Some Push-back Against The Plan To Eliminate Cash

On the to-do list of the progressives setting out the steps needed to perfect the world, right at the top we find “Get Rid of Cash.” That makes total sense. Use of cash for financial transactions is the source and enabler of human sin and failing almost without limit. Our free exchange (aka “capitalist”) system gives rise to endless varieties of undesirable activities, ranging from the criminal to the sketchy to the non-virtuous to the icky. If only we had a world without cash, all transactions could be forced onto electronic payment systems where they could be continuously monitored by the forces of good. The undesirable ones could be identified and stopped. What’s even the argument against this?

I had a couple of posts back in 2016 and 2017, here and here, covering the advocacy of one particular know-it-all, Kenneth Rogoff, who was calling for the forced elimination of cash. Rogoff was far from a nobody in this debate, having been, among other things, Chief Economist of the IMF and a big-time economics professor at Harvard. Since 2017 I have not much covered this issue, but the advocacy has moved on well beyond even Rogoff’s dreams. During the Biden years the big idea became the “Central Bank Digital Currency” — replacement of our humble greenbacks with “digital” (electronic) currency issued directly by the Federal Reserve. Of course, Treasury Secretary Janet Yellen became a big promoter.

Over the near decade since I wrote those two posts about this subject, the use of cash has declined significantly, with the strong encouragement, although mostly not the mandate, of governments. The decline has been more pronounced in some countries than in others. In the U.S., data from the Federal Reserve indicate that the percent of transactions involving cash declined from about 35% in 2015 to only 16% in 2024. Two of the countries where use of cash has declined the most are Sweden and South Korea. According to the latest figures I can find (Sweden and South Korea, both 2023), the percentage of transactions involving cash is around 10% in both those countries.

Which makes it interesting that suddenly Sweden, of all countries, has caught on that elimination of cash might not be such a great idea. Here are two articles from March, one from The Banker (behind paywall) and another from The Guardian. Excerpt from The Banker:

Sweden is backpedalling on its decades-long push to go cashless. The [reasons are the] threat of war, coupled with concerns about “signals” from the US under President Donald Trump. . . .

From The Guardian:

[I]n the context of today, with war in Europe, unpredictability in the US and the fear of Russian hybrid attacks almost a part of daily life in Sweden, life without cash is not proving the utopia that perhaps it once promised to be. Such is the perceived severity of the situation that the authorities are trying to encourage citizens to keep and use cash in the name of civil defence. In November, the defence ministry sent every home a brochure entitled If Crisis or War Comes, advising people to use cash regularly and keep a minimum of a week’s supply in various denominations to “strengthen preparedness”.

The two articles put the reason for the shift as “war” or “civil defence.” That’s a very good reason, but it could be stated even more broadly: a fully electrified payments system is subject to what is called a “single point of failure.” When the electricity goes out, the means to make payments completely fails, and remains out of action until the electricity comes back on. That could be in an hour, or a month. Meanwhile, what? In a system without cash, there is no back-up.

What could knock the electricity out? War — hypothesized by Sweden as an attack by Russia — is one possibility. Hacking is another. Grid instability is a third, exemplified by the recent outage in Spain and Portugal. Those countries got their grids back up within about a day; but increasing penetration of wind and solar generation on grids in major countries significantly raises the likely frequency of such outages, and the challenges of recovering from them.

And then there’s the issue of surveillance. The whole electronic payments system is subject to continuous monitoring by the authorities, all done in the background without any notice to you that you are being watched. I am regularly amazed at the willingness of almost everybody to submit to this surveillance (which you can avoid every time you use cash). After all, the authorities would never misuse this information, would they?

If you think that the authorities would never misuse information gained from transaction monitoring for political purposes, you need to look at the “debanking” scandals of the Biden years. Here is a December 2024 piece from the Telegraph providing some details, and listing some prominent victims. Donald, Melania and Barron Trump — no surprises there. How about Nigel Farage, the likely next Prime Minister of the UK? And how about large number of prominent figures in the world of cryptocurrencies? Hey, the Bidenauts deemed the whole crypto thing to be sketchy. And besides, a lot of those crypto guys might be Republicans. Aren’t those reasons enough to banish the industry from the banking system? From the Telegraph:

The alleged debanking of crypto entrepreneurs comes amid a years-long crackdown on digital currency business and their billionaire founders. Under the Biden administration, US regulators have unleashed a series of civil and criminal lawsuits against cryptocurrency exchanges. Those prosecuting such cases claim they are simply enforcing regulation or crackdown on wrongdoing. Yet critics claim it is part of a broader effort to target political opponents. [Mark] Andreessen claimed that it is not only businesses that have been impacted, but “just generally political opponents”.

The general surveillance by the authorities of all of your banking and credit/debit card transactions takes place under the USA PATRIOT Act, passed in the aftermath of the September 11, 2001 attacks. On May 7, Congresswoman Anna Paulina Luna of Florida introduced a bill called the “Privacy Restoration Act” to end that. From Representative Luna’s statement on introduction of her bill:

“For over two decades, rogue actors within our U.S. intelligence agencies have used the Patriot Act to create the most sophisticated, unaccountable surveillance apparatus in the Western world,” said Congresswoman Luna. “My legislation will strip the deep state of these tools and protect every American’s fourth amendment right against unreasonable searches and seizures. It’s past time to rein in our intelligence agencies and restore the right to privacy. Anyone trying to convince you otherwise is using ‘security’ as an excuse to erode your freedom.”

Representative Luna’s bill is at least a small sign of push-back against the pervasive surveillance state. I am not expecting the bill to pass any time soon, but it is encouraging to see at least some small signs of resistance. Meanwhile, you too can push back by using cash whenever possible.