Cashless society?

[jennypenny]

The idea of eliminating paper money has been in the news a lot lately. Like most of you, I plan to get by on a very low SWR. I've thought about different issues that would affect my ROI like inflation, deflation, ZIRP, taxes, banking limits, etc. I've also planned for a temporary ban on cash withdrawals. I've never planned for living in a cashless society.

It's pretty easy to envision. I'm just trying to think through the ramifications, especially for ERE. Negative interest rates are the biggest concern. The other that I don't like is the ability for an arbitrary haircut on savings accounts to pay for debts (state or federal).

Here's a Bloomberg piece ... http://www.bloomberg.com/news/articles/ ... olish-cash
and Zero Hedge ... http://www.zerohedge.com/news/2015-04-3 ... talitarian
and the Rogoff paper referenced in the article ... http://scholar.harvard.edu/files/rogoff ... c13431.pdf

I'm not looking to start a political or Keynesian/Austrian debate. I'm just curious if it would change anyone's financial plan. I hate the idea of being forced to 'invest' to maintain my SWR. Kinda takes the "S" out of it.

[J_]

I understand your worries. And I see no escape if your "ifs" should occur.
As it happens I accept to go without the S, in other words to use my capital itself.
But I have also alternatives, because I can still reduce my spendings (a lot).
Life is never "safe", but you know that already very well.

[Ego]

Sounds to me like a solution looking for a problem.

[jacob]

"Let us control the money of a country and we care not who makes its laws."

[tylerrr]

The idea of eliminating paper money has been in the news a lot lately. Like most of you, I plan to get by on a very low SWR. I've thought about different issues that would affect my ROI like inflation, deflation, ZIRP, taxes, banking limits, etc. I've also planned for a temporary ban on cash withdrawals. I've never planned for living in a cashless society.

It's pretty easy to envision. I'm just trying to think through the ramifications, especially for ERE. Negative interest rates are the biggest concern. The other that I don't like is the ability for an arbitrary haircut on savings accounts to pay for debts (state or federal).

Here's a Bloomberg piece ... http://www.bloomberg.com/news/articles/ ... olish-cash
and Zero Hedge ... http://www.zerohedge.com/news/2015-04-3 ... talitarian
and the Rogoff paper referenced in the article ... http://scholar.harvard.edu/files/rogoff ... c13431.pdf

I'm not looking to start a political or Keynesian/Austrian debate. I'm just curious if it would change anyone's financial plan. I hate the idea of being forced to 'invest' to maintain my SWR. Kinda takes the "S" out of it.

That Zero Hedge article is truly frightening to me....It really shows the extent to which big government will go to get complete control over people's lives.

This is why I will always lean libertarian and against collectivist, big government political parties. It is truly maniacal the way these people consistently try to control every aspect of your life, abuse you, and steal from you. "Control freak" doesn't even begin to describe the psychosis of these people running big state governments.

Making us into a cashless society is a truly devious way of stealing more from us and controlling us even more.

You have groups of maniacs in these governments, including the United States, constantly thinking of ways they can slip in new hidden taxes that the average idiot in the street doesn't notice and other ways to control you. Why? Because they "know what's best for you" and you should do what you're told.

[henrik]

I'm just curious if it would change anyone's financial plan.

The obvious thing that comes to mind is to try to become/remain dependent on currency (electronic or otherwise) as little as you can. In other words, take the financial out of the plan as much as possible:)

[jacob]

Yeah, maybe something like ERE ... that could work!

Ultimately, the goal would be only having the investments generate the income to pay the taxes and "unjust"(*) insurances. Using it to cancel itself out so to speak.

(*) E.g. the insurance necessary to cover "corrupt" prices like $100k medical bills and $10M "hot coffee" lawsuits.

[reepicheep]

This episode is worth a listen: http://radicalpersonalfinance.com/survi ... s-rpf0102/

[jennypenny]

I've received another 19 emails from (admittedly) prepper friends about this topic. They've included links to new limits for cash transactions including CC payments, forex transactions, deposits, withdrawals, and simple purchases. I realize it's the prepper topic du jour, but it does have me staring at my accounts this morning wondering what kind of effect it would have and how I might position myself differently wrt asset management.

And I did reread the Gold Confiscation Act of 1933, mentally inserting "paper currency" and "coins" for their gold counterparts. Interesting.

I wonder if going to a cashless society would affect or frighten most people, since so many are already used to living that way? Even if a person/family doesn't consider themselves as living paycheck-to-paycheck, they probably still function in a kind of just-in-time financial system, where the money is in and out almost instantly (half of the time, right on their own pay stub). If they are on some form of assistance or don't have any savings at all, they might even resent the objections of people who have savings accounts.

