Way back in May 2015, I wrote a blog post about an article that I found in The Telegraph by Jim Leaviss. Judging by the number of comments (at the time there were 3,208 of them) plus all of the social media shares; the Telegraph article certainly generated a lot of discussion. You can read it in full here (but it is behind their paywall). The story was part of a series, where respected people in the finance world at that time, put forward controversial ideas. A cashless society was one of them.
Basically, the premise of the article was; if we lived in a totally cashless society all our money would be in a government-controlled bank. This would make it easier to manage the economic boom and bust times.
In this futuristic cashless society, it would work like this. When the economy needed a boost, you would be charged for having funds in the bank. This would encourage you to spend rather than seeing your money being eaten away in fees and negative interest. When the economy needs to be slowed down there would be a charge on transactions to encourage you to save.
The thought of a centralised bank having this much control over our spending is still a somewhat scary concept. Particularly if you live in a country where the government can't even run its own books and is hopelessly in debt, let alone manage the money for its citizens.
In this cashless society scenario how are you supposed to save for retirement? If you are encouraged to spend and are penalised for saving this would throw retirement planning out the window. There’s enough of us struggling with retirement planning in our current system.
How the world has changed in the nine years since that article came out. We have had a pandemic, where we basically weren’t allowed to use cash.
Crypto has risen and fallen several times.
The economy has also gone up and down, and governments are still printing the stuff for us to use.
AI is keeping an eye on our transactions, and we are actively discouraged from using cash. We get charged fees to put it into our bank accounts.
I don't know about you, but over the years, I have been moving to being cashless. I would be lucky to have $10 at any one time in my wallet. I rely on plastic or my phone to pay for items on a day-to-day basis. Cheques have completely disappeared, and I pay my bills electronically via internet banking.
Having said all of this, I still have a fondness for cash. From a money psychology perspective, it’s important. It’s tangible, it helps us teach our children about money before introducing them to the electronic medium.
Using cash also helps us understand the pain/pleasure principle. Before cards came along, we would go shopping with a bundle of cash. We would hand over some notes and get some goods in return. We immediately felt the pain of paying and the pleasure of receiving. We could assess straight away if we were happy to suffer that amount of pain for that pleasure.
With electronic payments, we still get the pleasure, the instant gratification, but the pain is delayed, the second part of the transaction, the pain bit, only hits when/if you look at your bank account or credit card balance. Often, by the time this happens, you have lost the initial feeling of pleasure from the purchase. So, you might get a double dose of pain.
This is called the abstraction of money. The transactions have become easier, but our awareness of what we are spending has been diluted.
I have a challenge for you. If you don’t have any cash in your wallet right now. Go to the money machine and draw out a $20 or $50 note. Practice the pain/ pleasure principle. How long does that note stay intact before you break it? Once you have spent it once, how long does it take for the rest to disappear? What is the decision process you go through when deciding whether to use the note or not?
I’d love to hear your feedback and comments if you do the exercise.
Lynda Moore is a Money Mentalist coach and New Zealand’s only certified New Money Story® mentor. Lynda helps you understand why you do the things you do with your money, when we all know we should spend less than we earn. You can contact her here.
18 Comments
A great article. Very thought provoking.
Also interesting is the cost of the switch to electronic payment for the consumer. The retailers now have to pay merchant fees (and more for the chipless wireless version). The extra costs are passed onto the consumer and most of that money goes to the banks and credit card companies. At a guess 2-3% extra of our money spent on cards is taken by the card provider and bank.
Plus as you say there is an increase in real spend.
Plus Plus the ability to sign up for subscription services that are also hard to follow.
Thank you for raising this, the though that governments could print money causing inflation(devaluation) and then have the cheek to punish us but taking our money in "fees", most likely before we get to spend any of our money, is mind blowing. I fear people will sleepwalk into this. Wont need to TAX us it will just be "fees", write a mean comment about something/someone, protest about the "fees" and you will be fined, more "fees"!
We need clear separation between money and government!
Cashless? Depends how much more control you want the state and corporatocracy to have over your life I guess? There's already cameras following your movements around town and upcoming GPS tracking of your movements via RUC. Between your telecommunications able to be tracked and along with every financial transaction the journey to dystopia is becoming well paved. The state and banks being able to remove your savings to support the system, says more about the quality of the lifestyle prison we're being forced into, than the wonders of our economic ideology, and beneficent technological "progress".
The super organism hive mind forces your acquiescence and serves itself, not humans.
Using the past government as an example I would rather give my money to my 6 year old son than trust Grant Robertson or Adrian Orr to manage this it efficiently. Once they have the power to do as you propose that would slowly morph to further extra "justified" measures. Step by step.. inch by inch.. Hence while a CBDC which effectively allows this and has some merit, these are vastly shadowed by the negatives. The government should be limited in power and keep to their lane.
I don't know about you, but over the years, I have been moving to being cashless. I would be lucky to have $10 at any one time in my wallet.
I can't and don't wish to think of a world without cash, and always have at least a $50 on me. How do you pay someone if you buy something off of someone on marketplace, how else do you close a deal on a higher value item as such without wafting the cash in front of the sellers face to entice them. There are many transactions between individuals such as this that need no oversight or involvement of a bank to track. I certainly wouldn't be paying GST on such an item as it is a person to person transaction, and my preferences of what I buy and who from need not be recorded with a bank for privacy reasons as they already get enough information (and profit) from us. In a world where digitisation of near everything is becoming more ubiquitous, an privacy less common, we need to be very mindful of our information and whom we give it freely to, as often once out of our hands, we cannot control who does what with it. Yes I use my card for plenty of things too, but not all situations are relevant to this.
Yep, everythings peachy, until our officials go full totalitarian. The last few decades have been a mainly western anomaly in human history. Plebs have had freedom most couldn't dream of historically. Things have a habit of reverting to the mean though. Our betters only hand out crumbs when it suits, slavery is the human normal.
I haven't used an ATM for...I don't know how long. I tried depositing cash at the bank a few years ago and realised I didn't know how it was done at that time - and I actually worked as a bank teller when I left secondary school.
Now cash deposits are done through ATMs, but since I neither carry nor receive cash I have no need for them. I do all my purchases electronically, and my income arrives the same. However, I believe there is still a place for cash in society, for low value transactions such as sausage sizzles and street-level charity donations.
Should cash be outlawed overnight I'd expect the physical cash to retain a black market value equivalent to its previous face value due to a massive pushback from the public who don't trust the government/banks to operate in their best interests and enabling total freedom.
Just wait until the Visa and Mastercard networks become political pawns as global conflict heats up...
Imagine having all the resources necessary to carry on producing and living your daily life but no means of making transactions. That's the real value of money and that value is being taken away from us (or more specifically our governments).
As I understand it some Scandinavian countries that moved quickly to cashless options are now making serious plans to address the risk of losing their ability to transact in a time of crisis.
That's the risk here isn't it, as well as the situation that occurred with frozen accounts in Canada 2022. While for convenience it may seem like a positive step forwards. But it removes an option for physical representation of monetary value that has existed for an age, and leaves the potential, while seemingly small, to be harnessed and utilised against the people. While we'd love to think this may never happen, Trudeau has exercised such power and shown that the possibility of this is only a couple of days in parliament away form occurring should the political will exist, and I'd like to think many are wise to see the risk in giving opportunity for such control without any alternative, to a government.
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