Most western nations will soon adopt digital currency. Already, more than 80% of day-to-day transactions in the First World are settled with debit cards, credit cards, PayPal, or checks. In Europe, the use of the EC card—a sort of interbank debit card—has become ubiquitous. Going “cashless” is the Big Trend.
With the now widespread use of smart phones, payment for many small transactions is as simple as just waving a phone at the checkout counter. (This is a so-called “contactless” or “mobile wallet” purchase.) Mobile wallets, such as Apple Pay, Google Pay, and Samsung Pay, are catching on rapidly. So rapidly, in fact, that some urbanites no longer carry any cash. At many stores, kiosks, and even restaurants this will likely become obligatory in the next few years. No smartphone? Sorry, “No soup for you!”
From Voluntary to Mandatory
Whether it takes five years or just a year, the end of cash—or at least cash as we know it–is coming. The transition from the convenience of electronic commerce to the requirement for electronic commerce will be a Sea Change event. For those of us who live in remote areas beyond cell phone coverage, this change will be a troublesome hindrance. Other than writing checks, how will we be able to buy and sell things, especially with other private parties?
But for all Americans, going cashless will remove the last bastion of our privacy. Paying in cash provides anonymity for purchases. Adopting electronic-only currency will be a big change. Every transaction will be positively tallied and tracked for both the seller and the buyer.
Ominously, the push for going digital is coming just as hacking and identity theft is reaching pandemic proportions. The prospect of being forced to put your liquid net worth into digital bucks and then seeing them wiped out is quite frightening.
The Digital Currency, Around the World
There is already a war on cash in progress. And this isn’t just something in the realm of foreign headlines. There is a war on cash here in the United States. And a rapidly-growing number of countries are nearly ready to switch to digital currencies. Here is a brief summary:
Norway is on a similar trajectory. In Norway, only about 5% of retail transactions are now paid for in cash. Some recent reports have mentioned that Norway may drop the use of folding money and coins as soon as 2019.
In France the cashless move has been slower than in Scandinavia but still relatively rapid. In addition to now widespread use of cash cards and debit cards, contactless devices and digital wallets (such as mPOS) are catching on.
Almost one-third of Denmark’s populace uses the cellphone app MobilePay for their transactions. The Danish government has established the goal of going cashless no later than the year 2030.
Of the western European nations, only Germany seem to be bucking the trend. There, cash is still king.
In Japan, like Germany, there is considerable resistance to going cashless. Those of the younger generation in the big cities are switching to cash cards and various contactless systems. But the majority of these systems are pre-paid.
In Australia’s major cities, digital wallets are now all the rage.
Citibank has announced that it was eliminating cash transactions at some of its Australian bank branches. There are already “no cash” bank branches in many U.S. cities, and I expect this trend to accelerate. High crime areas will probably be first.
The Indian Experience
India’s recent experience is particularly instructive. In 2016, the 500 and 1,000 Ruppee notes were demonetized. The stated reason was to stop counterfeiting, but the real goals were control and tax revenue. After the deadline, 500 and 1,000 Ruppee notes became worthless. Anyone holding them in effect got a 100% tax. This was a devastating bureaucratic blow, since 86% of India’s circulating currency was in those denominations. Not stopping there, the Indian government now plans to fully ban large transactions.
For some more detailed information about India’s war on cash, see the InfoGalactic article.
Welcome to the Cashless Fishbowl
The most dreaded implication of going cashless is transparency. There will no longer be any “private” transactions. We’ll all be swimming in the same fishbowl. This transparency is a tax collector’s dream come true. It could allow deeper and broader taxes. Simple set-rate sales taxes could become passé. Instead, taxing authorities could use variable transactional taxes levied as a tool of social engineering.
Specific “sin taxes” could be levied on everything from sugary drinks to alcohol, ammunition, and edged weapon purchases. It is noteworthy that point of purchases transactions are now largely keyed to Universal Product Codes (UPCs). The same cash register that itemizes your purchases also debits your payment card. So it is a fairly simple incremental step to pick out bureaucratically-perceived “sin” UPCs and tax them at various rates. The excuse given will of course be “societal costs”. (Such as higher cost for medical care.)
Grounds for Investigation
What else will the mandatory use of digital currency bring? Any controversial (but ostensibly legal) purchases might trigger investigations by law enforcement agencies. These “no-no” items could include: precursor chemicals, ANFO fertilizer, Tannerite (exploding rifle targets), greenhouse grow lights, hydroponics equipment, large inline fuel filters (which are dual use as “solvent traps”), radar detectors, voice scramblers, encryption software, bulk quantities of foods, controversial books, body armor, night vision equipment, fighting knives, pyrotechnics, some medical items, precious metals, colored gemstones, D-Con rat poison, colored contact lenses, and many other items. Just by living as a well-prepared individual, you would probably trigger multiple investigations at various levels of government. This will be a very uncomfortable fishbowl, indeed!
