Posted 8 months ago | by Ben Armstrong
Going Cashless – It Probably isn't Going to be Great
There is a big gap between digital assets and a cashless society.
In the wake of the COVID-19 political nightmare, calls for advanced societies to get rid of physical cash are on the rise. The technocrats love this theme – and they are likely to push this program no matter how ridiculous things become.
The idea of a cashless society is loved by the government as it totally removes the idea of individual assets from the social contract. Money – in its modern form is a very new idea. Fiat currency has been used in the past, but it generally doesn't last more than a few decades.
US dollars have probably been able to buck this trend because of political factors, although the world's most used currency is likely to be living on borrowed time. All that aside, once the central planners decide to roll out a cashless society, we will see how poor a system central planning can be.
Cashless Means No More Rights
In essence, a cashless fiat currency system puts total control over ownership in the hands of whoever controls the system. In the modern world, central banks would likely take on this role, which would probably be terrible for the majority of the population.
As people have little understanding of how money actually works, it is likely that whoever is behind this push for a cashless society will be able to remove peoples' ability to have private assets.
While people could still own things like real estate and equities, the transfer of these goods would have to be done in the national currency – which means that the state would act as a gatekeeper for all commercial transactions via the currency system.
Many People Will Resist
Just because people are willing to use cards and payment apps, the transition to a cashless society may be much more difficult than the central planners may imagine. There are many businesses that need to be able to move value internationally, which will create competition among currency regimes.
In order to stop this from happening, governments would have to use capital controls, which are generally not effective for larger entities. Smaller economic actors might be drawn to decentralized assets, as they can be used both locally and globally – and aren't controlled by any government.
We can already see this kind of dynamic unfolding in Venezuela, where an ongoing economic crisis has forced people to abandon the national currency in favor of just about any other kind of asset, as the Venezuelan government has shown itself to be terrible at managing the economy.
These Plans Generally End in Tears
It would be difficult to find an instance in history where this sort of shift to a wholly fiat currency worked for any amount of time. Of course it may work in the short run, but as the fall of the USSR demonstrated, no centrally planned economy will be able to survive on an indefinite basis.
The move toward a cashless society may take root in some nations – but it is not going to become a new global financial system. Much as the EU has struggled to remain viable over the span of just a few decades, the move towards a digital fiat monetary order will bring substantial problems and resistance.
It would be a very good idea to learn from the long suffering Venezuelans, and have a plan b in place. The governments and central banks won't be there to help you when their plans go terribly wrong, and there is no food to eat. This might sound like hyperbole, but these situations are all too real.