Published on The Doomstead Diner on December 22, 2016
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One of the hottest topics in Collapse Economics these days is the prospect of the "Cashless" society. Denmark is flirting with being the first country to go completely cashless, along with the other Scandinavian countries of Sweden and Norway.
In debates about the future of cash money, Denmark is often cited as the possible World’s first cashless society. Is that true? An investigation on the current state of cash in Denmark.
Cash is dirty.
Cash is expensive to print.
Cash is for criminals.
Opponents of paper money, such as established economists Bofinger and Haldane, have declared the war on cash. In 2016, this is more apparent than ever before. The European Commission for instance currently assesses a potential ban of the 500 Euro banknote, as “these notes are in high demand among criminal groups.”
More so the finger is often pointed to Scandinavia, to show how some countries are already on the move to become ‘cashless societies’ – to eliminate cash whatsoever. And Denmark could be the World’s first. Hold up – is that true?
Money is symbology for a credit system that allocates the resources available in a society. It can be just about anything, as long as what you choose as the physical symbol is hard to counterfeit. In Africa for a long time, Cowrie Shells were used as money. They were relatively rare and about impossible to counterfeit. Similarly, Gold and Silver have been used as the symbol, the metals themselves are elements and can't be counterfeited. However, they can be alloyed with other metals, thus debasing the coinage made with them. This was what the Romans did as their civilization collapsed. They weren't able to keep bringing in enough gold and silver to keep coining up to have enough money in circulation.
The metals are in relatively short supply for a growing population, and they tend to be hoarded as well taking them out of circulation. So in the modern era, paper money which was hard to counterfeit was developed as the currency and means of exchange. The way paper money is traditionally made hard to counterfeit is through fine engraving and special paper and ink. However, modern scanners made the engraving easy to duplicate, and if you have enough scientific expertiese and a big enough budget, the paper and ink can be duplicated as well.
Money originates in the banking system as credits and debits on a balance sheet. Then the bills get printed up, and each one has a Serial Number on it. At the origin point when it first gets handed out over the counter with fresh bills, the bank has a record of the serial numbers and the person that money was handed to. After that though, there is no keeping track of where those bills go or to who. In theory you could track it if in every transaction the serial numbers were recorded, but in practice that is never done, it's too cumbersome.
Because it can't be tracked, cash is very useful in the Black Economy, for things like drug deals and making bribes to politicians. Its also useful to hide your transactions from the Tax Man. If you begin to believe your banking system is untrustworthy or unsafe (they always are, but sometimes more than others), people start taking their money out of the banks and stuffing it in mattresses instead. This can make a bank insolvent, because it needs deposits as part of its capital. When you deposit your money in the bank, it becomes an unsecured loan to the bank, which they will then use as the basis for making other loans. Making loans and originating money is how banks MAKE MONEY.
So, as far as Da Goobermint and the Banksters are concerned, paper money is not very good. Da Goobermint wants to be able to track all transactions so they can be taxed and the Banksters want your money in the bank as much of the time as possible so they can use it for more lending. How can we solve these problems, they wonder?
Well, until the advent of the modern computer and the internet, it was basically an insoluble problem. However, once the communications systems were in place and enough places where transactions take place were wired into it, the possibility of being all electronic balance sheet transfers became possible. It goes back as far as the Telegraph and Western Union and the ability to "Wire Money". It further expanded with the Telephone, which made Credit Cards possible. If you remember back to the early days of American Express, if you used your card at a restaraunt they would call AMEX to get a verification, and once verified the transaction was cashless, going from your credit line over to the restaraunt's bank account.
At first, these credit cards were available only to the very rich, and few people used them. The verifications were done manually and when the restaraunt called for verification, there was a live person on the other end of the line who did the verification of your account, on a big old clunky IBM Mainframe at the Amex Headquarters. However, as the computer systems and communications systems improved and you could put Point of Sale (POS) terminals in stores, it became possible to issue Credit Cards to many more people. Thus Master Card and Visa were born, and banks began issuing out Debit cards as well.
This brings us up to today, where at least in the FSoA pretty much everybody has Plastic of some kind, and over 90% of all transactions are done this way, so cash has become unecessary, at least as far as the Banks & Goobermint are concerned anyhow. They would like to see cash eliminated entirely, because this is good for them. Not so good for the average J6P though who is worried his money isn't safe in the bank and one day it will just be…GONE! Also not good if he currently runs some type of cash bizness and wants to hide some of the income from the tax man.
What's the PROBLEM with taking cash out of the system entirely then? Well, as long as you have complete faith that your computer systems will be up and running 100% of the time, communications up 100% of the time in 100% of locations and the system won't be hacked, there is no problem. Unfortunately, none of those conditions are true even in the 1st World countries, and definitely not true in 3rd World countries.
In places like India, vast areas of the country aren't even wired for electricity, much less have full internet coverage available 24/7. Many in the population don't even have bank accounts or ID. The only way they function in the society is with cash. They get paid in cash, they buy their groceries with cash, they pay their rent with cash. When India recently took its two largest denomination bills out of circulation, it created instant HAVOC, and is still causing havoc. They may very well never recover from this poorly planned and executed monetary experiment. It's already created a massive deflation in their housing market, as people simply don't have working money to pay the rent with. Getting replacement bills out into circulation also has been a clusterfuck and goods are becoming hard to come by whether you have working money or not, because the supply chains are breaking down.
