A headline from Yahoo Finance article reads,
Notes From the WEF: Cash Is Dead, Long Live Digital Cash.
Consensus is building on one issue at the World Economic Forum in Switzerland: Cash is dead.
“Physical money is out,” said B.S. Kohli, an economic advisor to the head of the Indian state of Punjab. Mothanna Gharaibeh, Jordan’s minister of digital economy and entrepreneurship, agreed.
A few months ago one of Australia’s biggest banks ANZ stopped handling cash at its bank counters in many of its branches. In recent past the US central bank Federal Reserve has launched its experimental program of a digital dollar. The Indian central bank RBI has also launched a similar pilot project with its own digital rupee. Chinese central bank PBOC also has launched its pilot program of a digital yuan. The move by ANZ bank has been criticized by many as the beginning of the end of cash. Governments the world over, globalist institutions like the WEF, and their propaganda mouthpiece mainstream media outlets are pushing their plans of cashless societies, the program of central bank digital currencies (CBDCs).
First, as reported by MSN news ANZ has not stopped the use of cash but only switched handling of cash to its ATMs and other automated systems because over the counter handling of cash by its staff has reduced significantly due to people mostly using digital transactions in the post Covid world. It doesn’t mean the end of using cash in Australia.
But if we agree with the critics and assume that this small step by ANZ is a move towards worldwide ending the usage of cash then we also have to see how successful the global governments will be in ending the use of cash. Is cash dead? World governments and global elites can push their programs of ending cash but trying doesn’t automatically mean success. Human history is full of autocratic ambitious leaders trying to win, control, and rule the world. They all have tried and ultimately failed. It is true that in their efforts to control the world they have done immense damage to humanity, but that is the nature of our fallen world.
A sound understanding of the economic theory and history tell us that ending cash will be impossible because using cash is embedded in human action. Cash is defined as,
legal tender—currency or coins—that can be used to exchange goods, debt, or services.
Cash is also known as money, in physical form. (Emphasis added)
This means any commodity that market participants are using to exchange goods. It is not necessary to use fiat currency notes or coins. Before the advent of modern fiat paper currencies people used to use all kinds of commodities for facilitating exchanges e.g., cowrie shells, stones, cattle, animal furs, tobacco, cigarettes, and precious metals like gold and silver etc. All those monies are forms of cash.
The idea of legal tender has a built in theoretical and historical bias in favor of the governmental authorities. Cash is not only currency or coins issued by the national governments, but any physical commodity that market participants decide to use as money. As Carl Menger and later Ludwig von Mises explained, money originates in the market and not by some government fiat. Market participants will use any commodity as money which has highest saleability in the market. As Aristotle explained, any commodity with sound money properties will be used by people to facilitate their day to day trade.
The above discussion implies that it is impossible for the government to end cash (physical money as opposed to proposed digital currencies). Why is it impossible? Let us see. We all know that the defining characteristics of the human specie is ‘exchange/trade’ i.e., humans are the only species on Earth who exchange/trade goods with each other to fulfill their varied needs. Exchange/trade is the key to human existence, progress, and building of a civilization. Without exchanges the human existence will be very primitive and precarious. Exchanges are so ubiquitous and such an integral part of human existence that Ludwig von Mises defined economics as a study of Catallactic. After Mises, economists like Robert Murphy defines economic science as nothing but a study of market exchanges.
Praxeologically speaking, human beings act to improve their present dissatisfaction to better their future. This implies they will use whatever subjectively defined means possible to achieve their ends. If the government issued digital currencies will ease and facilitate their market exchanges then they will use them instead of cash. But if governments and global elites will try to use their centralized digital currencies to control market exchanges and human lives, human beings will find out some other forms of physical commodity which they will start using as money in the underground economy outside government controls. We already see this phenomenon all around us. The whole new world of cryptocurrencies came into existence to give people an alternative of the central bank fiat currencies which were losing their purchasing power. In India during its demonetization policy of 2016 many northeast states started resorting to the barter system.
As I said above, money originates in the market and not by any government fiat. Money is whatever the market participants are using as a common medium of exchange. If people living in a particular geographical area decide to use cigarettes as a common medium of exchange to facilitate their trade and survival then cigarettes will be money for them. If another area decides to use cowrie shells then those shells will become money. Most likely people will use precious metals like gold and silver as monies like they’ve always done historically. In the underground market all kinds of cash (physical money) will flourish to facilitate market exchanges.
No government in the world can fully control their subjects. The God given survival instinct in all of us is so deeply embedded that no government can extinguish that instinct completely. In today’s world we see different world governments themselves trying hard to ditch the dollar to facilitate their mutual trades which came under the attack of the US government! Life finds its way. Government rulers who think they are God will ultimately fail in front of His creation.
Apart from use of cash being the core of human existence, another reason why cash will never die is because use of cash has many benefits over the use of central bank issued fiat digital currencies.
First, cash transactions are private between the buyers and sellers. No governmental authority can track cash transactions easily as they do centralized digital currency transactions. Citizens who are worried about governments spying over them or tracking them for tax purposes will never give up their use of cash. As I have said above, even if governments force the use of CBDCs (Central Bank Digital Currencies) on citizens, they will find a way around and invent new monies for themselves.
Second, the use of cash is easy as it doesn’t depend on the use of technologies like the internet, mobile phones, or electricity. Cash is also more safe than digital currencies because for stealing cash thieves must physically come close to your property as opposed to digital currencies which can be easily stolen by online thieves and scammers from far away places anonymously. Use of cash doesn’t require any financial or telecommunication literacy as opposed to online payments using digital currencies. Using digital payment system is not easy as we see with instruments like credit or debit card, and UPI (Unified Payment Interface). User requires a mobile phone – which he has to register with the bank – and there are multiple layers of security features like OTP or grid scores etc., which are very time consuming and cumbersome requiring sophisticated level of understanding. Cash avoids all these issues. These reasons make cash more attractive compared to CBDCs.
As far as digital currencies are concerned they are not bad per se. Technology is neutral. It is up to human beings to decide whether they want to use the technology for a good or bad cause. Governments will always try to use technology to further their own interests at the cost of common people. But people will also resist and fight back to keep those controls away from government hands. Freedom ultimately wins and history is our example.
Global governments and their supporters can try to force people to use digital currencies but ultimately people will choose their own monies. People will stop using cash when they want to, not when governments want them to.