The future has looked rather grim for some time, however, in recent months, glimmers of hope have reappeared on the horizon…
Part I of II, by Claudio Grass, Switzerland
For years, I’ve been following very closely all the relevant updates on the State’s war on cash. I’ve read and written a lot about all the direct and indirect efforts to restrict the citizens’ choices and make sure they shift all their transactions and savings to the digital realm, where they can be better monitored, controlled and if need be, confiscated, by central authorities.
For some time now, the future looked rather grim. After the covid crisis and all we heard and read about Central Bank Digital Currencies (CBDCs), freedom loving citizens and independent thinkers couldn’t be blamed for losing hope. However, in recent months, glimmers of hope have reappeared on the horizon.
An uphill battle for the State
As we covered in previous analyses on this issue, there has been a relentless and concerted campaign by governments and their central banks to minimize, and ultimately eradicate, the use of cash by businesses and by private individuals. A lot of time, thought and taxpayer money have been poured into these efforts for many years. However, the population had largely remained annoyingly stubborn, so in response, we’ve seen all kinds of different approaches. They’ve used the “carrot” and the “stick”, with similarly disappointing results.
Both in the US and in Europe, they tried more “nudging” regulatory steps, such as adding little hurdles here and there for large cash transactions, some extra red tape for traveling with paper money in greater sums and in general added nuisances and burdens that simply made it a hassle to choose that option. When that didn’t work, they tried using extremely spurious arguments and making almost entirely fraudulent claims about “the kind of people” who use cash.
Much like today’s rhetoric over crypto and decentralized money, the same, by now, very familiar assertions were used against cash too. Only tax evaders, drug cartels and terrorists need the privacy that cash affords and thus, law abiding, upstanding citizens “have nothing to fear if they have nothing to hide”. Naturally, most sane members of the public either laughed off this narrative or simply ignored it and we all went about our business.
This is especially true in Europe, which is home to some of the most “stubborn” cash users in the world, like the Germans, the Swiss and the Italians. So, then the bureaucrats in Brussels decided to step up their game, in coordination with most national governments. Over the last decade, the “stick” has been used very liberally. For instance, they outright banned cash transactions over ten thousand euros. The European Central Bank (ECB), under the leadership of “Super Mario” Draghi, simply announced one fine day that it will stop printing the 500 euro note, creating serious issues for law-abiding citizens, savers, and business owners who relied on this denomination.
Of course, a great portion of the population did shift in their habits overtime, especially as banking technology and more recently, fintech solutions, provided easier and more practical alternatives to cash, which helped further the governments’ efforts. If anything, in an ironic kind of way, these developments clearly demonstrated that private companies and the invocation they brought to the table did a lot more to convince people to add digital payments to their options than the State’s coercion and infantile scaremongering campaigns ever came close to achieving. A lot of people, especially the younger demographics, have embraced these options. Many others have partly shifted to a “hybrid” approach, still using or saving in cash, but also depending on digital money for their daily transactions or for much larger purchases.
However, the fact remained that the State’s ambitious goal of making cash a relic of the past proved to be woefully elusive. Up until 2020 at least, their efforts seemed to be making the progress of a snail and the whole war on cash appeared to be all but doomed. Until that point, it looked like a sort of “stalemate” had been reached, where the State had converted as many people as it ever would and further efforts would be largely futile.
———- END OF PART 1
Part II of II, by Claudio Grass, Switzerland
Finally, a victory for the State
Central planners and paper pushers of all stripes are not generally known for their acumen or their ability to recognize and successfully seize opportunities in time. They always tend to lag behind more or less every other member of society: from the innovators and entrepreneurs, to the criminal masterminds, which is why all upstanding citizens still retain a modicum of freedom, but also why we all still have to see any evidence that the State is there to “keep us safe” from bad actors.
Still, the pandemic was arguably too great and too obvious of an opportunity to miss, even for this group of chronically myopic people. The way they made use of it to further their goals and to mount new, bigger, better attacks against cash, was admittedly rather crass and juvenile, but it worked all the same. While not the most elegant of propaganda schemes we’ve seen in modern history, linking the fear of disease with paper money was undeniably effective in scaring significant numbers of people away from cash and really moving the needle in this war.
