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Watch Your Back - Meaning Your Access to Cash

Sunday, September 6, 2015

A couple weeks ago the Financial Times came out with an article arguing for the end of 'cash'.  They are using the term 'barbarous relic' - a term John Maynard Keynes used for gold as a form of money - to de-legitimize cash as the source of our economic problems.

To most of us, Keynes is either a complete unknown or a vaguely familiar name - someone we heard about while the news was on as background noise while we were preparing dinner.  And our memory of the idea of gold (and silver) as the foundation of the money supply is all but non-existent seeing as it has been nearly 50 years since the gold held on our behalf was effectively stolen from us by the 'financial-political complex'.  (I'll channel a little modified Dwight Eisenhower here.)

But it is extremely important that we understand some of what is going on here, so I'll try to simplify things:  The Financial Times calls the legitimacy of cash into question:
The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory.
Note the refined academic vocabulary - 'bearer instrument with a zero interest rate'. You and I call it the dollars in our wallet.  The difference in description is telling and very important.  To say cash is a 'bearer instrument' is a deliberate propaganda attempt to take the simplicity of the money in our wallet and turn it into something academic and complex.  The point is to convince us that we are not smart enough to understand its implications.

The next part is even more revealing.  To note that cash "limits central banks' ability to stimulate a depressed economy..." reveals quite a few important things:  First, it reveals a view of money that sees it as a tool of the state to impose particular views about what a healthy economy looks like. Those views, I can absolutely guarantee, are very different when seen from Wall Street then when seen from Main Street.  Money, when viewed from Main Street, is a utility that is contrived by civil society (meaning you and I agree to exchange it) to facilitate everyday commerce.  It is crucial that we get our heads wrapped around this difference if we are going to defend ourselves from a possible attempt to ban cash.

To digress a little so as to explain: Economic growth comes when raw materials are made into things that are needed and useful.  To do this, you have to have capital (which includes land).  But the transformation of raw materials into other useful things requires something else: labor. When labor uses capital (or capital uses labor - depending on how you look at it) 'value' is 'added'.  Money, represented most commonly by cash, is how we measure that value and exchange it with one another.  This is just a somewhat technical way of explaining what is said above, and needs to be said again and again and again: Money is a utility (something of use) contrived by individuals in civil society to facilitate everyday commerce.  It is not a tool of the state the enforce the sensibilities of the financial-political complex (i.e. the 'elite') as to what a healthy economy looks like.

The article further reveals itself as essentially a propaganda hit piece: 
The second feature of cash is that, unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence.
Again, there is a lot here - and some things that are conveniently missing. To start with, the idea that cash cannot be tracked is nonsense - our dollars all have serial numbers.  What cannot be tracked is everyday economic activity. No mention is made of the relative percentage of circulating cash which is facilitating "illicit activity" over and against the whipping cream and pound of shrimp I just bought with cash about an hour ago.  That number would be so small as to make throwing the baby out with the bathwater look like a reasonable proposition. And no mention is made of what the "abolition of cash" would mean for personal freedom.  "[M]aking life easier for government..." is blithely assumed to be a worthy end in and of itself.  (Our Founding Fathers would roll in their graves at this thought.)  And to suggest that "squeezing the informal economy out of existence" is desirable is to say that activities which might otherwise expose the intellectual nakedness of central bankers and their academic economist colleagues must be suppressed literally at all costs.

The article uses the example of Greece and tax collection, and it is, indeed, the absolutely perfect example. Greece shows us what happens under confiscatory tax regimes: all of the creativity which ought to be directed toward innovating and improving things in the real economy is directed instead into tax avoidance - an artifact of allowing the political economy to swallow up the real (civil) economy whole.  This is an awfully inconvenient truth for the financial-political complex, therefore it must be suppressed by the banning of cash.

Benjamin Franklin was asked what he and his colleagues had created.  "A republic, if you can keep it," he responded. We have already allowed ourselves the first false luxury which threatens it: Almost fifty years of deficit spending means we have voted ourselves the treasury - the day Franklin said would herald the end of the republic.  The second, and final step to losing it entirely would be to stand by quietly when the political-financial complex takes away our access to cash.

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