[Chad]

...new limits for cash transactions including CC payments, forex transactions, deposits, withdrawals, and simple purchases...

New limits in the US? Also, are these limits or just an amount the company has to report to the government? I'm not too concerned with the CC payments, forex, deposits, or withdrawals. Those all already have an electronic piece you can't avoid. Simple purchases is the only possible issue and it would be a future issue under a more totalitarian government.

Some times I'm more worried about the people worrying, than I am about those being worried about.

http://www.reuters.com/article/2015/04/ ... O320150429

[Ego]

There is already a place in the U.S. where currency is illegal. Prison. Yet prisoners manage to use cigarettes as a means of exchange. Where there's a will there's a way. I expect the same would happen if currency was outlawed. China or Russia or Cuba would refuse to go along and we'd all be using yuan or rubles or pesos or US postage stamps or winning lottery tickets instead of cash.

[DSKla]

I agree with Ego that it seems like a cashless society would give the government less control of our money in the longrun, as we would just adopt some new form of currency. Just about anything that is finite and in-demand can be a currency. Even if using a substitue currency was made illegal, it would just be more of a pain in the ass than a control. Anything that people want will have a market for it (alcohol, drugs, weapons, nylon stockings, cigarettes), and if it's illegal there will just be a black market. It doesn't seem smart to set up a situation that would reward people for creating their own subtitute currencies, or bartering directly without any currency in the middle. Why wouldn't be just use the digital currency to buy physical goods and exchange those tax-free? Would the government just set up a Bartering Enforcement Agency (BEA) and spend hundreds of billions of digital dollars to fight the war on exchanges-without-an-electronic-dollar-medium?

[Dragline]

Interesting article about how digital currency is being used to circumvent currency controls in Argentina:

http://www.nytimes.com/2015/05/03/magaz ... .html?_r=0

[5to9]

I'm a bit confused here. What are the scenarios where this should impact my finances? I already rarely carry cash, and probably couldn't scrounge up more than a few hundred bucks in cash around the house. This is not to say that I am in any way paycheck-to-paycheck, I have plenty sitting in my checking account, I just don't keep in in physical cash.

Am I missing a subtlety where they are also talking about making savings/checking accounts illegal? How do they see society functioning then?

I can see the reasoning behind holding commodities/gold/etc., but if you don't trust the government, why do you believe the cash that they print would protect you from them?

[Dragline]

Legally, bank accounts and brokerage accounts are relatively easy to attach/freeze. So cash is the way to go if you are concerned about legal/governmental interference with your stash.

This is why you always see stacks, boxes and briefcases full of cash in any movie or show involving illegal activity. It's just more difficult to find and trace. This is how its actually measured: https://www.youtube.com/watch?v=QA8GBPrGfgc

[Ego]

WRT how cash acts as a store of value, I would think that eliminating cash would spark an interest in alternative currencies among those who never really cared all that much about them before and thus would begin the napster era where everyone does it.

[Chad]

Outlawing cash would also make it more difficult for the dollar to remain the world's reserve currency. Losing it's status as the reserve currency is the last thing the government wants.

WRT how cash acts as a store of value, I would think that eliminating cash would spark an interest in alternative currencies among those who never really cared all that much about them before and thus would begin the napster era where everyone does it.

That would definitely happen.

[5to9]

Interesting. I guess I just always figured USD denominated assets were equally subject to the whims of a government. I understand the harder to track piece, but I didn't figure major illegal activity or tax evasion were core parts of anyone's ERE strategy here

As far as it sparking interest in alternative currencies, that would be interesting to see how it would play out. Would it make them the defacto currency of criminals? Are they already mostly there?

[5to9]

Outlawing cash would also make it more difficult for the dollar to remain the world's reserve currency. Losing it's status as the reserve currency is the last thing the government wants.

Can you explain this? Do foreign countries actually hold piles of physical dollars? I did not realize that was how it worked.

[Chad]

@5to9
I'm not suggesting their are piles of dollars in Chinese, Japanese, European, etc. government banks. I'm only suggesting a government decision to outlaw cash/dollars would be another reason to give up on the dollar as a reserve currency. It wouldn't be THE reason to give up on the dollar, just A reason. If China wasn't rising and Europe wasn't united into an economic zone, it wouldn't be an issue. But, there are other options for a reserve currency now other than the dollar. These currencies are already pressuring the dollar. No need to put more pressure on the dollar with a needless no cash policy.

For instance, every black market/illegal market in the world operating in dollars would immediately stop using dollars. This would be a much bigger change than most people realize. It probably wouldn't be enough to topple the dollar from it's reserve status, but it would definitely eat away some of the foundation.

Basic inconvenience is another reason.