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Censoring Cash

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If “money talks,” then a global campaign is being waged to silence it or, at least, to let cash speak only with permission.

The Economic Collapse blog states, “All over the world, governments are either placing stringent reporting requirements on large cash transactions or they are banning them altogether. We are being told that such measures are needed to battle illegal drug traffic, to catch tax evaders, and to fight the war on terror.”

Some governments are weighing the outright elimination of cash. Last year, for example, Swedish officials debated going cashless.

Cash still circulates, but the prominent Swedbank announced its intention to cease cash transactions in central Sweden with the exception of one Karlstad branch office. The Local reported, “Swedbank’s plans to go cashless, slated to go into effect on May 1st, will make it impossible for people outside Karlstad to withdraw from or deposit cash in their bank accounts.” It is sometimes difficult to distinguish banks from government agencies in the implementation of monetary policy.

Those for and against cash

On the side against cash, three forces with distinct but largely compatible self-interests are converging: governments, banks, and major financial corporations. Of course, there is not a perfect confluence of self-interest among the three. But they all benefit from people using electronic payments rather than cash.

Governments want a cashless society because then every economic exchange would leave a clear and accessible trail; taxation would be easier and far more thorough. Banks prefer customers to use their debit and credit cards, which come with a list of charges attached; they also want to rake in the commissions that accompany various forms of electronic transfers. Credit-card corporations think everyone should use their fee-laden services (and then these companies profit a second time by selling the personal information gleaned from these transactions to other businesses or to governments).

Those who are for cash include consumers, merchants, and privacy advocates. Consumers want options, including the ability to snap up the “discounts for cash” offers that are becoming common in restaurants and shops. Many merchants and small businesses hope to avoid the expense of credit-card readers and transaction fees; indeed, the added expenses would drive some out of business. Privacy advocates warn of the total surveillance that would accompany a cashless society. The data reaped and retained on you by credit-card companies and banks would include each book purchased, every drink in a bar, all banking and investments, political or religious donations, lingerie for your wife, guns and ammunition, and so on.

In political terms, the battle is between social control and personal freedom, between whether the government commands your wealth or you do. The opponents of cash rarely frame their arguments in these terms, however. Instead they stress the utility of electronic transfers and their alleged benefits to society.

Arguments proffered against cash

The basic arguments for electronic payments can be reduced to the “3 Cs”: cost, convenience and crime.

The “cost” argument is straightforward. Paper and coins cost the government money to maintain and renew; the cost is paid by the taxpayer. Electronic transfers are far less expensive, and the costs are usually borne by private entities like credit-card companies. (Of course, such companies pass on the cost to customers who are usually also taxpayers.)

But an alternative and far better solution to this problem is never discussed: namely, using private currencies, including ones based on gold or silver. Companies and individuals could issue their own money and place it on the free market in much the same manner as they did in America prior to the Civil War. Historically, some private currencies were so successful in terms of reliability that they were specified for the payment of government debt. Competing currencies would reduce the cost to customers not merely of new money but also of inflation.

The “convenience” argument is similarly straightforward. Electronic transfers save time and effort: it is easier to pay bills from your cell phone and make purchases over the Internet.

But convenience is a subjective evaluation. People who perceive a personal benefit in electronic money transfers will use them naturally, with no need for government’s urging. People who perceive personal disadvantages will continue to use cash for a wide range of reasons, including privacy concerns, a discomfort with the electronic means, a distrust of banks, a desire to get good deals, and pure habit. In a free economy, cash and electronic payments would compete openly.

The “crime” argument actually reduces to two different arguments.

The first is that individuals are personally safer if they do not carry cash. In explaining why Swedish buses are now refusing to accept cash, an official stated, “It is not acceptable that people go to work in fear and concerned that they could be subject to a robbery.” In other words, the Swedish people live in a state of fear and violence that can be eliminated by banning cash.