Now, in a place like Denmark where just about every square inch of the country is wired up, you wouldn't have this same kind of problem if you went cashless, although even in Denmark there are people who live off the official economy and depend on Cash to work. Besides that though, you run into all sorts of problems on occassions where you have a power outage or communications outage or the computers with all the account information go down, even for short periods of time. All of a sudden, everyone in the checkout line at the grocery store can't pay for their food. Everyone commuting home from work can't pay the fare on the light rail. Everyone whose gas gauge is on empty can't fill up on gas at the pump. etc, etc, etc. Anyplace that does go 100% cashless is going to run into these problems, and I think TPTB have to know this.
Even though I use Plastic almost all the time myself, I always do carry enough cash to buy groceries or buy gas if the debit card doesn't work. At my local grocery store this has occurred twice due to the system being down itself, and then a couple of other times because my account at the bank was "frozen" due to suspicious charges being dropped on the card number.
What is more likely than 100% cashless is that just the large bills will be taken out of circulation, but how large is large? In Europe, they have a €500 note, that one is just about certain to go the way of the Dinosaur. Here in the FSoA, the largest note is a $100 Ben Franklin. This would be harder to get rid of, because even just for buying groceries a family can spend $300 in the checkout line, I see that all the time with overflowing baskets of food. You would need 15 Andrew Jackson's or Harriet Tubman $20s to cover this, which makes your wallet uncomfortably thick.
What you may have noticed however is that recently, in about the last year a new $100 note on new paper with more "security" devices has been substituted for the old $100 note. My suspicion is these notes can be run through a reader and their serial numbers tracked. All stores will be required to have the readers, which will probably be part of the POS terminal, and anytime you use such a bill, it will be recorded in the transaction. You'll need your Goobermint ID to spend the bill. So, similar to plastic transactions, the bill can be traced back to you.
In the Black economy what may occur to circumvent this problem is a system of Barter may arise, and for this purpose such as large Drug Deals, Gold WOULD be very useful. After the large exchange is done this way, then the street level exchanges are all done with the small bills still in circulation. However, then when the drug dealer spends his money, he has to account for where he got it. If he can't account for it, it's a criminal offense.
Because Gold and to a lesser extent Silver could be used in the black economy and to try and store wealth outside the Banking system, it will either be made illegal and confiscated, or any official transactions done with it heavily taxed. So if you went to the Coin Dealer to exchange it for some of the paper currency, there might be a 50% tax on that transaction. In the case of the Great Depression, Gold ownership was made illegal and the Gold confiscated and then revalued. No reason to believe that would not occur again here as things further spin down in the Bankstering system.
What you have to remember here is that "your money" doesn't belong to you, it's part of a very large and complex system of credit that has been evolving in this iteration since the Medici Banking era. That system gradually spread its tentacles around the entire globe, and now most of the 1st World countries at least are fully wired up with the communication system necessary for all electronic transactions, fully recorded with everything bought and sold and by who to who. It's the ultimate means of control over everything that goes on in the society, and as long as these systems are up and running, TPTB that run the system are going to use every means possible to maintain this control. Even if a 100% Cashless society is not achieved, in the 1st World countries it will reach close to that goal before the system crashes in it's entirety.
The reasons it will crash in its entirety are many. First of all, whether the money being moved around here is cash or digibit, the entire system is horrifically insolvent, and even if ovenight 100% of all depositors money was confiscated to recapitalize the banks, it still would be insolvent. There's more debt out there than there are credits to balance it, because of the interest charges on all the loans. On top of that you have trillions to quadrillions in derivative bets which can't be paid off. Then you have the problem that either cash or digibit, money is not flowing through the system to the end consumer to buy the products of industrialization. Some still have access to the credit, but fewer all the time as people drop out of the work force. Finally, what the money actually REPRESENTS, the resources available to the society are depleting, especially measured against the increasing global population size. So you can't make it work long term no matter what you use for money.
What the conversion to (mostly) cashless can do is stretch out the Extend & Pretend a while longer, so it's likely to be undertaken in 1st World countries, at least if the monetary system doesn't reach critical mass and crash before a further changeover can be implemented. The possibility such a system could be implemented in India or other 3rd World countries is exceedingly small, thus the reason they attempted to exchange one paper bill for another, and in the process took themselves one step closer to complete collapse.
The mostly unanswerable question is just how long the the Extend & Pretend game can be extended out here? All you can say for sure is that it will crash at some point in the future, but pegging a date to it is quite difficult, if not impossible. You have another variable in the equation, which is the political instability that arises as more people lose more purchasing power, whatever the money is that is being used. You also have the geopolitical instability as different countries jockey for position trying to control what is left of global resources, mainly China, Russia and the FSoA there. There are inumerable possible Trigger Events that could set off a cascade failure at any time, so any kind of mathematical prediction is useless because of a discontinuity in the function. WAG though, it's hard to see how it holds together more than another 5 years, but it's just a guess.
So, even if the Banksters and Da Goobermint get their wish and convert to all digimoney, don't sweat it too much because it won't last all that long. When it does crash, you'll have much bigger problems than trying to hide income from the Tax Man or keep your wealth safe from thieving Banksters.