Is Cashless Economy a Good Idea?

Since long world government institutions like the IMF (International Monetary Fund) and the central bankers are pushing for an idea of a cashless economy (Agarwal et al., 2015). Harvard university Keynesian school economist like Kenneth Rogoff wrote a book on the subject The Curse of Cash! India’s popular prime minister Narendra Modi went as far as to implement this idea on 1.4 billion Indians when he banned the use of 500 and 1000 rupees notes in 2016 under his plan of demonetization. One of the goals of that plan was to make India a cashless economy. Although that plan hasn’t materialized in that most of the cash that he took out of circulation was back in the economy after two years. But global authorities and the Indian government have not given up their goal of a cashless economy. Now under the disguise of the Covid-19 pandemic, they are again pushing for a cashless economy. Their argument for banning or discouraging the use of cash now is that, currency notes are a potential carriers of the Coronavirus! The Indian central bank RBI, keeping aside its role of a central planning monetary authority, temporarily assumed a role of an health expert and made this comment,

RBI had affirmed the possibility of currency notes as potential carriers of novel coronavirus and demanded government incentives for digital payments.

in order to limit the coronavirus pandemic, the public can make payments by sitting at homes through various online digital channels like mobile and Internet banking, credit and debit cards etc and avoid using or withdrawing cash to the extent possible.

So why are the authorities around the world pushing for this idea of a cashless economy? Why do they hate cash so much? Let’s see.

Why they want a cashless economy?

In his book The Curse of Cash, Kenneth Rogoff lists down some major reasons why governments and their central bankers want to eliminate the use of cash. These reasons are as follows,

The use of cash to facilitate tax evasion and to by-pass government regulations

Here’s Rogoff,

The largest holdings and use of cash in the domestic underground economy likely derive from residents of all types (e.g., citizens, green card holders, employers of illegal immigrants) who are broadly engaged in legal activities but who are avoiding taxes, regulations, or employment restrictions. These are mostly otherwise law-abiding citizens who engage in tax evasion opportunistically, because they know that by using cash, they can hugely reduce their chances of ever getting caught.

Outright criminal activities

Ken Rogoff says,

We next turn to the use of cash in outright criminal activities, both domestic and foreign. Criminal financing involves many modalities besides cash.


Rogoff says,

Another area where society incurs massive social costs is the use of cash to corrupt and bribe public officials. The social costs of corruption presumably are orders of magnitude greater than the scale of the bribes themselves, but even estimates of the payments are staggering.

Other reasons listed are, Human Trafficking; Human Smuggling, and Exploitation of Migrants; Terrorism, Illegal immigration and border control, Counterfeiting, and Public health,

In addition to facilitating criminal activities, used paper currency can be a vehicle for spreading disease. Researchers at New York University analyzed $1 bills and found evidence of thousands of microbes, including a wide range of bacteria, even some antibiotic-resistant ones. Though most people are aware of the hygiene problems associated with handling cash, one can imagine paper currency being an agent of transmission in some future pandemic.

Reading the last statement one wonders if the present Indian government is dancing on the tunes of these international forces. If not dancing then they are definitely taking a cue from books like Rogoff’s. The Covid-19 pandemic is a perfect pretext for the powers to be to grab more powers in the name of saving humanity from a mostly harmless virus. As the former Chicago mayor Rahm Immanual once said, government should never let a serious crisis go to waste! Covid-19 is a perfect example of this. And, what this also means is, government can create/manufacture a serious crisis to grab more powers to do things they couldn’t do without that crisis like banning the use of cash and making economy cashless for their own good.

Is this Cashless economy a good idea for we the people?

As individual citizens of different nation states, we can easily see that all above listed reasons are for government to increase its power and control over our lives. For common people, a cashless economy will be a disaster as that type of economy will be controlled by a totalitarian government. What Rogoff thinks is good for the government is not good for the common people, especially the productive tax payer. To understand this one has to understand the true nature of the state aka the government. As the German sociologist Franz Oppenheimer very eloquently explained in his book The State: Its History and Development Viewed Sociologically, human society is always divided between two classes of people. On the one side is those people who live their lives using economic means of productive work producing surplus goods, selling that surplus in the market and earning their living honestly in that process. On the other side there are those people who live their lives using political means of stealing/robbing others’ hard earned income. The state and all its officials, including intellectuals like Kenneth Rogoff, are part of the second group who use the political means of legal plunder. We can easily see that there is an inherent antagonism between these two groups of people in the society. If one gains then the other necessarily looses as the former gains at the cost of the latter. If a cashless economy is good for the government to increase their control over taxpaying citizens’ lives then that definitely means productive people and with them common people are going to suffer. Only state officials who are living parasitically will benefit, in the short run, from a cashless economy. In the long run a society of parasites will be doomed. Progress of human species demands that people using economic means should win in this battle of survival because without production, consumption, which is the final goal of all economic activities, will be impossible. The state will also be doomed if they keep on fleecing the productive people of the society because without them parasitical state cannot survive for long. With a cashless economy state officials will basically stab in their own back!

