
After Cash: All Fun and Games Until Somebody Loses a Bank Account - jseliger
http://www.bloombergview.com/articles/2016-03-15/the-end-of-cash-and-the-rise-of-government-power
======
atemerev
Here in Switzerland:

— The largest cash note is 1000 Fr. (slightly more than $1000). It is readily
accepted everywhere and I can pay for coffee with it and get change. (The
coffee will be around $4, or $7 for vanilla latte in Starbucks).

— My ATM daily cash withdrawal limit is 75000 Fr. (not a typo). I dream of
hitting it once, but I'm not that rich.

— I can go to the nearest bank and buy a physical gold bar, from 1g to 12 kg,
for cash, no questions asked, no papers needed. And sell it later at the same
place, with only a nominal fee taken (if still in original package).

And I like it this way. When I travel in any other country, it looks strange
to me when even a 100€ bill is frowned upon and probably won't be accepted.

~~~
wjnc
It's a bit snarky, but tax payers around the world are thankful for having to
pay additional taxes for your privilige. In the sense that the freedoms you
enjoy financially in Switzerland have enabled massive tax-dodging worldwide.

Half a million worth of gold, no questions asked? Anti-terrorism-financing
acts in Europe start with actions needed by banks and institutions at about
10-20k euro per transaction. Again, I would be among the first to doubt the
use of these kinds of acts (does it stop _anything_?). But the tax dodging for
one has been a real consequence of Swiss law. It's kind of where the
libertarian in me meets the tax payer.

~~~
mike_hearn
I'm not sure you can say the decisions of one country "enable" crimes in
another quite like that. The Swiss approach to tax and financial privacy isn't
unreasonable, and if other countries _require_ global cooperation to enforce
their tax systems, then isn't that more of a design problem on their end?

~~~
inflagranti
Exactly. It's very similar to the encryption debate right now. But there
should be a right to privacy regarding in which back I put my money after
taxes were payed on it and the total amount of money is declared.

The main issue I always saw with the banking secrecy laws that we would store
money for people like gaddafy and other rogues. That we should have stored
much earlier by law.

~~~
atemerev
This was solved years ago.

All banks, including Swiss banks, now require client identification first (no
more "numbered accounts"), and they are disallowed to open accounts for some
categories of people.

------
retrogradeorbit
"Most of us are already moving toward a cashless society -- not because we
care about the crime-fighting, but because the stuff is darned inconvenient."

What on earth are they talking about? Why do people keep saying cash is
inconvenient, as if saying it makes it true? It is, in my experience,
extremely convenient. It is the most convenient form of payment, person to
person. I owe money to my friend. Do you have a pay-pass terminal? Oh you
don't. Let's just log into our bank accounts. Let me make sure I got your BSB
number and account number right. etc.

I want to give some money to the homeless beggar. Excuse me, do you have your
bank details?

Cash is king for a reason: Convenience.

~~~
pathy
I open up my Swish App (owned/operated by big Swedish banks), enter my friends
phone number (either manually or via my contacts) and then enter the amount
and a message, totally free and significantly more convenient than cash, which
I basically never carry.

I can even pay the kids selling strawberries by the roadside via Swish.

Then again, Sweden is in the forefront of the cashless society at the moment,
for better or worse.

~~~
onion2k
Is Swish an open system that any bank can join, or is it a way for the
incumbents to keep new banks out of the market?

~~~
sciolistse
Any bank can join.. if they meet the requirements.

[https://www.bankgirot.se/en/about-bankgirot/participant-
requ...](https://www.bankgirot.se/en/about-bankgirot/participant-requirements-
for-the-settlement-and-clearing-systems/Payments-in-real-time/)

There are plenty of legal regulations to wade through to join, but it's not
impossible and the requirements are publicly available.

~~~
jacobush
And plenty of institutional red tape added by "BiR", but sure, not impossible.
Just not something your regular startup would pull through.

------
dheera
The biggest problem I see coming with "cashless societies" is severe
technological fragmentation. For mobile payments, in China you can get around
with WeChat Pay and AliPay; in USA you use PayPal, Apple Pay, Android Pay,
Samsung Pay, Venmo, and probably a few others I'm forgetting. In Australia you
have PayWave. What about plastic? In Singapore you have NETS, in USA you have
Amex, Visa, MasterCard, in China you have UnionPay, ...

