The slow death of cash

[GandK]

A World Without Cash

tl;dr The EU is heading toward decommissioning its largest Euro bill to "deter terrorism."

We've touched on the demise of cash and other forms of physical wealth (to include gold) in multiple threads over the last few years. I currently find myself on the fence about whether or not it's worth swerving for. Does anyone think this is a big deal, or think it's inconsequential? Anyone have a specific plan to deal with it?

[Dragline]

It becomes a big deal when there are negative interest rates, as currently in some European countries. Then you definitely want to hold currency over bank deposits. But 100s or their equivalent are probably good enough.

On the other hand, smaller denominations are better for when you want to take a "money bath".

[chenda]

The €500 note was always a bit of an anomaly so I don't see it as an indicator in itself of any decline in cash.

Unless you're into tax evasion I don't think any decline in cash transactions is likely to be a problem. Cash is not going to vanish anytime soon anyway.

[Toska2]

I think it's a big deal. $500 euros denominations is still petty cash for any dealer worth catching and prosecuting. It's casting a wider net than say, going after BMW M6 owners. I agree that drugs are a scapegoat with decriminalization and other contributing factors to usage. Terrorism by nature is done cheaply. I find our overzealous congress willing to destroy more of my tax money than any terrorist could, barring nuclear.

Since inflation is always desired, how long would it take for them to be reintroduced as needed?

As for a solution? Start a bank and deal with imagined "terrorists". We always need a scapegoat, why not profit?

[George the original one]

> Since inflation is always desired, how long would it take for them to be reintroduced as needed?

US gov't has not managed to issue larger denominations despite half century of inflation turning a $100 bill into 10 hrs of minimum wage work (used to be nearly a week's wage back when the thousand was available as currency). And wasn't there some talk of the $100 going away soon?

[slimicy]

I don't see this happening in the US anytime in the near future for two reasons:

1) It would destroy the homeless population's ability to interact with the normal world in a substantial manner. Unless Bernie is elected and we get a basic income and universal ID cards cash is just too important to a large portion of our society that doesn't have a bank account.

2) Hundred dollar bills are very useful. This may just be because I live in Las Vegas, but again there'd need to be a fundamental technological advance that makes buying chips as easy as slapping a $100 bill down on the table or the whole economy here would suffer.

[enigmaT120]

Can't you still get thousand dollar bills? I could swear I used a couple to pay for my CRX. Maybe I just wanted to and couldn't.

[George the original one]

Wikipedia, https://en.wikipedia.org/wiki/Large_den ... s_currency: "The Federal Reserve began taking high-denomination currency out of circulation (destroying large bills received by banks) in 1969, after an executive order by President Nixon. As of May 30, 2009, only 336 $10,000 bills were known to exist; 342 remaining $5,000 bills; and 165,372 remaining $1,000 bills."

Existing bills are still legal tender, but they're hoarded by collectors and smugglers

[Riggerjack]

I agree with dragline, cash is an important impediment to central banks use of negative interest rates. So, of course we have to associate it with criminals and terrorists...

Personally, I don't see negative interest rates as bad, so much as a natural expansion of bad monetary policy.

I dislike misinformation. Misinformation about money (as stated above) and misinformation about pricing (QE, etc). But my preferences are irrelevant.

Minor (less than 1%) negative interest rates wouldn't affect my investment choices much, anyway...

[Miss Lonelyhearts]

The New York Times recently came out in favor of discontinuing the $100 bill, following the E.U.'s example as mentioned by GandK. Although I'm generally agnostic/apathetic about my ability to hoard hard currency, I found the apparent shift in mainstream, "right-thinking" media-types startling.

@slimicy: you're right on both counts, but gamblers and the homeless are not traditionally courted by the monetary policy crowd.

[jennypenny]

I agree there will be a big push to eliminate cash for the reasons stated above. Also, electronic payments can be monitored and tracked, which means they would have a record of every purchase people ever made. Think of the algos that would be used to predict behavior based on that. I hate the idea for that reason alone. It would also mean that the system relied on power to function. That would put more strain on the environment and make it more susceptible to outages and cyber attacks.

