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We Are a Mostly Checkless Society – Should We Be Cashless?
I think it is nice to have more than one reason for making major changes in life. When I left the private sector and went to work for the federal government in 1971, I had two. I had been working in banking operations for a decade, the last six years developing software and converting and managing automated banking operations on mainframe computers. Now the American economy was slipping into recession and I was working for a small company providing automated services for mostly small banks, too small to operate their own mainframe computers and all the attendant requirements. I had three small children so having a secure and well-paying job was on my list of important things. I also had a vision, developed from the work I had been doing, that computers would enable the eventual elimination of much of the check-based financial operations. I wanted to be part of that show.
I took a computer specialist position with the then Federal Home Loan Bank Board (FHLBB), regulator for the Savings and Loans, at that time mostly existing to take savings deposits and make mortgage loans. Shortly thereafter, savings institutions, including credit unions, began encroaching on what had always been commercial bank territory — demand deposit accounts subject to withdrawals by check.
Friction between all these different types of institutions in the payments arena led to the creation of the National Commission on Electronic Fund Transfers in 1974. My serving as alternate delegate from the FHLBB to this commission gave me experience that led later to my selection as Administrator, Operations Planning, and Research Staff (OPRS) at the US Treasury, a position from which, working closely with the Federal Reserve System, other financial institution regulators, and representatives from the institutions themselves, I was able to fulfill my vision of working to take checks out of the payment process.
We were issuing 40 million checks monthly, most of those were Social Security checks issued all on the third of each month and delivered through the Postal Service. The Social Security application was the first converted to Direct Deposit and delivered through the Federal Reserve System to the financial institutions all across the United States. Once this ‘critical mass’ was achieved, commercial businesses across the country were able to convert their payrolls and other check transactions to Direct Deposit and so eliminate even more check transactions. I later had an opportunity to manage and be responsible operationally for the systems I had helped develop when I was Director of the Kansas City Regional Disbursing Center and later as the Chief Disbursing Officer in Washington overseeing all federal disbursing.
One of the biggest cost-savings effects of this change is the fact that the transactions are now only required to travel in one direction (credit transfers) instead of a check going out in the mail, for example, requiring deposit into a bank account, and finding its way back to the issuer through the check clearing system (debit transfers), with the added burden on the check issuers of reconciliation, determining which checks have cleared and been paid and which are outstanding.
That is the checkless society. What about the cashless society?
The credit and debit cards, many issued through banks, have supplanted many of what were formerly cash transactions. So cash transactions are way down. Recently there has been a coin shortage and some businesses are having to make adjustments to accommodate that.
Over recent decades the composition, nature, and function of our banking institutions has changed. We have the big five, too big to fail, and many Americans don’t think there are banks that serve local community businesses as they should.
What can happen if we go cashless? One thing I always think of on US currency: This note is legal tender for all debts, public and private.
There are various entities (platforms on the internet) that offer automated (cashless) payment service-but some of these are refusing to process payments in certain situations. That won’t do in a cashless society.
And here’s one that is really troubling. With the problems caused by the pandemic and the shutdowns, the Fed has been dumping money into the system. Anyone notice the drop in your deposit interest rates? If we go completely to a cashless society, will the banks implement negative interest rates effectively charging their deposit customers for maintaining liquid balances?
Some of these current trends are giving me pause.
Published in General
They say, “write about what you know,” so I will only speak of my own hoard of gold and silver coins, such as it is or will be.
What will happen to my hoard of gold and silver coins is that it will disappear as if it were rusting and being eaten by moths, sifting through my fingers and blown away by the wind.
And then when I am called before G_d in judgement, I will weep, because I believed in my mind that…
and even that
and that I should
and should
and should
…but I did not live out this knowledge, instead keeping it stored up inside.
OK, I misunderstood what you were saying. I retract the Comment.
I always appreciate @markcamp‘s posts and comments. I must say here though that I, and I suspect many here, have no love of money but see some form of money as required for the normal interaction among individuals, that of trade. We do not favor the concept that the facilitation of trade transactions should always be done under the purview of government. We simply recognize individual liberty and that means two or more individuals can trade freely without any government intervention. It is clear, as Mark has pointed out, that the connection of our government’s taxing authority to our monetary transactions is a death knell for individual freedom. This must change.
Wasn’t actually a serious question, selling would deny the purpose in their acquisition, which is still appropriate
Yes. Hence my comment. However, if they were bought for purposes of capital appreciation, the answer might be different.
Bitcoin is pseudonymous, not anonymous
Cash is most anonymous unless the bills are marked like in ‘fast and furious’
Gresham’s law is bad money drives out good money?
I can’t remember if Mises believed this so correct me if I’m wrong…
My problem with Mises and his cult followers is they believe all fractional reserve banking is fraudulent and therefore must be abolished
That view is naive and problematic in many ways
When did Benjamin Franklin become the largest limit?
When did we get rid of the 500 dollar bill?