On the face of it, the central claim of the authorities, namely that there was a real and serious risk of “catching the deadly covid virus” from merely touching a dollar bill, might have seemed like a feeble move, one that was more likely than not to have the opposite effect on rational, thinking individuals. There was zero scientific evidence to back it up when it was first uttered, and even as months went by, no proof was presented. Surely, no sensible citizen would take this guidance seriously.
The problem was that the covid crisis clearly revealed that sense and reason are actually in woefully short supply in the West. Where the fear of all those cash-loving jihadis and dollar-bill-stacking cartel bosses failed, the “invisible threat” succeeded. People started to shun paper notes, most in a “better safe than sorry” kind of way, others because they were actually, earnestly terrified. There’s an abundance of news stories from that period of people microwaving and bleaching their paper notes, a fact that is both amusing and deeply depressing at the same time.
Naturally, it wasn’t only the state-sponsored fear campaigns that drove this shift away from cash. The lockdowns and forced business shutdowns made it literally impossible to use cash in many cases, so it is evident that this “victory” was also thanks to extreme coercion too. Nevertheless, the fact remains that entire swathes of consumers successfully changed their behaviors. Even more importantly, even when the lockdowns were lifted, cash use didn’t just snap back to what it was.
Many continued to use digital payments and stuck to the habits they developed at the height of the pandemic. As prematurely and as naively as always, central planners rushed to celebrate their final triumph. The “cashless society” they had envisioned for decades, was now essentially a fait accompli.
Not so fast…
One thing professional scaremongers should have seen coming is that if there’s anything scarier than the threat of maybe contracting a virus that will maybe make you sick, is the idea of definitely missing rent or mortgage payments and certainly ending up either starving or homeless. And this is exactly what has been happening since the start of the year, very swiftly reversing all the gains that the “cashless society” zealots made during the covid crisis.
Recent reports have revealed that changes in cash use were among the many effects that inflation has had on consumer behavior. As more and more households have found themselves in financial distress, unable to cover basic expenses and dreading what comes next as the winter starts to bite and energy prices are at record highs, going back to using paper money was among the first “instinctive” moves many consumers made. Different people chose to return to cash for different reasons, but among the most commonly cited ones were the fact that one can keep better track of their spending this way.
For more sophisticated and forward-thinking citizens, other reasons prevailed. For many who recognize the trajectory we’re all in, economically and politically, putting their trust in banks and in governments is an increasingly tall order. It wouldn’t take anything as dramatic or unimaginable as a bank run (although the citizens of Lebanon might beg to differ on the probability of such an event) for people to lose access to their funds, or at least have it severely restricted. Especially under the present geopolitical conditions, the present inflationary catastrophe, the downward spiral of most advanced economies and an ongoing energy crisis, one can imagine government measures with similar effects being imposed, in the name of “solidarity” and for the “common good”.
One great example of the public fleeing back to cash can be found in the UK, one of the advanced economies most brutally ravaged by inflation, and one of the nations where digital payments had gained the most traction. The trend reversal is already glaringly obvious, according to recent reports by the Post Office, which has been seeing record levels of cash withdrawals over its counters. As Euronews reported, “Last month, the organisation handled a record £801 million (€951 million) in personal cash withdrawals, up almost 8 per cent month-on-month and up over 20 per cent year-on-year. In total, over £3.3 billion (€3.9 billion) in cash was deposited and withdrawn over Post Office counters. This is the first time figures have crossed the £3.3 billion threshold in a single month in the Post Office’s 360-year history.”
Naturally, as any precious metals investor knows, keeping one’s savings in pieces of paper of no value whatsoever other than blind faith is not a particularly wise investment strategy. In a severe crisis or a mass collapse of faith in government, the only use those dollar bills and euros will have to their owners would be whatever warmth they could provide once set alight. However, it important to acknowledge this trend as a step in the right direction and as a reason to keep hoping that perhaps sense and reason might once again become more commonplace in our societies.