The program of cashless economy rests on a faulty Keynesian economics premise of government, and its socialism in the form of various regulations and controls on the market economy, is beneficial for all of us. This premise is faulty and wrong because, as the Austrian school economists like Ludwig von Mises and Murray Rothbard have shown, government’s central planning and its socialist calculation is simply impossible. That central planning will damage the economy and society and doom the country as history has shown us time and again. The best way to organize an economy is to go the free market capitalist way. Laissez Faire is the best policy to solve the economic problem of ‘what to produce, how to produce and for whom to produce’. Market’s price and profit and loss system is the best way to allocate society’s scarce resources where they are most urgently needed. Government is a parasitical institution feeding off the productive sector of the society and it can’t do any good in the end. It can only destroy our scarce resources thus by making us all poor, hungry and dead in the end.


The idea of a cashless economy only has one goal and that is to increase government control over the lives of ordinary citizens who are already burdened with all kinds of controls. All reasons listed by economist like Rogoff for a need of a cashless economy are actually a direct result of already existing strict government controls e.g., Rogoff, instead of planning and scheming to ban the use of cash, should ask himself, why otherwise law abiding citizens are avoiding paying taxes? There must be a reason behind that tax evasion. The major reason is because the tax rates are very high and compliance is very complex e.g., India’s recently imposed GST or the exodus of wealthy people from India and China or the state like California because of heavy taxes and more draconian regulations! The cannon of taxation says that taxes must be low and simple to comply. May be lowering taxes and making them more simple will result in more compliance if that is what the state officials want! Corruption is again a direct result of more government interventions in the economy. When at each and every step people will have to take permission of politicians and bureaucrats then that gives a chance to those state officials to demand money for pushing the file on next table. Government licensing bureaus are also used by business tycoons to eliminate their competition by giving bribes to politicians and bureaucrats. In such a suffocating socialist economy, as Mises said, corruption is actually the vent through which an economy breathes and survives. Ending government bureaus/departments will end corruption. Rolling back the government is the solution of the problem of corruption, but state officials will not roll back their powers. Illegal migration is also a direct result of draconian government powers in a country from where people are fleeing. Historically people have fled from an oppressive government to an area where governments are less oppressive. This means, ending government oppression will end illegal migration too. That will also end problem of border control. When Mexico or Cuba or Afghanistan or India etc. countries will be prosperous, no citizen of those countries will die to get an American passport. Also, when there will be no Western nation state waged wars in the Middle East, there will be no refugee and migration crisis in the West. And as far as terrorism goes, detailed researches of Prof Robert Pape show, the root cause of terrorism is foreign military occupation, which triggers secular and religious people alike to carry out suicide attacks. End that foreign military occupation and you end terrorism. Counterfeiting will also end if we have a world monetary system based on an honest money in the form of commodities like Gold and Silver. Counterfeiting results from the use of dishonest debt based fiat paper currencies of governments. And, central bankers printing these paper currencies without any limits is itself a process of counterfeiting because it robs people of purchasing power of their hard earned income. Will Kenneth Rogoff or world governments and central bankers call for ending the central banks to end the problem of counterfeiting instead of pushing for this idea of cashless economy? No. Because that will take away all powers from the hands of economists like Rogoff and governments.

All in all, a cashless economy if imposed, under the guise of phony reasons given above, will be a nightmare for common people. People will have no place to hide from the government officers who will be knocking on their doors to rob them of their hard earned income. At a whim of politicians or central bankers banks will lock our bank accounts depriving us of our livelihood as we are already seeing in the case of PMC bank. This idea of a cashless economy is a direct attack on our freedom, and so we all must resist it with all our strong resolve.

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9 thoughts on “Is Cashless Economy a Good Idea?

  1. Sakhi says:

    Why is that you consider whatever Mises said to be gospel and whatever keynes said to be outright bullshit.
    Also those thinkers that u follow were also humans and can make mistakes

    • Mises India says:

      Who told you that I consider whatever Mises said to be a gospel? Do you know everything about me? Mises and Keynes books are out there in open. Read them and decide for yourself. I don’t follow thinkers. I analyze ideas no matter who gave them. If they are sound then I accept them. If not I discard them. Thank you.

  2. Rohan Mehta says:

    Dr. Madhusudan, many intellectuals in India and other western countries have praised the models of Scandinavian countries as being Democratic-Socialism . Sweden, has nearly gone cashless and everyone is fine with that. Also, these countries have high tax rates. So, does it not contradict with your analysis about going cashless? People are fine with that approach, atleast from the outside. Hence these intellectuals and economists will push for cashless societies in the coming decades. What is your take? Thank You.

