Cashless Societies: How Realistic?
By Daily Bell Staff - December 28, 2015

In Sweden, a Cash-Free Future Nears … Parishioners text tithes to their churches. Homeless street vendors carry mobile credit-card readers. Even the Abba Museum, despite being a shrine to the 1970s pop group that wrote "Money, Money, Money," considers cash so last-century that it does not accept bills and coins. Few places are tilting toward a cashless future as quickly as Sweden, which has become hooked on the convenience of paying by app and plastic. – New York Times

Dominant Social Theme: Remove analog money ASAP.

Free-Market Analysis: Sweden is being touted as the wave of the future as regards money, but perhaps not.

When something is profiled in The New York Times, as the "new" cashless Sweden just was, we need to consider whether the trend is subject to change or is not so powerful as we are being led to believe.

One of the problems with seeing Sweden as a pioneer is that its population is fairly cohesive. In fact, Swedes constitute a good example of the tribes we often refer to in Europe. Europe is full of tribes. The French are notoriously tribal and it strikes us that the British fought two world wars to shatter Germanic tribal unity.

Years ago, we reported regularly on what would happen when "Europe" stopped being of benefit to the tribes. Because it has been disguised by rhetoric, people often don't understand why the tribes gave up so much including their ancient currencies to join Europe.

In fact, they were often bribed by pots of EU money that poured into the government to adjust unallowable deficits. The top elites pocketed this money and then went to work campaigning for EU unity. Once the EU agenda triumphed, those in power slipped away with the money and the larger population was stuck with an evolving authoritarian empire.

It was inevitable that the tribes, once lulled by good times and cash infusions, would begin to resent an era of "austerity" and impoverishment. What we didn't anticipate was that the European elites had an answer: Organize a mass Islamic migration (apparently this is what's going on) that would cause confusion within Europe's tribal countries and focus resentment away from Brussels and the monetary system and toward "Islamification."

It is true we didn't anticipate this breathtaking attempt at cultural reshaping but otherwise events are unfolding much as we expected. Sweden, though the Times article doesn't note it, is reacting much as we anticipated. While the Swedish intelligentsia has portrayed itself as shocked and dismayed, the "far right" has made enormous political strides in the country. Anti-immigration forces now reportedly support the country's third largest party.

The Times predictably ignores the political trends, however. It burbles on about Sweden's "tech forwardness" and the "personal safety" that a cashless society offers.

This tech-forward country, home to the music streaming service Spotify and the maker of the Candy Crush mobile games, has been lured by the innovations that make digital payments easier. It is also a practical matter, as many of the country's banks no longer accept or dispense cash. At the Abba Museum, "we don't want to be behind the times by taking cash while cash is dying out," said Bjorn Ulvaeus, a former Abba member …

Advocates like Mr. Ulvaeus cite personal safety as a reason that countries should go cash-free. He switched to using only card and electronic payments after his son's Stockholm apartment was burglarized twice several years ago. "There was such a feeling of insecurity," said Mr. Ulvaeus, who carries no cash at all. "It made me think: What would happen if this was a cashless society, and the robbers couldn't sell what they stole?"

Of course, this is hard to fathom. Ulvaeus may feel safer in his apartment but someday hackers may clean out his bank account or hijack one of his credit cards. Physical crime may drop even as cybercrime rises.

For some critics of the "cashless society," the reasons it is evolving are considerably more mundane than "progress" or "technology." It is the lower bound that is stiffening determination. As financial institutions are increasingly forced toward the "zero bound" by the failure of monopoly central banking, less-than-zero rates are being contemplated. And what's stopping the program is cash.

If you have the choice between storing your money at a bank – and losing a chunk of it every month to negative rates – and keeping your funds in cash … well, cash is bound to win. It's the reason Citibank's chief economist not so long ago called for a "ban" on cash.

Glenn Beck has been journeying in Sweden and through a third party is providing updates on his travels. A recent report contained the following information:

Glenn said Sweden is now at a tipping point where the Swedish people will be the minority within the next 10-12 years. "They're currently being taught that there is no Swedish culture — that's what they're teaching their students — there is no inherent Swedish culture," Glenn said … People are begging their governments, saying, "You don't understand, fascism is coming because you won't listen to the people."

This is exactly the point. One can speculate, as we have, that the social chaos and resultant authoritarian political movements are exactly what those in real power desire and expect. But such an evolution does not necessarily bode well for an evolving cashless society.

This is what the Times article misses. Restrict our observations to Sweden and we can surely suggest that if the political climate continues to fracture the current Swedish consensus, many Swedes may rethink their enthusiasm for government/corporate control over digital money.

In fact, while we don't expect Times writers to understand this, basic economics may cause the cashless society to founder. If one accepts that the zero-bound is a big reason for digital commerce, then people will gravitate toward cash simply to avoid negative interest rates.

No matter what proponents of the cashless society mandate, competition between negative interest rates and neutral physical currency (and perhaps precious metals) will make sustaining such a system difficult.

But even if such a society avoids negative rates, it is very likely that there will continue to be a significant demand for cash. With little restraining it from hiking taxes and passing more onerous legislation, governments will gradually make gray and black market activities more attractive.

People such as those that read publications like The Daily Bell will be the first to adopt private solutions that combat government invasiveness. It is inevitable.

After Thoughts

In other words, be careful what you wish for.

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