Of the many quasi-utopian techno-political ideas we’ve heard bandied about in the past few years, the idea of a cashless society ranks right up there with universal basic income in terms of column inches devoted to it. And much like universal basic income, it’s beloved by liberals for a whole slew of reasons.
As The Economist points out, a cashless society would do away with any sort of privacy in financial transactions. Proponents say this could eliminate illegal black market economies, such as drug and human trafficking, or at least bring them under control. But it would also potentially bring every transaction you make, from lattes to lathes, under the gaze of the government.
Proponents also say eliminating cash would make central banks more adept at steering the economy through monetary policy, since no liquid resources would reside outside of banks and it could enable economists to experiment more widely with nontraditional policies, like negative interest rates.
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Other benefits include “security, lower costs, hygiene and convenience,” The Economist reports. Yes, complete oversight of every financial transaction that could ever possibly be made is a small sacrifice for not catching a cold from someone else’s dollar bill.
A cursory glance at a cashless society reveals why the idea is so popular among liberals. However, there’s one question that rarely gets asked when discussing this brave new world, but is being asked right now in Puerto Rico in the aftermath of Hurricane Maria: What happens when the power goes out?
(Check out some of the effects of hurricanes here.)
Ryan McMaken with the Mises Institute, an economic think tank in Auburn, Alabama, says it’s not a pretty picture. He pointed to Puerto Rico, where things were so bad that the federal government actually had to deliver a jet full of cash after Maria struck, according to Bloomberg.
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Bloomberg reported that bank executives “described corporate clients’ urgent requests for hundreds of thousands in cash to meet payrolls, and the challenge of finding enough armored cars to satisfy endless demand at ATMs. Such were the days after Maria devastated the U.S. territory last month, killing 39 people, crushing buildings and wiping out the island’s energy grid. As early as the day after the storm, the Fed began working to get money onto the island, according to a person with knowledge of the matter, who asked not to be named discussing the Fed’s preparations.”
As of Thursday, less than 20 percent of the island had electrical power, according to ABC, meaning many bank branches can’t open and ATMs can’t operate. That also means many Puerto Ricans find it impossible to engage in digital financial transactions. On an island with little potable water, and where people need to buy food and other necessities, that’s a pretty big deal.
“Puerto Rico has been fortunate that the United States, so far, has not attempted to implement many anti-cash measures that have been popular among central bankers in recent years,” McMaken wrote.
“Certainly, abolishing cash is likely to devastate a poor economy more than a wealthy one. A wealthy country, with more advanced and reliable infrastructure, and with greater access to resources in general, is more fully able to weather a shortage of physical cash, and natural disasters. Overall, though, going cashless makes an economy more fragile, and makes ordinary people sitting ducks whenever there is a natural disaster, or even worse disruptions such as wars.”
There are plenty of other arguments against the push for a cashless society, mostly revolving around creeping government intrusion into every aspect of our lives. The fact that it would let the current crop of central bankers, whose record in the face of crises hasn’t exactly been stellar over the past decade or two, implement even more exotic and untested regulatory vehicles to steer the economy should also be of grave concern.
But let’s forget about all of that. There’s only one thing we need to ask cashless proponents in order to completely destroy their arguments: “So, tell me — what happens when the lights go out?”
H/T Zero Hedge
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