A Cashless Society: Orwell's Perfect 1984 Scenario
"In the mind of an economic tyrant, banning cash represents the holy grail." --Michael Krieger
When authoritarian government wants to exert a new dictatorial program, it's often first floated in reduced or localized form so as to observe public reaction. The "bail in", forcing depositors and investors to bear the losses of a failing financial institution, became news in 2013 when many depositors in troubled banks on the island nation of Cyprus literally had money in their accounts confiscated while a "bank holiday" was declared. Googling "Cyprus bail in" garners more than 400,000 hits, so there is detail for anyone interested. As a practical matter, though, for depositors whose accounts were given a "haircut", it amounted to legalized theft.
The bail-in story was mainstream news for a week or so, then essentially disappeared. Something that happened on an island the size of Connecticut far, far away wasn't a big deal for the public, although some did understand it as a precedent applicable to future situations and part of an emerging strategy to eliminate physical cash. To the extent that "money" can be confined exclusively within the electronic realm, cash, as material carried on the person, would become history.
Now consider the concept of "negative interest", such that one's savings account, rather than accumulating interest actually gets a periodic reduction "" as a sort of economic punishment for not spending money." Negative interest rates are a powerful control mechanism for central planners to discourage "excessive" saving and to promote spending as a path to stimulating the economy.
But the twin prospects of bail-in and negative interest have diminished public trust of the financial system even further, so that the withdrawing and stockpiling of cash is on the increase . Because such hoarding is counter to the interests of the masters of monetary policy, there is a growing movement within financial circles to do away with cash altogether, this to begin with large denomination bills. Earlier this year, Lawrence Summers, a former Treasury Secretary and director of the White House National Economic Council, published "It's time to kill the $100 Bill " in the Wash ington Post, that prime launch pad for governmental intention.
There is no more prominent advocate for "phasing out anonymous paper currency" [yes, "anonymous", his choice] than Harvard professor, Federal Reserve board member and International Monetary Fund economist Kenneth Rogoff , who objects to the fact that cash "handcuffs central banks". If the banks "try setting rates [i.e., interest] too far below zero", he worries, "people will start bailing out into cash." Rogoff claims that a cashless society would benefit everyone in that tax evasion would become more difficult, and criminal enterprise that thrives on bills would be thwarted. In fact, such a society would represent the last gasp of personal privacy. Rogoff, a chess grandmaster, has applied his intellect to the service of a cold theory of efficiency and regimentation that is at war with the creative, autonomous, democratic chaos of real life. Recently, he expanded his philosophy into a book, "The Curse Of Cash".
Point: We "ordinary people", of whom Lawrence Summers refers, are being "trained" to use cards -- credit and debit. It's an interesting but dystopian example of governmental modification of mass behavior, a little at a time. My credit union, for example, now provides a monetary incentive if I use my debit card a specified number of times monthly, and I admit to have fallen into line. Each month I'm reminded, like a kindergartener getting a gold star, that I've fulfilled the required number of debits. I must not be alone, because everywhere now I see cards rather than bills being presented at cash registers. How much more time and coaching would be needed before our use of electronic money is so ingrained that a final phasing out of paper money would be accepted by "ordinary people" without a riot ensuing?