And guess what? None of these systems talk to each other. Even PayPal USA
doesn't talk to PayPal China for goodness sake. Most payment systems require
local addresses and phone numbers to even register an account, so if you're a
short-term tourist or business traveller, you're out of luck. If you're a
frequent international traveller, cashless societies are going to be absolute
hell unless we come up with some kind of internationally-standardized
protocol, which doesn't seem to be happening any time soon because each
payment system has a corporate agenda behind it.

~~~
white-flame
Plus, every electronic form of payment includes fees. Their sole purpose of
existing is to collect fees to pay the owning company's investors.

The effect is that in the middle of all monetary transactions, there is a
mandatory and forced private profit scheme. That's insane.

Cash is free to use, and bears no intrinsic fees. The same is often true of
personal checks in the USA. While these are the most labor intensive ways of
transferring money, they don't incur any intrinsic shrinkage in their use. All
the digital and fully automated systems of transferring money are more
expensive at face value.

~~~
shoover
True. PayPal is currently free for interpersonal payments, but who knows in
the future. Now that banks are not processing so many checks they have to
compete using their own "easy pay." Chase has QuickPay, which I haven't used
because it's yet another network, but it is free to send money to someone at
Chase or another bank in the ClearXchange network. Maybe if they can stay in
the game and expand their interoperation payments will stay free.

------
frik
Who is behind the recent cashless movement? Which group? Who wants to profit?
The huge population who will be on the looser side, is evident.

It's not surprising that lesser educated people would find it convenient to
not have cash. Though those don't understand what they would loose in the
first place. Cash means freedom, no one can spy on what you spend your money
on. And a big part of the money is still spend every day in the real world on
location, and the smaller part online. Also cash cannot loose value as easily
over night or even vanish without a trace (banks are private and can go
bankrupt). It's very easy to keep track of your spending, when you use cash
for all location payments (banks of course would like to loan you money). And
remember, there was a time when banks were a new thing, and to catch consumers
they provided bank accounts and services for free. Back then, you got your
money from your employer in cash. Suddenly, employers started to pay out the
money only to bank accounts you were locked in to the back system and of
course they started to charge you for bank account and all their "services"
incl ATM and cards.

~~~
majewsky
The dominant explanation among leftist economists in Europe is that banks
wants to set negative interest rates on consumer bank accounts. But that only
works when cash is eliminated. Otherwise, negative interest would cause a bank
run because keeping the money at home in cash is literally more profitable
than leaving it in the bank account.

~~~
ArkyBeagle
So basically, the protocol they use for monetary policy doesn't work, so
they're trying to prevent deflation by eliminating cash.

------
anexprogrammer
This is a topic that always fascinates me on HN.

HN typically is in favour of privacy, and against surveillance. Then is
equally enthusiastic about cashless apps which have a transaction record for
every tiny amount. I don't understand :)

I'll generally buy most day to day items with cash and a card just for online.
I don't find it any way inconvenient - there's an ATM at the supermarket and
near all the shops I visit.

Amongst children and friends I don't see any evidence of a move to cashless
either. They'll still take notes for a night out and make sure to leave enough
for the cab home, or go to the hole in the wall first. They'll use a bank app
to pay back a random £20 borrowed.

------
bcg1
In person, I always use cash whenever possible. It saves business owners 3% or
so on processing fees, so they can keep prices lower. I suppose there is the
possibility that they might forget to declare that transaction and not have to
pay federal taxes on it... but that wouldn't break my heart and potentially it
would keep the money within the community.

"Cashless society" is a cute idea for tech enthusiasts living in urban areas
(nothing wrong with that btw) but it is not feasible for most of the places
where I find myself.

~~~
pjc50
_It saves business owners 3% or so on processing fees_

Banks charge business owners to deposit nontrivial amounts of cash too,
especially in the form of coins.

~~~
bcg1
Not anywhere close to 3%. And anecdotally, I've never had anyone complain when
I handle them a bundle of $20 bills.