The second fork of the “crime” argument is that cash causes crimes that harm society. If you are against crime, the argument runs, then you should oppose cash. This is akin to gun-control arguments in which guns are blamed as much as or more than people for acts of violence.

The specific “crimes” that are said to be committed by cash are usually a mixture of violent acts and peaceful ones that the government has criminalized. A January 7 Slate article entitled “Cash Out” quotes Richard Wright, a criminology professor at the University of Missouri–St. Louis. He offers a typical analysis, “There is reason to suspect that [street crime] will decline as the use of cash increasingly is replaced by credit and debit cards or other forms of electronic monetary transfer.”

The article goes on to say that “Most violent crime is the result of one person trying to take another person’s cash, whether it’s an addict robbing a convenience store or one dealer robbing another.… If cash isn’t available to steal, the opportunities to commit crimes dwindle.”

This analysis is typical, because it includes prominent mention of drugs and drug dealers. In the same vein, a report published by the National Council on Crime and Delinquency predictably found, “[C]hanging to an electronic cash system … would wholly eliminate certain classes of crimes, severely reduce the incidence of others such as drug crime, and shrink the underground economy.”

Including drugs blurs the line between violent crimes and government-created ones. As with the prohibition of alcohol (1920–1933), the majority of the violence associated with drugs results from driving it underground. And as with alcohol, the only practical solution to drug violence is decriminalization.

Nevertheless, linking cash to “the drug problem” is a powerful strategy for critics. The argument gains automatic sympathy from many listeners, and the stage is set for a further blurring of the crucial difference between violent acts that are true crimes and peaceful acts that are crimes only because the government says so.

Blurring boundaries enriches government

Money laundering is generally considered to be “the process of taking the proceeds of criminal activity and making them appear legal.” The 1970 RICO Act (the Racketeer Influenced and Corrupt Organizations Act) allows money associated with criminal activity to be seized and used by the authorities. And since 9/11, money laundering has been a particular focus of government because it is said to finance terrorists. But what constitutes money laundering has been very widely interpreted.

In a 1994 Freedom Daily article entitled “The War on Cash and Privacy,” Donald S. McAlvany explained,

The Treasury Department has published a booklet … which contains a list of suspicious activities that … fit the profile of a “money launderer.” These activities include: 1) Paying off a delinquent loan all at once; 2) Changing currency from small to large denominations; 3) Buying cashier’s checks, money orders, or traveler’s checks for less than the reporting limit (i.e., under $10,000); 4) Acting nervous while making large transactions with cash or monetary instruments; 5) Opening an account and using it as collateral for a loan; 6) Presenting a transaction that involves a large number of $50 and $100 bills; and 7) Presenting a transaction without counting the cash first.

Money can now be seized with little or no proof of wrongdoing. For example, on October 19, 2011, KMOV St. Louis reported that a car was stopped by the police for speeding, and because the car was “suspicious,” they had it checked by “a K-9 drug-detecting unit.… No drugs were found.” A search of the car uncovered “nearly $180,000 in cash inside a duffel bag,” however. The police “released the driver but seized the cash” in the expressed belief that “the money was related to a drug operation.” And property so seized is notoriously difficult for the owner to recover.

Cash will not disappear

Currency has been a part of man’s history since the oldest profession first demanded payment in advance. It is highly improbable that the government can mandate or engineer a cashless society any more than it can eliminate the black market or other expressions of the free market. All that government can do is cause distortion.

But elimination may not be the true goal of the campaign against cash. The goal may be nothing more than the flexing of greater control. The demonization of cash allows governments to pass laws to monitor the “criminal” behavior of cash users. Why? Because cash constitutes wealth that could escape the state’s grasp. Governments tend to view free money the same way they view free people — with outright suspicion.

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    Wendy McElroy is an author for The Future of Freedom Foundation, a fellow of the Independent Institute, and the author of The Reasonable Woman: A Guide to Intellectual Survival (Prometheus Books, 1998).