Plus, it would put the tooth fairy out of business.

[vexed87]

The abolishment of the 500 Euro note is significant if central banks don't print an equivalent amount in smaller denominations. Don't quote me on it but I recall reading it was about 20% of value of all notes in circulation. This would be a clear indication of an attempt to phase out cash and not just make things harder for tax evaders and terrorists, whatever the percentage there will be a lot less money in circulation to hoard under people's floorboards and escape monetary policy.

Regardless of attempts to phase out larger cash denominations, inflation is doing the job of making the smaller denominations irrelevant too. Obviously the establishment would have us believe that inflation is low or isn't happening at all depending on how you measure it, however governments fudge tge figures and don't factor in asset inflation of house prices, land, equities, gold and other safe havens that are inflated every time Central Banks apply increasingly extreme stimulus/QE monetary policy. My wages certainly are not rising anywhere near the cost of housing, and the houses are not increasing in any meaningful measure of value!

It's a constant source of amusement that people blindly welcome the idea of banning cash, making the criminal and terrorist's lives harder without realising the impact on erasing their own liberties.

[chenda]

@Vexed87 I don't think anyone is seriously proposing banning cash. It's true I've never used a copper in years, although if inflation remains relatively low the smaller denominations will still be used for a long time to come.

[vexed87]

chenda, no not yet, because the banks with NIRP are not passing on the costs to the majority of consumers. Only if that happens will consumers prefer to start hold physical cash, then come the calls to ban cash or introduce capital controls.

[GandK]

Also, electronic payments can be monitored and tracked, which means they would have a record of every purchase people ever made. Think of the algos that would be used to predict behavior based on that.

This has always been my biggest problem with the idea, too. Being coerced into paying negative interest rates is a mosquito bite in comparison, although I'm not sure where that stops. How low can they go?

I do think physical cash will go away in my lifetime, just not sure what if anything to do about it planning-wise. This feels like seeing a wreck up ahead and saying, "Do we sit in traffic with everyone else, or do we get off the highway and potentially take twice as much time driving four times as far to avoid it?" G and I already experience eye rolling, etc. when we pay for things with cash. How long before there's a fee for cash transactions?

[vexed87]

How long before there's a fee for cash transactions?

There already is, it's covered in the price of your goods. Some's gotta pay the armoured vans that collect cash from stores

[henrik]

How long before there's a fee for cash transactions?

There already is, it's covered in the price of your goods. Some's gotta pay the armoured vans that collect cash from stores

You've also got to cover the costs of the banks charging merchants for payment systems and card terminals.

For practical purposes, I don't think getting rid of the 500€ note means anything. It's never really used in everyday life (I once literally got laughed at by a Lidl sales person in Germany when I attempted to pay with one). Even 200€ notes are rare. But whether it indicates a slow death trend, I don't know, but it's worrisome...

[stayhigh]

Getting rid of cash would be great intrusion into private life. Full exposure of all of your transactions, habits, what you buy, where and when you buy. Banks will decide about everything. 10% transaction fee on everything? No problem, you cannot use payment option other than through bank system. You lost your driving licence? So there is no cars or petrol for you, all transactions blocked by bank! Most of your groceries is not organic? So health insurance void! You want to buy red bicycle, but bank will refuse transaction, as red is the color usually associated with communism. You only can buy eco-friendly green one.

Sound like nonsense, but you can get an idea. Hopefully it won't happen...

How about Norway? https://www.rt.com/business/173564-norw ... e-country/

[The Old Man]

Eliminating cash assumes the electronic payment systems work flawlessly 100% of the time. This is an absurd assumption. While it is not common these systems do go down.

[Forskaren]

Here in Sweden cash is also getting used less. If you want to travel by bus, it is common that they will not accept cash payment.

Still, it exist events where they only accept cash as payment for food etc. Events organised by some small and local non-commercial organisation, can often be cash only.