Regular readers will be fully up to speed on the Reserve Bank of
India’s botched attempt at a handbrake turn style demonetisation thanks
to Jerri-Lynn Scofield’s thorough coverage (see here, here and here for
more background on this sorry tale). But the Indian government’s
attempt at implementing a strategy of moving an economy away from
physical cash (notes and coins) is only the latest — although the most
aggressive seen to date — in a global battle to make cash obsolete.
What’s new in India is that users of the payment system are being made
to demonetise by coercion. But in every major economy, physical cash is
under siege.
In this article I will show how central banks, the commercial banks (especially the Too Big to Fails), governments and technology companies have been waging a war on cash for decades. Inspired by the seminal work of Langdon Winner, who made the bold claim that technology has politics, I will also argue that drive to “reform” and “modernise” the payments systems we use, with its incessant focus on technology, has camouflaged the disproportionate power of some of the agents seeking to force this change.
Before diving in to the historical examples, it is worth considering in the context of the payments systems we use what, exactly, is physical cash? Leaving aside the obvious stores-of-value and means-of-exchange descriptions — and looking at cash as a payments system — it has some unique and rather special characteristics. Firstly, as a service, it is free at the point of use. When I pay you in cash, neither of us incur a fee for my settling my account with you by handing over notes or coins. Secondly, while the provision of cash as a service definitely does have costs associated with providing that service to us, the cost of that service is progressive. To put that another way, if your liquid net worth is $10,000, then it costs you little or nothing to store that wealth in cash. If, however, your liquid net worth is $1,000,000,000, it costs you an awful lot to store that wealth in physical banknotes.
http://www.nakedcapitalism.com/2016/12/the-global-war-on-cash-lessons-from-history.html
In this article I will show how central banks, the commercial banks (especially the Too Big to Fails), governments and technology companies have been waging a war on cash for decades. Inspired by the seminal work of Langdon Winner, who made the bold claim that technology has politics, I will also argue that drive to “reform” and “modernise” the payments systems we use, with its incessant focus on technology, has camouflaged the disproportionate power of some of the agents seeking to force this change.
Before diving in to the historical examples, it is worth considering in the context of the payments systems we use what, exactly, is physical cash? Leaving aside the obvious stores-of-value and means-of-exchange descriptions — and looking at cash as a payments system — it has some unique and rather special characteristics. Firstly, as a service, it is free at the point of use. When I pay you in cash, neither of us incur a fee for my settling my account with you by handing over notes or coins. Secondly, while the provision of cash as a service definitely does have costs associated with providing that service to us, the cost of that service is progressive. To put that another way, if your liquid net worth is $10,000, then it costs you little or nothing to store that wealth in cash. If, however, your liquid net worth is $1,000,000,000, it costs you an awful lot to store that wealth in physical banknotes.
http://www.nakedcapitalism.com/2016/12/the-global-war-on-cash-lessons-from-history.html
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