July 22, 2021

"If cash were replaced with a digital dollar... the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts..."

"... creating an incentive for consumers to spend and for companies to invest. A digital dollar would also hinder illegal activities that rely on anonymous cash transactions, such as drug dealing, money laundering and terrorism financing. It would bring 'off the books' economic activity out of the shadows and into the formal economy, increasing tax revenues. Small businesses would benefit from lower transaction costs, since people would use credit cards less often, and they would avoid the hassles of handling cash..... A digital dollar could threaten what remains of anonymity and privacy in commercial transactions — a reminder that adopting a digital dollar is not just an economic but also a social decision.... With proper preparation and open discussion, we should embrace the advent of a digital dollar."

From "Cash Will Soon Be Obsolete. Will America Be Ready?" by trade policy professor Eswar Prasad (NYT).

Do you still use cash? I carry around some cash, but it seems to be the same cash I've had for the past year. It was an unusual year, but still.... 

A highly rated comment over there comes from hb in the Czech Republic: 

Cash is essential for privacy. Without privacy, there is no freedom. Thankfully Sweden recently backtracked on it's march to go cashless, citing the needs of the poor, the elderly and the non-tech savvy. I don't want to live in or bequeath to future generations an Orwellian world where the government and corporations and every hacker knows every time I buy a pack of gum.


Ann Althouse said...

rb writes:

"My wife and I generally go through ~ $350 in actual cash/month, mostly for low-dollar items like the occasional newspaper, a small grocery purchase, or something needed from the hardware store. Sure, we could get by without cash, but using a credit card or having an account debited by $1.67 certainly seems unnecessary."

Ann Althouse said...

I'm trying to think of any time this year that I've used cash and can only think of the time I spent $4.01 on a dish of ice cream at the Union.

If it had been easy to see the Apple Pay device there, I would have used it.

Ann Althouse said...

David writes:

"Could the government just extract money from accounts? Yes, but it would be outright theft and actionable. Congress could pass a tax law allowing it, making it "legal".

"However, the risk is where the government just creates accounts for everyone out of an arbitrary sense of national need and starts depositing dollars enabling rapid inflation out of a sense of need for stimulation. They could also start depositing a newly created currency and control how those dollars are spent, penalizing unfavored products, services, companies, and people."

Ann Althouse said...

tcrosse writes:

"I keep small bills on hand for tips. The person who loads my groceries in to the car at curbside pickup, the hairdresser at Great Clips, the guy who delivers Chinese food, all prefer to be tipped in green."

Ann Althouse said...

Joe writes:

"Your comment nails it...privacy. Think of all those new golf clubs that won't be purchased by husbands, or those bottles of Scotch that are a bit nicer than they usually are. The marijuana industry would see a big dropoff.

"Pre-pandemic I would get $120 every week or so from the ATM, and it's amazing how it would dwindle during the week. I have a hard time using a credit card for anything less than $20 (even though I pay it off every month), so it would go to sandwiches, light bulbs, lottery tickets (only over $500M payouts), and tips...I like to pay tips in cash if I can. These days that same $120 lasts 2 weeks.

"In Japan I routinely carried the equivalent of $300-400 in cash at all times. It is still a very cash-heavy society and incredibly safe. I even paid my bills in cash at the 7-11. On those days I might have $700-1,000 in cash. The cool part was, at 100 yen to the dollar, I was carrying around a roll of 100,000 yen...Mr. Big!"

Ann Althouse said...

Mark writes:

"This is the type of speculation that comes around only in the sclerotic economies created by socialist authoritarians. They reach the zero bound and no matter how many trillions they pump into the system the promised utopia 'surprisingly' never seems to emerge. 'Unexpectedly' they say. Where to go from zero but down?

"Contrast with the recent past where policy was driven in part by what I am told is the worst businessman on the face of the Earth, yet in a fortnight of months the United States managed to achieve unprecedented levels of non-rebound growth in productivity, employment and household wealth. We were promised the rotten economy was 'The New Normal'...

"Suppose these wizards eliminate currency and impose their hefty negative interest rates- five percent, ten percent. Humans are smart and will find ways to get to a zero rate of return. There are ways. Prepay taxes. Prepay bills. Pay a year's worth of utility and mortgage payments. Buy stamps. Buy gift cards to Costco, Apple and Amazon. Go to the bank and take out cashiers checks, roll them over every 90 days. Of course the authorities will make rules to prohibit these things. Imagine the upside down world where the IRS charges prepayment penalties and your landlord sues you for paying your rent. Ever heard of 'unintended consequences'?

"Better to enact pro-growth, pro-citizen polices the dumbest businessmen are lucky enough to stumble upon."

Ann Althouse said...

MadisonMan writes:

"I spend about $100/week in cash. Coffee shop, grocery store, tips, that kind of thing. I only tip cash, even when restaurants say they don't take cash. I'll pay the bill on a card, and leave cash as a tip. The Professor as you've quoted them makes no compelling argument to me to ditch cash, but then says we should embrace it after all? I'll pass."

Ann Althouse said...

