still find ways to exchange and barter services. To "put food on the table" I could still work for someone on the side, but instead of receiving cash, request that they pay me directly in flour, corn, beans, etc.
* No more charity collections.
Again, this confuses form and function. If we don't have cash, I couldn't put a few bucks in the Salvation Army can, but I could still donate. I'm pretty sure that almost every charity in existence already has a way to receive electronic donations through their website. Even if cash was completely banned, that doesn't mean the Salvation Army bell-ringers would go away. They could simply have a QR code on the bucket that donors could scan in their phone and use to deposit funds directly to the charity.
* No more selling bits & pieces from your home that you no longer want/need for a bit of cash in return.
Someone needs to tell them about e-Bay where millions of items are bought and sold everyday without the need for cash. If they are referring to holding a yard sale, then using electronic transfers such as Zelle, Cash App, Google Pay, etc would all be valid solutions.
* No more cash gifts from relatives or loved ones.
As described previously, children can still get gift cards, checks, money orders, etc.
*What a cashless society does guarantee:
* Banks have full control of every single penny you own.
Don’t get me wrong, this is a terrible thought, but it is a bit of a stretch to say that just because a bank controls our assets it will abuse them. The electric company has complete control over my power and yet they didn't cut it off in the middle of the summer. The simple fact that a company has control doesn't necessarily mean that they will abuse that control, especially if they are bound by strict regulation and citizens have strong legal protections. Even today, the vast majority of financial assets (stocks, bonds, cash) are kept inside of banks. What percentage of your net worth do you currently keep in actual, physical cash? For me, it is well below 1%. Given that most of us already trust banks with the vast majority of our assets instead of holding everything in cash, I’d argue that we should be much more concerned with consumer protections and sound banking regulations than fretting over giving banks the remaining 1% of our assets.
* Every transaction you make is recorded.
This is possible, but not necessarily required. Even with cellphone records, we see that many companies have time limitations on how long they store data. At some point, it simply becomes cost ineffective to store data for no reason. As with the issue of control, the issue of privacy can be solved with appropriate legislation that protects privacy or mandates that records only be kept for a certain duration.
* All your movements & actions are traceable.
This is an incredibly sloppy argument and provides absolutely no rationale justifying how not having paper currency will result in your movements and actions being tracked. A cashless society would mean that your transaction history could be tracked, but any locations you went without spending money would not appear on your transaction history. Don’t get me wrong, I do support privacy, but a cashless society has less power to track our movement than our cellphone which tracks our every move even in locations that we don’t spend money. If we are concerned about a cashless society, we should be even more concerned about the misuse of our cellular data and location history.
* Access to your money can be blocked at the click of a button when/if banks need ‘clarification’ from you which will take about 3 weeks, a thousand questions answered & five thousand passwords.
These numbers appear to be made out of thin air and serve no other purpose than to make us feel helpless and overwhelmed. No bank will require 5,000 passwords and there is no evidence given as to why it would take 3 weeks to unlock funds. The fact of the matter is that banks can already freeze our assets. All this power that you imagine banks will have in the future, they already have. And yet, our funds aren’t all frozen. Why? Just as we have to follow the law, banks have to follow the law. Freezing funds has to be done in accordance with the rule of law, and if we want more consumer protections, that is a political issue that we need to advocate for regardless of whether we use digital currency or not.
* You will have no choice but to declare & be taxed on every dollar in your possession.
So, one argument against a digital currency is that we will have to follow the tax code and obey the law?? If we are already in compliance with the tax code, then removing cash should have no impact as far as taxation is concerned. If individuals are currently using cash to avoid compliance with the tax code and fear that digital currency will force them to comply, then that is more of a political issue (reforming the tax code) and a legal issue (tax evasion is bad).
* The government WILL decide what you can & cannot purchase.
The government already does this through laws and the police force. I think this argument is trying to insinuate that a cashless society would make the black market disappear, but I don’t agree. If a criminal wanted something illegal, they would just have to buy something else that the other party wanted and give it to them. It would be more inefficient than cash, but it would still be possible. As with the previous point, if you are currently trying to avoid the government telling you what to purchase by using cash to purchase illegal items, that is a political/legal issue. By arguing that you need cash to get around the government telling you what you can purchase, you are implicitly admitting that you would rather avoid complying with the law instead of working through the legal process to amend and change the laws.
* If your transactions are deemed in any way questionable, by those who create the questions, your money will be frozen, ‘for your own good’.
Again, this is a reason we need strong consumer protections and sound banking laws. If the government truly wanted to seize our assets for whatever reason, they could so through sheer force whether or not we have some scraps of paper in our wallet or not.
As an economist, crypto enthusiast, and lover of personal liberty, I want to see people take control of their financial independence and live in a society unencumbered by oppressive government interference and corrupt corporations. However, I don't think paranoia solves anything, and as I look at this viral Facebook post, I see a misunderstanding of what a cashless society really is. It simply means there is no physical cash. It doesn't mean we can't transfer value between individuals, and it doesn't mean the government will suddenly seize all our assets.
I understand the spirit of the post in that they are afraid of an oppressive regime, but I think they are focusing on the wrong question. This Facebook post confuses an economic issue with a political issue. The government prohibiting you from taking a side job, giving a birthday gift to your grandchildren, or shutting down your economic freedom isn't a monetary issue. It is a political consequence of an oppressive regime. History clearly shows that governments don't need a cashless society to oppress their citizens. Sure, having a discrete method to transact (cash,gold, cigarettes, Monero, Zcash, etc) might make it slightly more bearable to live in an oppressive regime by allowing individuals to occasionally skirt regulations, but it certainly isn't a solution. The real solution is to focus on establishing a society that recognizes individual rights, encourages economic productivity and freedom, and is governed by a stable and impartial rule of law.
The fact that we currently have a certain amount of economic freedom and liberty isn't due to the fact that 2% of our wealth is hidden in paper bills and coins. Rather, it is due to our representative form of government and the laws and legal protections that we fight (metaphorically) for every single time we head to the ballot box. If we want to protect our liberties and our freedom, it is much more important to focus on political solutions that honor and respect commerce and liberty than it is to worry about whether or not we will be able to keep scraps of old paper in our wallets.