All of the requisite technologies for the digital currency transition are in place. Now it is just a matter of when individual nations (and blocs of nations) decide to make the switch. Again, smart phones are becoming ubiquitous. That is the key enabling technology. Vending machine makers have already produced a new generation of machines. They are already equipped with credit and debit card readers, eliminating the need for currency and coins. Keeping bank accounts with direct deposit are mandatory for military service members and virtually everyone on the Federal payroll. (That is a huge legion, just by itself.) So the question is no longer “if” but “when”.
Ready, Set, Barter!
It is high time to get ready for the transition to e-currency. Hedging into precious metals is an obvious choice. I posit that even if transactions with metals are outright banned, they will still be widespread. Why? The advent of transparent markets breeds opaque markets. Making transactions in silver and gold will probably become a misdemeanor crime. (And perhaps even a felony, depending on the amount transacted.) But if anything, this criminalization will make holding silver and gold coins more popular than ever.
Obviously, in order to be ready to transact in silver and gold you will need to have those coins (ideally, before the cashless transition). If you already hold some real money, then it is simply a matter of adjusting your holdings into small, barterable increments. So, for example, if you presently own some 1-ounce gold coins, then you should consider trading some of those into either silver coins or at least into 1/10th ounce gold coins. (Just be forewarned that the latter carry a substantial seller’s premium. You will probably not be “trading straight across”, ounce for ounce.)
Already Holding Silver?
But what if you already have some silver? If you have any large ingots (10-ounce, 100-ounce, or larger commercial ingots), then you should consider trading most or all of those into either 1-ounce silver rounds, or better yet into pre-1965 U.S. silver dimes or quarters. (Small increments make for smooth and easy transactions.)
It would also be wise to make any purchases of controversial or dual-use items before the advent of fully-tracked digital commerce. And now is the time to round out your personal library with books on arcane subjects that could raise eyebrows. It is also wise to put together a reference library to peg the relative value of coins, guns, pocket and wrist watches, and various collectibles. Knowledge is power!
Many years ago, Colonel Jeff Cooper coined the term Ballistic Wampum to describe the use of ammunition for barter. The suitability of common caliber ammunition in this role is self evident. Because it has most of the key attributes of a barter good, I consider ammo co-equal to silver coins. What are these attributes? Durability. Ease of Recognition. Fungibility. Divisibility. Practicality. Near Universal Appeal. Oh yes, and: Cool Factor. In a future barter economy, all the Cool Kids will be swapping Ballistic Wampum.
Gain Key Bartering Skills
This is also a good time to get accustomed to bartering. If you are inexperienced with barter, then be advised that there is a learning curve. Take the time to read this SurvivalBlog article: The Savvy Barterer–References, Skills, and Tools for TEOTWAWKI Barter.
Many communities host farmers markets, community garage sales, and flea markets. They are great places to learn how to barter. Also get accustomed to traveling to attend coin shows, gun shows, and Ham radio swap meets. The experience that you gain in bartering there will prove itself invaluable. (Once digital currency is instituted and a good portion of legitimate private commerce is driven underground, barter skills will be tremendously more important than they are today.)
Take the time to research and then join barter and/or local currency networks. To start, do your homework with web searches on phrases like these:
- “Alternative Currency”
- “Local Currency”
- “Ithaca Hours”
- “Barter Club”
- “Barter Network”
Long Term Risks of a Cashless Economy
The long term risks of a society under a digital currency regime are difficult to fully predict. There is, of course, the aforementioned loss of privacy– what I call “The Fishbowl Effect”. But just as scary is the recognition of the fact that a universal digital currency at the national or even multinational level opens the doors to monetary mischief. What is to stop a government from grossly inflating a digi-currency and then simply dropping a zero? That is something difficult to accomplish with paper currencies and coinage, but it could be done in the blink of an eye with an electronic currency.
There are probably many other risks that I haven’t considered. But suffice it to say, adopting digital currency will be like opening Pandora’s Box. Brace yourselves, folks, and hedge!
What About Bitcoin?
The topic of Bitcoin deserves an essay of its own. I’ll suffice here with a few notes:
- First, remember that just like any other currency its value is a perception. Whether you are looking at a Federal Reserve Note, a one-ounce silver trade dollar, or a Bitcoin, its value (purchasing power) must be agreed to by both the buyer and the seller. No agreement, no sale.
- In recent years, the value of Bitcoin in relation to paper currency has been all over the map, but the general trend is upward.
- Be sure to keep at least three copies of your Bitcoin “wallet” (wallet.dat) file, and hide them well in separate places.
- Your passphrase should be long, memorable, and unique.
Most of all, don’t put all of your eggs in one basket. As I recently mentioned in a SurvivalBlog column, you should beware of putting too much of your wealth into Bitcoin or other cryptocurrencies. When times get hard, governments get grabby. And of course Bitcoins stored by third party exchange services are vulnerable to hacking. For more information on Bitcoin, see this over at Wired: Bitcoin Has Come Roaring Back—But So Have the Risks.
In closing, we should anticipate the advent of digital currency with a wary eye. Plan ahead, and you will be ready to cope and even profit. But if you simply go on with your day-to-day life and get caught unaware by the change, then it could be costly to both your net worth and to your personal freedom.
Because this has been just a brief summary, I look forward to the Reader Comments to this article. They should be quite illuminating! – JWR