 _Many banks don 't charge fees for using machines that count coins that are
dumped into them. However, some big banks are charging customers who deposit
lots of cash. At one major bank, there's no fee for the first $10,000
deposited. After that, you'll pay 20 cents per $100._ [1]

[1]: [http://www.bankrate.com/finance/banking/sneaky-bank-
fees.asp...](http://www.bankrate.com/finance/banking/sneaky-bank-fees.aspx)

~~~
acveilleux
That link only applies to consumers.

My bank generally charges 0.225% on bank notes deposits and 2.25% on coins
deposit for commercial customers. The max per month without fees is 1000$,
coins always have fees.

My bank is one of the big 5 canadian bank with assets in management over
500B$.

If you need to contract an armored courrier to move that cash, that's an extra
very significant fee.

~~~
bcg1
Still not anywhere close to 3%. And I'm not arguing that electronic payments
don't have merit; just that the elimination of cash does not have appreciable
merit to be feasible.

------
tzs
Speaking of losing a bank account...I'm curious how safe in the US bank
accounts insured by FDIC are. I understand that it works well in the classic
case of an insolvent bank where the problem is that the bank mismanaged its
resources (too many bad loans, for example) and so doesn't have the money to
cover deposits.

In such a case the bank has full records of everything that happened, and
auditors could come in and figure out exactly how much is owed to whom.

But what would happen if online attackers got into a bank's systems and
completely pwned the bank, having free run of the system for several months.
Suppose they wiped all the live data, and managed to also wipe a few months of
backup data.

How would FDIC figure out who lost what from insured accounts if the bank
itself no longer has records covering that?

~~~
singlow
The FDIC does not insure against fraud, theft or accounting errors. It only
protects against bank insolvency due to under-capitalization.

~~~
mcherm
That isn't QUITE true. There are enough details that I can only speak in
generalities, but in general, ordinary consumer accounts are indemnified
against fraud and theft by the bank itself. US law requires that banks cover
all or nearly all of a customer's losses to most sorts of fraud and theft
(which it is depends on the kind of payment system) so long as it is a regular
consumer account (small business accounts, for instance, may be out of luck)
and the customer reports it within certain legally mandated time frames.

If the fraud is so extensive that the bank cannot afford to reimburse all of
the customers, then the bank is undercapitalized and will be taken over by the
FDIC.

------
johnchristopher
I am puzzled to see the majority of comments here favouring an all
bank/electronic solution that leaks an insane amount of metadata to the
regular players [0] (bank, gov., etc.) because it's the opposite of what I
usually read in the regular encryption submissions regarding privacy (and
defence against the prying eyes of a government).

[0] who gives what amount of money to who and when for instance

------
Animats
What makes you think cash is anonymous? In China, ATMs record the serial
numbers of the bills they dispense.[1] 80% of ATMs in Beijing, Shanghai,
Nanjing and Guangzhou had this feature in 2013, and it was supposed to be
rolled out nationwide by the end of 2015. There's no secret about this; you
can ask the ATM to print the serial numbers of the bills it dispenses on your
receipt.

Now being rolled out in China: ATMs with face recognition.[2]

[1] [http://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-
pro...](http://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-provide-
banknote-serial-numbers) [2]
[http://en.yibada.com/articles/35951/20150601/china-worlds-
fi...](http://en.yibada.com/articles/35951/20150601/china-worlds-first-atm-
with-facial-recognition-detect-fake-bank-notes.htm)

~~~
dublinben
It is utterly trivial to launder cash to avoid this kind of tracking. Pay for
a $1 pack of gum with a $20, and now you have $19 in clean cash. Rinse and
repeat as necessary.

~~~
pjc50
Trivial for small amounts, not trivial for large amounts. In China it's all
about the "ants moving house" of capital flight.

------
junto
I am lucky to live in a safe area. I don't like the tracking capabilities of
debit and credit cards. I don't want my bank to know what kinds of shops I
like to shop in, or how I chose to spend my money.I don't want a profile.

As a result I love cash. The only time I use cards is online or larger
purchases where I can't easily carry around that much cash.