I think the professor's main argument is that it's good for the government to have this view into all transactions — for tax and other purposes. I suspect that one of the purposes is to cure people of the fantasy that they have a private life.

Ann Althouse said...

Tom writes:

"The process described in this post sounds outlandish, but it's actually a good functional description of what the government does when it prints a lot of money and allows inflation to rise."

Ann Althouse said...

Joseph writes:

"I can think of a few awful consequences of such a policy. Here is one: A future administration could cancel a dissident's access to the digital currency, leaving said person with NO MONEY. No food, no utilities, no transportation, no housing, no salary or job, nothing."

Ann Althouse said...

Jim writes:

"I was buying gas yesterday and wondered when the last time I actually handed cash to the person at the station. It must have been at least 30 years ago."

Ann Althouse said...


I remember all the times my father bought gas by saying $5 worth just to simplify the transaction (instead of "fill 'er up"). If the tank was low, $5 would pretty much fill it up.

Ann Althouse said...

Wendy writes:

"I typically use my card for everything because of convenience and if the banks are going to make money off my transactions then so should I. I did the research to figure out which rewards card makes sense for our lifestyle and what we purchase/use and I don't pay an annual fee nor do I carry a balance. I use it to pay my insurance, water bill, gas, and groceries, all stuff that I used to write a check for. If there is not an additional charge I will use my card and at the end of the year I 'make' a few hundred dollars from my cashback card. I am looking to see if I can pay additional bills on my card as well rather than using the online bill pay function with my checking account.

"I do keep a bunch of cash on hand in a safe because there are times that the card reader is down at the grocery store. I don't want to feel trapped if the grocery store (specifically but potential other stores) or gas station gets hit by a ransomware attack or that I cannot get money from the ATM.

"For me the rash of ransomware attacks and breaches has me considering if I should take out more cash for those just in case scenarios. I try not to be a 'prepper'. paranoid, or conspiracy person but yeah sometimes the craziness of the world makes me think maybe I should be prepared just in case. I have no intention of forgoing a bank but I like to think of it as diversifying access to my own money, plus it is not like my money is making any interest in the bank so why not have that peace of mind of having some on hand."

Ann Althouse said...

Temujin writes:

"The move to a cashless society is very real and will definitely happen. Sooner rather than later. And it will be by design. You will see more and more well-placed articles and appearances by 'experts' on TV and radio telling you all the positives about going cashless. Note that today, well before we are fully cashless, we have become almost cashless. Many of us exist using no cash at all. I suspect that cash use is more in the older generations than the younger. In this cashless way of living, virtually everything you do and buy is recorded and used in various ways to manipulate your life. The ads you see, the things you are encouraged or discouraged to buy or use are based on your habits. Now- put that information into the hands of your Government and you can imagine where it goes.

"For instance: You say you don't want to get a vaccine? Well...funny how your funds have been cut off. Or your credit cards no longer work at certain businesses, or...your paycheck, sent digitally, has not yet come through. Or, let's say your social credit score is not up to the Governmental Standard. Can you be persuaded to change your ways via access to your money?

"I know. Sounds preposterous, right? Well, give a look to China and you'll see your future.

"The entire purpose of cryptocurrencies (say, like Ethereum) is the idea of DeFi- decentralized finance. It is peer to peer finance via blockchains. Not through a bank. And not through a governmental entity. A sovereign cryptocurrency is not DeFi. It is simply the government gaining full control over your privacy and your money. That said, I see no way to stop governments from going in that direction. It will be interesting to see which method of currency is the final winner in this, DeFi or Sovereign Currencies."

Ann Althouse said...

Washington Blogger writes:

"When your voting record, your associations and any other private action you take becomes the means by which you are destroyed, the ability for anyone to track your spending is a scary thought. By removing all options for anonymous transactions, you open up the ability to punish unapproved activity. What if you used your money to buy a children's book?

"I like cash because I give anonymously to two families who have lost the husband/father. Monthly envelopes with cash given to the Church secretary ensures the gift remains anonymous. It would be harder if all transactions were traceable."

Ann Althouse said...

Narr writes:

"Cash IS privacy. That's the point.

"How about the gummint gets to check up on all uses of cash--
what's the harm, there being no privacy anyway?

"USA-- Universal Surveillance Authority."

Ann Althouse said...

Doug writes:

"In China cash was ubiquitous when I started working there in 2010. Very few people had credit cards, a few more had debit cards, no one had heard of checks, and most people used cash for most everyday purchases, and bank transfers for really big transactions. Today cash has disappeared in favor of phone-money apps: We-Chat and Ali-Pay. These apps are linked to debit accounts. Everyone uses them. The lowest street vender won’t take cash any more more, he just wants We-Chat. One reason is that phone-money eliminates the risk (ever present in China) of receiving counterfeit currency. Phone-money is also very convenient, you don’t have to worry about losing it, or getting it to a bank, or being robbed. So maybe this is where we are headed. However, mainland Chinese have very different feelings about privacy than Americans. They accept that the government can send them a traffic ticket based on an AI review of a security camera video and deduct the fine directly from their We-Chat account. Americans might not like that, so perhaps this isn’t our future. On the other hand, most Americans seem to give little if any value to financial privacy, as evidenced by the relentless expansion of the so-called “money laundering” laws, most of which have little to do with crooks hiding the proceeds of crime."

