Everyone knows cash has no paper trail. There is no way to prove where it came from, or who used it last with complete certainty.
Cash is one of the oldest forms of money in existence. The exact origin cash is still unknown, but historians believe coins were first used as money around 5,000 B.C.
Physical money in the form of coins and paper bills allow the user a large degree of privacy and autonomy. Cash can’t be easily tracked by governments or institutions. Thus, organized crime, prostitution and other illegal street level activities could thrive undetected more easily. And the people involved could remain anonymous with less effort.
As technology improved after the Industrial Revolution, Governments began looking into ways to increase money surveillance and track where money comes from, where it goes, who uses it, who has it, when, etc. This led to the invention of “electronic money” in the form of credit cards, debit cards, money apps, and wire transfers. With electronic money, everyone’s spending habits can be watched and tracked with precision. The information can be sold to large businesses or collected by various Government agencies.
Since a person’s spending habits are a window to their personality and priorities, those with access to this data can use it for marketing and surveillance purposes.
Today, few people are concerned about any loss of privacy or autonomy from electronic forms of payment BECAUSE it still remains a choice you can make. Cash still exists today and people can still choose to use it when they wish.
But anyone paying close attention will notice cash is gradually being phased out of existence. Already today, many places don’t accept cash payments. There are various products, services and assets you can’t buy with cash. Electronic payment methods are becoming more various and more standard over time.
While eliminating cash has the potential to make society safer by curbing organized crime and street level theft, it also has the potential to eliminate personal privacy. It can lead to less personal freedom overall. People will no longer have true, physical custody of their money. Instead, they will have a claim to that money, similar to music playlist saved on a cloud service.
Interestingly enough, crime is used as the main excuse behind the need to phase out cash. Yet, credit card fraud, tax evasion, money laundering and illegal bank transfers continue to thrive. Various regulated banks and financial firms have been found to be the largest facilitators of illegal funding and money laundering. And this is all being done electronically.
Without cash, the institutions that control money will have complete control over the terms and conditions under which regular people access and use their money. This gives institutions the power to control the economic behavior of society. For instance, banks or Governments can impose financial punishments upon people based on their behavior. They may have the power to discourage savings by charging higher fees for accounts with “less activity” or refusing to give accounts to people with certain political views or social behavior. It can be a very slippery slope.
So, what does this all mean for the individual who wants financial security? It means investing in other physical forms of currency outside of cash, such as physical property that generates “cash flow” or appreciates in value.
There is no way to know when an unexpected event my occur in the future that blocks people from gaining access to their money. We saw this occur during the stock market crash of the late 1920’s. There was public panic that led to crowds of people rushing to withdraw their funds from banks in a number of “bank runs,” and were unable to access their money because the banks already invested it all in the market.
A person who only has money in the form of an electronic savings account or money invested in the market is at higher risk if the monetary system ever fails. A good safety net is to have physical assets as well that hold value and can be used or sold in place of money. Even more importantly, individuals need to invest in a financial education and truly understand how money works. History can, and often does, repeat itself. But usually in a different form.