Have you ever thought about the ramifications of a cashless society? I’m talking about the real, first-person effects, not some ephemeral conspiracy theory or possible biblical prophecy. This is bad news for a lot of reasons, not the least of which are the ways it would affect day-to-day life.

Here’s my definition of a cashless society, so we’re all singing from the same songbook:

Cash would no longer be legal tender, therefore you could not make purchases with it, pay bills with it, or spend it in any way.  You would not be able to deposit cash into your bank account so you wouldn’t be able to accept cash for an exchange of goods or services.

Therefore, cash would be nothing more than a worthless piece of paper. (I know, I know. Debt-based currency is a totally different article though.)

We’re heading this way. Jose recently wrote that Venezuela is rapidly becoming cashless and here in the United States a concerning early sign is that there is a “change shortage” which is causing many stores to give you your change on a store loyalty card or invite you to donate that change to some cause.

Gifts

Think of all the times that cash is an appropriate gift. I’ve always given money, like stuffing a child’s birthday card with a $20 bill or giving a new graduate some cash to put toward college expenses.  When I got married, we received quite a bit of money from various loved ones. My dad always gave my daughters some spending money of their own each time we visited and they were surprised and delighted every single time.

However, in a cashless society, there are two problems with this.

First of all, the recipient would not be able to use the cash. He or she would not be able to spend or deposit it.

Secondly, if a monetary gift is given, it would have to be done with a check or electronic transfer. This means that the government (and the Tax Man) would know precisely how much money any person is given. That might not be a big deal for the 7-year-old who got $20 from grandpa, but what about the graduate who raked in a couple thousand in gifts from family members to celebrate his or her accomplishments? At what point will the government have their hands out for “their fair share?”

Side Gigs

A lot of folks are really struggling right now with the COVID shutdowns. Jobs have been lost, hours have been cut, and financial problems abound. One of the ways that these people are making ends meet is with side gigs. Folks are cutting grass, cleaning houses, driving for Uber, delivering food, babysitting – they’re coming up with all sorts of ways to make some extra money. A huge percentage of these people are being paid in cash.

But if suddenly you can no longer spend your cash, you’d need to be paid electronically. How many people who don’t already have a business have a merchant account for taking credit or debit cards? There are options like Paypal and Venmo, which take a percentage fee, but they’re going to have to figure out something.

And then, as above, every single bit of this side gig money is traceable and trackable. This could quickly turn your 20 bucks from lawn mowing into $15 after taxes.

Selling Secondhand Goods

Raise your hand if you’ve ever sold something to pay a bill.  Me too! I’ve sold jewelry, furniture, exercise equipment – all sorts of stuff to meet an obligation when in a pinch.  Not only that, but I have a yard sale every single year to downsize the things that I found I don’t really use, which often brings in a few hundred dollars.

How will this work in a cashless society? Well, if you are selling just one larger item, you’d probably end up using some kind of payment app like Venmo or Paypal. On the other hand, a yard sale would be nearly impossible to conduct electronically. Who is really going to be able to sit there and do Paypal transactions all day, especially when folks are buying things that cost 25 cents?

And there we are, down another way of making some quick money.

Tips

Lots of folks who work in food service and the beauty industry, just to name two niches, depend on tips to make a living. Generally, tips are collected from tables or paid out at the end of the shift if they were put on a debit card. But…once there is no cash, these tips will have to end up going on a regular paycheck. One hundred percent of this money will be subject to payroll withholdings.

This will mean that a lot of people see a sharp decrease in their earnings, plus they’ll have to wait for their checks to get the money. It puts a lot of power into the hands of the management and it would not be difficult at all for someone to manipulate the amounts the workers have earned.

Children

I’ve written many times about the importance of allowing children to handle their own money. It teaches them responsibility and life skills that will serve them well in the future.  My daughters have had access to money since they were in kindergarten, and possibly before.

Now, how are you going to give a five-year-old access to money if it’s all electronic? Are they going to end up with their own bank accounts and debit cards? That hardly seems realistic. There is also the option of gift cards, but that means the money can only be spent at certain places, taking away the vital learning curve of saving your money to put it toward a Big Goal. Forget lemonade stands, gifts from Grandpa, or putting change in a piggy bank – these will all be things of the past.

The unbanked or underbanked

Eight million households in the United States are “underbanked” or “unbanked.” This means that they don’t have any kind of bank account due to fees, bad credit, or other obstacles. These people rely on check-cashing businesses that already take a hefty fee to give them the pay they’ve earned. What will they do when this is no longer an option?

Most of the people who are unbanked or underbanked are living under the poverty line already. This would mean that they can no longer pick up side-gigs to make ends meet, they can’t do odd jobs, and getting them any kind of assistance will be more difficult.

Slate reports how the coin shortage is affecting these Americans:

To the average American, this shortage may only cause minor headaches—a harder time paying at a parking meter or exact change required at a coffee shop. But some 8 million American households, or 6 percent of Americans, are “unbanked,” meaning that because of fees and other financial hurdles, they have no checking, savings, or money market account. Many rely instead on services such as money orders, pawn shop loans, or payday loans. According to Venky Shankar, a marketing professor at the Center for Retailing Studies at Texas A&M University, Americans who make $25,000 a year or less use cash for around 45 percent of their purchases. So those Americans might struggle to pay for essential services without change on hand. They also might find it more stressful to round up or donate their change, should stores ask for it. “For an unbanked or underbanked person, it could leave them in a horrible situation if they don’t have access to the cards,” saidAngela Lyons, a professor of economics at the University of Illinois at Urbana-Champaign. (source)

And this is just a coin shortage. Imagine how difficult it would be if our society became completely cashless.

There is an alarming amount of power in access.

So, we can see this isn’t an ideal situation for any of us.

But even these things are relatively minor in comparison to the potential for abuse against citizens in a cashless society. If every single dime you bring in is tracked and recorded, you will have no financial privacy, and you’ll also be at far more risk. Many of us keep some cash savings around the house for emergencies. Even if there is a bank holiday, we’ll be okay because we have the money sitting around to take care of any incidentals while we are unable to access our banked money.

But what happens when things are cashless? All that money we’ve stashed away over the years would have to go into the coffers and we’d lose a certain amount of control.

It’s all well and good when times are okay, but what happens when there’s a Cyprus-style event and the government decides a bail-in is in order? If you don’t recall, back in 2013, billions of dollars were seized from depositors to protect the small country’s banking system. This was done to make good on an $11.6 billion dollar debt owed to creditors outside the country.

If you think that sounds far-fetched – like something that could “never happen here,” it’s incredibly important to note that we already have language that allows for bail-ins here in the United States. After the bailouts for the economic crisis of 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Act of January 2010, which prohibits government bailouts but allows bail-ins. So, yes, the money in your account could indeed be used to save a floundering bank.

Not only that, but think about the outrageous phenomenon of civil asset forfeiture. If you aren’t familiar with it, that means that an entity can seize your property or money even when you have not been convicted of a crime. Civil asset forfeiture provides billions of dollars to the US Government and local police departments every single year. Imagine how much easier that would be if your wealth was all in one place.

And let me take it just one step further before I take off the tinfoil – think about how many websites, YouTube channels, and social media accounts have been purged and demonetized over the past few years. Is it that much of a stretch of the imagination that this could be taken a step further? That perhaps unpopular opinions could be fined and money immediately be withdrawn from the accounts of those who dissent with the status quo?

Maybe I’m just another paranoid conspiracy theorist. But are you actually paranoid when “they” are really out to control you?