Cash has been around for thousands of years. I doubt it can be removed from
our society without a great deal of backlash. That is a very good thing in my
opinion.

~~~
klez
> I doubt it can be removed from our society without a great deal of backlash

This is the reason there's so much talk about going cashless these days. It's
being propagandized so there's less friction when they decide it should
happen.

------
csense
Unfortunately with civil forfeiture, the situation with cash isn't much
better. (E.g. the case of a black kid who carried $10,000 cash, his life
savings, to move across the country, ended having the money taken by police
and never returned, he was cooperative with officers and never accused or even
arrested.)

------
gd1
There's been a deluge of anti-cash articles post Davos, and it's no mystery as
to why. Not because it helps to prevent crime, or is more convenient, or any
of these other reasons. Simply because you can't implement negative interest
rates in a deflation event if your citizens have access to cash.

~~~
mfairbank
I see this mentioned often, but it just isn't the case. In order to
effectively implement negative interest rates, we will have to modify the
exchange rate between physical cash and bank deposits to remove the incentive
to hoard physical cash above the amounts needed for normal daily activity, but
we will not need to ban it outright. This paper[0] from the International
Monetary Fund explains in more detail the steps banks will take to implement
the changes.

[0]
[http://www.imf.org/external/pubs/ft/wp/2015/wp15224.pdf](http://www.imf.org/external/pubs/ft/wp/2015/wp15224.pdf)

~~~
guard-of-terra
Whoa, the guys who wrote this paper should get treatment not dissimilar as
people who helped design and build Nazi death camps.

People will just ditch banks and return to exchanging physical currency in
their transactions. Why would you need electronic money if it incurs
additional fees?

------
e12e
About losing a bank account:

"HSBC shuts accounts of Muslim organisations, including Finsbury Park mosque":
[http://www.theguardian.com/world/2014/jul/30/hsbc-shuts-
acco...](http://www.theguardian.com/world/2014/jul/30/hsbc-shuts-accounts-
muslim-organisations-finsbury-park-mosque)

------
ersii
Regardless of your opinion if we're going to have or would want a cashless
society or not - the article glosses over a lot of negative aspects.

The article mentions crime as a main motivator to shifting away from cash. The
amount of robberies/muggings have gone down, but card theft and fraud is sky-
rocketing. I would be interested to hear more about how kidnapping/extortion
have fared in comparison as well.

The article mentions that retail crime will be just a memory after we've
shifted away from cash. There has been plenty of retail card theft and fraud
stemming from hacked retailed networks and hacked/rigged payment terminals
during the last three years (2013-2016).

The article mentions that shifting away from cash would give the governments
of the world a leg up in controlling our usage of money. I have nothing to
object to there, but would like to add that it also gives private companies a
leg up in controlling our usage of money as well. Both from the perspective of
knowing where we spend and what we spend on - but also as they can terminate
the contract to any retailer or payment processor at basically any time. Sure,
not everyone is Wikileaks - but when you've broken the principle, it could
happen to anyone.

------
nissimk
People have been saying bitcoin here, but without spelling it out. Bitcoin is
digital money. One of the most important properties is that you don't have to
trust any other party to protect it for you. This makes it similar to cash. If
you have cash in your teapot, someone has to physically force their way into
your home to seize the cash. If your money is all digital in banks, it can be
easily seized or frozen by the bank or the government. With bitcoin, you have
digital money that cannot be easily siezed or lost due to a failure of some
organization.

Unfortunately, nobody knows how to make it scale yet where it will be usable
by a large number of people and still maintain this "trustless" quality.
Hopefully all of the smart people currently working on the scalability issues
will solve this problem and we can move to a digital cash future.

------
OneOneOneOne
Electronic government controlled bank accounts seem like a good idea.

It is good our government would never violate our freedom.

~~~
TheOtherHobbes
Losing access to your accounts would effectively excommunicate you
economically.

I suspect this is considered a feature, not a bug.

------
faebi
Recently my Debit Card didn't work anymore and the process to get a new one
didn't work correctly. It meant I was without cash and possibilty to get my
cash for more than 4 weeks. It showed my very hard how depent we are on those
systems.

~~~
opium_tea
Couldn't you go to the bank with your passport? That's the fallback solution
in the UK.

~~~
faebi
Yes, but my bank is a small one in my old home area. Now I am living in a far
aways city without this bank. Also I was only on sundays in my old home area
and had no possibilty to go there on a weekday.