1000 dollar bill?
or hell even the 2 dollar bill?
can you give a simple example to illustrate this point?
explain to me like I’m in the 5th grade
NO
we should not disable electronic money transfer
that is different from saying we should go cashless
Ironically, printing paper is easier than minting coins
If you need to send money abroad, I highly recommend Transfer Wise.
I sent 500 bucks to South Korea using Transfer Wise.
It took 2 hours. Fees were minimal, I think 5 or 10 bucks.
All online, no phone calls, no paperwork, no one asking you annoying questions or signing forms
https://transferwise.com
I believe it runs on SEPA which is faster and cheaper than SWIFT
2 friends who regularly send money abroad recommended it to me.
I have a stupid question: what is EMP? I’m terrible with acronyms
electronic money (fill in the blank)?
Euro monetary policy?
Even if US government imposed a ‘cashless’ society tomorrow, there would be a black market ‘cash’ economy for those who don’t want all their transactions monitored by the (deep) state.
Are we assuming United States federal government-sanctioned cash is the only cash? How about cash issued by other entities? In the past, local banks and other institutions issued “cash.” If the U.S. federal government stopped issuing or backing “cash,” perhaps that creates an opportunity for other institutions?
Buy ammo.
Pseudonymity is a choice.
I took it to be Electro-Magnetic Pulse that knocks out all affected computer systems and is a great threat in cyber-warfare for locations with heavy dependence on computers.
I’m not super informed in this area, though I did see the advantages a cash society over cashless if you’re trying to circumvent or hide from the government.
There’s a reason illicit drug dealers dealt in cash and why U.S. cops had the authority (if not the right) to confiscate large bundles of cash without due process.
But there’s also a reason why ransomware thieves demand cryptocurrency (usually Bitcoin) now. And probably other illicit organizations are also using cryptocurrencies over cash as well.
There’s a good chance that if governments abuse their currency rights, too much they will pay a price. They paid a price when they abused their power over paper currency too when it mostly replaced gold and silver coins.
There’s always a way around things.
I’m not as doom and gloom over this as I used to be before Bitcoin.
BTW, while not an early adopter, I am mostly cashless now. Somewhere in my stuff there is probably a checkbook somewhere, but I haven’t written one in years.
I don’t carry cash, and sometimes it can be embarrassing when cash is needed for a tip, though in most cases now you can tip without cash.
I do realize that if there’s a major breakdown in the financial system, not having access to an alternate way to grab cash could be a big problem.
On the other hand, if things are that bad, knowing how to hunt and fish is probably a more useful skill along with knowing how to barter.
Electro magnetic pulse.
Even, I believe, Sweden, which is essentially cashless — they even donate to street beggars by waving their phones in front of theirs — has within the last year advised all its citizens to store a supply of hard cash, because What if the power goes out for any period of time?
And print your bank statements….
Or, as France did a few years ago, they close the banks for several days.
A few years ago, my boss gave me a $5k bonus. We cashed the check and stored the money in an out of the way place, worrying about our ability to withdraw funds if the banks closed for a while. It’s still there.
You are wise to be concerned. The state, with the assistance of the second-hand dealers in ideas–the media, the establishment religious leaders, academia and the teachers’ unions, the “science” establishment, the PR departments of large and medium-sized corporations–can now manufacture emergency situations from life’s inevitable routine challenges, like seasonal viruses, at will.
This one looks like that.
Every couple days now, I experience a mysterious thrill made possible by the Like button.
Members I’ve not met–they’ve not authored an article nor a Comment yet–whose intriguing new monikers appear when my cursor hovers over the Like control.
Are we getting lots of new friends here?
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Appendix
I like Likes for different reasons. You can fill in the blanks, below, for your own Likes.
I like Likes anyway, for no reason; after all, they are all from a select group, the Ricocheteers. We all want to be Liked by the cool kids.
I like Likes from people like _____ and his counterpart _____. And the other two, the pronouns. These make me feel like one of the theological/intellectual set.
I would like a Like from _____ because it would make me feel like an eccentric observer of human society with a wide-ranging curiosity, but I guess eccentric observers of human society don’t issue Likes: too conventional.
I like Likes from ____, _____, and especially _____ (though I think there’s only been one from him, or maybe none) because it’s like Robin Williams catching your act and laughing hysterically.
And of course, I ALWAYS appreciate a Like from you, ____; you’re a rock, and you forgive me everything. And you, ____, you add some danger and mystery to the Ricochet experience. And ____; you may brag a bit but you can back it up 110%, and you appreciate guys who are as smart as you even if ever so slightly less tough.
I like the Likes from those who never agree with me, like ____. I like the Likes I get from people I’m afraid I’ve harshly criticized, and lost forever as friends. These give me a peculiarly good feeling about humanity, and about being an ok person after all. I can think of _____ doing this a bunch recently but there are others.
Two dollar bills are still a thing. I read an article a while back about cash min-maxers who only carry 50s and 2s. 50s to pay for stuff and 2s for tips and such. The rarity of the two makes you more memorable and helps you get better service.