Ann Althouse said...

LA_Bob writes:

""...A digital dollar would also hinder illegal activities that rely on anonymous cash transactions, such as drug dealing, money laundering and terrorism financing...."

"Which is exactly why the "digital dollar' is not in our futures. There are powerful "special interests" who wish to keep their "private activities" private. Some of these "special interests" might even be spouses who want to keep certain transactions off of the family credit card statements.

""Cash control" comes up from time to time, but it never seems to get anywhere. It's a little like gun control. There's not enough public support to bring it about. And "cash control" doesn't even have an amendment to the Constitution for opponents to rely on."

Ann Althouse said...

TreeJoe writes:

"If you were moving a democratic republic to an authoritarian regime, wouldn't your highest priorities be:

"1. Control speech by saying that you are fighting disinformation and then begin to pivot the description of disinformation to be those things you find your political rivals espousing - whether that be questioning a prior election or pointing out flaws in the administration's expert scientists demands to control personal actions.

"2. Control commerce through some form of centralized control of capital.

"I mean really. An armed takeover is too obvious. But a 10 year plan to begin to control speech and currency? Very do-able. All in the name of the public good.

"If I was China or Russia or any nexus of countries that wanted to fundamentally undermine the principles of the U.S., and I was a long-term thinker, I wouldn't plan military attacks. I'd destroy the fundamentals that made the country so strong - free speech, free association, and de-centralized control of market activities."

Ann Althouse said...

Zev writes:

"the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts..."

"In other words, the govt could confiscate your money to get you to spend it. How could anyone be in favor of such a thing? This alone should be enough to oppose this stupid idea.

"People in favor of so vastly expanding government’s power are of an authoritarian mindset, and assume they will be the ones in charge."

Ann Althouse said...

Donna writes:

"I pay for just about everything in cash. The only exceptions are filling my gas tank at a local station (won’t use the card when I’m far away - nobody’s business where I’ve been) and occasional on-line purchases. It’s nobody’s business what I spend money on; it’s especially not the bank’s nor the government’s business.

"Example of too-nosy government: I live in Vermont along its border with New Hampshire. Vermont sales tax is 6%; NH is 0% so lots of Vermonters do the sensible thing and shop in NH. The Vermont Dept. of Taxes gets the identity of these Vermonters from audits of the big box stores through their credit card records and sends letters out to Vermonters demanding the payment of Use Tax with a bonus penalty fee added for not ‘fessing up on their tax returns. One accountant I spoke to said that the Tax Dept. also sends out demand letters randomly, assuming that all Vermonters shop in NH, and people pay up.

"As one of the many Americans who have lived under or have family who lived under a totalitarian government, I think it’s bonkers to leave your personal trail out there for anyone to follow. And to answer your next question, no, I don’t have a smart phone, sort of pointless since there’s no cell service where we live. I have a TracFone which lives in a kind of Faraday-style case in the glove box of the car for emergencies. Only used it once."

Ann Althouse said...

Jeff writes:

"Anonymity is one of the major selling points of Bitcoin and other non-governmental means of payment.

"A negative interest rate policy cannot be effective with a physical currency (paper or coin) as people will simply stash the currency somewhere to avoid it. If your goal is to get people to spend the money they have stashed in banks, inflation is the tried and true way of doing that.

"Negative interest rates usually come up for discussion when central bankers want to pretend that they either can't prevent deflation or get inflation up to their supposed target rate. At that point, it makes sense to replace them with their counterparts from Zimbabwe or Venezuela."

Ann Althouse said...

JK writes:

"Digital cash will not survive the first hurricane/tornado/snow storm that takes out the electricity or communications lines. With no electricity/network, you aren’t buying anything you need to survive. It was bad enough after Katrina that my T-mobile phone with a coastal Mississippi number couldn’t receive calls even when I was in Montgomery because T-mobile’s Mississippi switching exchange was offline. Apparently, one of their other exchanges couldn’t pick up the load to direct calls. Outgoing calls worked.

"Maybe the government uses their violence to impose digital cash, but soon other physical medium will come to be accepted. They are basically setting up the conditions for a black market."

Ann Althouse said...

Chris writes:

"We lament at how often we fail at adulting, but there is one thing my wife and I excel in. We are good tippers in restaurants. We tip generously, in cash if possible. She says cash is best for tips because the servers are more assured of getting the money.

"I assume cash isn’t entirely private since banks must have a record of which bills they distribute to us through ATMs. Beyond that, I’m not sure how a particular bill could be traced to a particular purchase. But then I don’t really know.

"I use cash for small purchases every day. My father was an early proponent of the Susan B Anthony dollar coin. I keep a few of them in my dresser in memory of him. I am sad to see that dollar coins have never caught on."