------
gedrap
I haven't seen anyone mentioning what happens in a cashless society if your
card is broken/lost.

I've lost my card, went to a bank, showed my passport, got enough cash for a
couple of weeks and got card replacement in a few days. What would happen if
the society was cashless? Would I get a new card immediately?

~~~
guard-of-terra
You can get a prepaid card with some amount, I guess.

------
julie1
Well the problem is you may not want your bank to gamble your money. And
governments refused to separate financial activities of banks with their
depots missions in most places. Leaving 98% of your actual money playing on
markets on stuff you would not have wished to invest in the first place. Like
the junk bonds and US mortage from 2007 that are still there in the bilans.

It is as if our arms are bent to deposit our money in less than trustable
places without guarantees.

Are they trying to prevent banks from bankrupting or what?

You also may not want government to be able to seize your money like it was
done in Malta or in Greece.

Banks are privately owned entities I do not trust. I have the right to not
entrust my money to thieves and parasites without a minimum of security on my
savings. Especially when they could bankrupt.

~~~
mnw21cam
The difference in law between a bank and any other company that looks after
your money for you (for example, a pre-payment for goods) is that a bank is
allowed to add your money to its central assets and do what it likes with it,
whereas any other company has to keep your money in a separate account until
it returns either it or the goods you wanted in exchange. Lots of people think
this is the other way round. This means that if a bank goes under, the bank's
creditors get to keep your money, and you get to claim back under your
country's guarantee scheme, whereas if a different company goes under, your
money in its separate account is protected from creditors, and should be
returned to you.

A while back I got a random letter written in German that I had to ask a
friend to translate for me. Turns out that a few years ago I had pre-paid for
some computer equipment that was under development in Germany. The company
director had played fast and loose with the rules and used my money to (fail
to) develop the product, before the company went bankrupt. Because of this
breach of the rules, the company lost its limited status, and the director was
personally responsible for the debt to everyone.

------
ArkyBeagle
Even if "cashless" works perfectly, now you've constrained the entire economy
to either the formal electronic currency or barter. Or maybe something like
wampum, an informal improvement on barter.

One need only look to the history of the United States before the greenback to
see it.

People do business outside the formal economy. They do cash only business.
Unemployed/underemployed don't simply stop breathing. Since we have a high U6
number, the hubris of even considering this is breathtaking.

Stretching a metaphor too far, "cashless" is censoring the economy. What
happens when the economy perceives this and routes around it?

------
ptype
Visa and mastercard are already skimming a portion of all payments via their
systems. So if we are moving to a cashless society, should this not be state
owned infrastructure? Imagine a future where no cash exists and the large
banks and card networks coown the infrastructure for all payments, taking
their cut. I feel that cash is an important competitor to prevent this from
happening. but unfortunately as with most things it's use it or lose it.

~~~
pc86
The government is not a bank, a technology infrastructure provider, or
anything of the sort. They should absolutely not be running payment networks.

~~~
ptype
The state runs/owns a lot of infrastructure.

------
ersii
The article claims Swedes and Sweden "are making the shift". That's currently
false, but it's something that could happen. Perhaps I'm reading it too
strictly, but as they were mentioning the National bank of Korea in the same
paragraph.. The current set of laws and regulations in Sweden mandates that
cash are legal tender and that there is an obligation for the Riksbank
(National bank) to make sure there is "enough cash" available.

There is currently no proposed changes to those laws in the direction of
scaling down cash. There are however proposed changes in the making that will
make cash more available than they currently are. The chief of the Riksbank
(National Bank / "Federal reserve") have an article in one of the major
newspapers about this very subject, published today [1].

[1]: [http://www.dn.se/debatt/bankerna-maste-ansvara-for-
kundernas...](http://www.dn.se/debatt/bankerna-maste-ansvara-for-kundernas-
kontantbehov/) (In Swedish)

~~~
Shaanie
If you read the linked article it's more about a social shift than driven by
law. I.e, many individuals are foregoing cash for cards, to the point where
churches and 'homeless' now accept cards.