  3. Madhusudan Raj says:

    First, “Sweden, has nearly gone cashless and everyone is fine with that”. Not true. Read this: “But an opinion poll this month revealed unease among Swedes, with almost seven out of 10 saying they wanted to keep the option to use cash, while just 25% wanted a completely cashless society (

    Second, “Also, these countries have high tax rates. So, does it not contradict with your analysis about going cashless?” How does Sweden having high tax rate contradict with my analysis? Can you please elaborate?

    Third, which people are fine with that? Mainstream economist? Well, they sure are pushing for that idea and so I wrote this article analyzing their proposal. They will do what they have to to grab more power. What will decide the fate of this idea is whether people are okay with it. If people are okay being slaves then fine. Who am I to say no to that? I will like to keep my cash. They can have their digits. The problem is them imposing their idea of a ‘cashless economy’ on us by using the immoral force of the state, which was originally (falsely) designed to safeguard our “life, liberty and property”.

    Finally, read this article to remove all the myths about Sweden that you have in your mind: And with socialist policies of multiculturalism Sweden is a mess right now with immigrants spreading havoc everywhere.

    • Rohan Mehta says:

      Thanks for replying, Dr. Madhusudan, I am not an economist but I have an interest in this subject, I read extensively on economics and economic thought. Earlier I was convinced that Marxist economic system of strict distribution was actually the most superior way of economic organisation and every country should follow it (I was in my teens and had idealist tendencies) but slowly with self-evident truths revealing themselves when I read more and more actually found out that it is the “state” which is the root of problems. People harp on the difference between “haves” and “have nots”, but actually the state itself creates these classes with politicians and bureaucrats being the “haves” and the rest being the “have nots”. The problem is I do not find enough material which backs Austrian and classical economics. All modern articles in economic magazines, journals and newspapers are highly biased towards Keynesian as if it is the only panacea for our economic problems. I am still learning this subject. MisesIndia provides some fresh air into this stinking and stagnant economic intellectual atmosphere.

      I apologize for not elaborating my point about high taxes. What I meant was that, what I felt by reading these modern articles, that people of these Scandinavian countries are fine with cashless societies and high tax rates. They have accepted it. I assume that they are rational enough to distinguish between good and bad, hence both these factors have been introduced with the concurrence of people, therefore, it seemed to contradict your analysis on cashless societies. Also, what are views on crypto-currencies? I do not understand this but its proponents have argued that it is better for transactions as state does not regulate it. So, by their logic will this not be a case in favor of Cashless transactions? I am confused. Thank You.

      • Mises India says:

        Dear Mr. Rohan, I am glad that you are doing your self studies and learning the Truth and Mises India is of some help to you in your endeavors. As far as Sweden goes, I gave you the survey evidence that many Swedes are not okay with the cashless economy.

        I do not endorse Cryptos as of now as they are purely speculative bits in virtual world. I like Gold and Silver which I can hold in my hands. State does regulate it and people like Ross Ulbricht is in jail for possessing it. I don’t know how it is better for transaction. Indians are attracted to it when it started going up in price, which is that pure speculation. I am following it since its inception but never got convinced. A digital gold/silver will be a much better alternative; that digital gold system can use blockchain technology. A bitcoin is nothing really. A gold backed bitcoin will be the real deal. Bitcoin can be a currency then, but not money because no one is using it in exchange right now. Most want it to flip it for the fiat currencies.

        I am not against the idea of Cashless economy per se and I have said that in past. All these technologies are great if the state is not hijacking them to enslave us. I personally love plastic cards. The only problem is the statist system of FRB and Central banks make it more dangerous for us. A free market system using digital currency backed by gold will be very convenient indeed.

  4. R C says:

    Am I logically correct and Rigourous?

    Problem with government digital currency.
    The Regression Theorem, first proposed by Ludwig von Mises in his 1912 book The Theory of Money and Credit, states that the value of money can be traced back (“regressed”) to the goods and services it obtains. Traced back means accurately accounted for backwards in time.

    Every excess printing of money is infact new money. It’s not just change of sign of RBI governor. It’s average of new notes plus old notes at any given time..It’s average metallic value of coins should not be higher than its nominal value – else it gets melted. Coins disappear from circulation creates coin shortage putting brakes on new paper currency which is printed.

    Government Digital currency in absense of metallic coins loses its above stated regressive property.

    It will then widely fluctuate in value like Cryptocurrencies do wreaking production.

    Metallic coins give value to paper currency.

    • Mises India says:

      Regression theorem states that value of money can be traced back to monetary commodity’s use as goods by people and not in other goods it obtained; it can’t obtain anything as money before becoming money. For example, before gold became money, it was used as ornament for many years and desired by all (what Menger called, high saleability). You should read Menger’s Origin of Money. So your understanding of regression theorem is flawed.

      Metalic coins are money. On behalf of which currency names like rupee notes circulate in the market for the sake of convenience. We can have Digital gold crypto currency easily. All problems solved. Market can provide it. But central banks won’t allow and so central banks must first go.

  5. Pingback: On Government Digital Currencies – Mises India

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