~~~
sleepychu
Got a link for 'homeless' accepting cards?

~~~
ersii
"Stefan Wikberg, 65, was homeless for four years after losing his job as an
I.T. technician. He has a place to live now and sells magazines for Situation
Stockholm, a charitable organization, and began using a mobile card reader to
take payments, after noticing that almost no one carried cash."

This excerpt is from the article [1] linked in the Bloomberg article [2]

[1]:
[http://www.nytimes.com/2015/12/27/busines/international/in-s...](http://www.nytimes.com/2015/12/27/busines/international/in-
sweden-a-cash-free-future-nears.html?_r=0)

[2]: [http://www.bloombergview.com/articles/2016-03-15/the-end-
of-...](http://www.bloombergview.com/articles/2016-03-15/the-end-of-cash-and-
the-rise-of-government-power)

------
faebi
Interestingly Switzerland goes into both directions. We are going more and
more into a cashless society and also our banking system is quite modern. On
the otherside the amount of 1000Fr bills issued in switzerland is getting more
and more. It means cash's main purpose will move to bigger amounts of money.

------
forgottenpass
"How Complex Systems Fail"
[http://web.mit.edu/2.75/resources/random/How%20Complex%20Sys...](http://web.mit.edu/2.75/resources/random/How%20Complex%20Systems%20Fail.pdf)

A no-cash system, beside all the other downsides, reduces and sometimes
outright removes the ability for humans to alter and/or workaround the system
when systematic failure modes are discovered. And that's just unintended
consequences, forget about perverse incentives.

This is the same reason I think augments that posit privacy is unnecessary
because enough downstream controls will somehow account for all "bad" things
that could happen. It's a scam, pushed by unscrupulous hucksters for their
advantage at the cost of everyone else.

------
yitchelle
Here in my small German town that I am living in. Shops that accepts debit
cards only made an appearances about 15 years ago. Before that, cash is the
only way.

Credit cards are still very much not in vogue in my town. Actually, even in
larger shops like Ikea, credit cards are not accepted.

~~~
thirdsun
That mirrors my impression as well - here in Germany credit cards just became
mildly common but customers are still far from being expected to carry one.
Debit cards however, are very common, however they won't help you when getting
a beer at sunday league football or visiting the local bakery.

~~~
thesimon
>Debit cards however, are very common, Agree. Sadly most of the times the
stores are only accepting the shitty domestic "girocard" scheme and not
international brands of debit crds.

>visiting the local bakery. Kamps usually accepts credit cards, even
contactless.

------
fieryeagle
TL;DR cashless with anonymity and decentralisation. Sounds like Bitcoin.

~~~
matt_wulfeck
Bitcoin isn't anonymous. You pay someone and can look at every transaction
they ever made.

~~~
fieryeagle
Only if I publish my address and leave patterns behind. Agree that it's
debatable then again, wouldn't you agree that in a relative sense, pseudo-
anonymous is better than bank accounts tied to your name?

~~~
majewsky
It depends. Pseudo-anonymity can give a (possibly false) sense of security.
With bank accounts tied to your name, at least you definitely know that "they"
can trace it back to you at every time, whereas with pseudo-anonymity you
might never know if you're fully anonymous.

~~~
fieryeagle
Good point there. Pseudo-anonymity (or should I say, pseudonym-based) is the
first step towards better privacy and decentralised transactions, not the
solution. Still, we have the means to do so, if we really want to. With bank
accounts, everything traces back to you by default without much improvement to
be done. Different systems, different purposes.

------
noja
By "cash" they means "government issued cash". Ban government issued cash, and
you'll get alternative hard cash appearing. Or barter.

------
dsq
update accounts set balance=0 where
name='name_of_person_disliked_by_senior_official';

------
ikeboy
>Even if these sorts of crimes are replaced by electronic thefts of equivalent
value,

Why would they be of equivalent value? Consider how much harder it was to
steal $100 million in cash, how much more planning it took, if even possible.

------
frogpelt
Cash is just a medium of exchange.

Sure, outright theft may become less lucrative. But if cash completely goes
away, black markets can and probably will start using their own medium of
exchange.

------
paulajohnson
Hence Bitcoin

------
theknarf
Bitcoin (or some other altcoin/cryptocurrency) would be the answer then.

------
throwaway21816
Yeah just convert all of your excess labor into bits, now they dont even have
to print money and distribute it.

Unlimited inflation time!

