Cash Is King

My friend Zach pointed out to me that the U.K. is taking steps to become a cashless society (it already has the dubious honor of being the leading surveillance state in the European Union). Naturally, the U.S. is not far behind.

I'm obviously a fierce advocate of free markets, so why do I so strongly oppose the idea of a cashless society? If cashless transactions are faster and more efficient than cash transactions, won't their widespread adoption translate into greater overall production and therefore greater prosperity for all? Not necessarily.

In order for a free market to work properly, it must be free of government interference. Any interference causes market distortions, often referred to as "unintended consequences." (Incidentally, the term "unintended consequences" assumes that the stated noble purpose of the interference is true, while the consequences are unexpected and unfortunate. In other words, the term assumes every government official says what he means and means what he says when interfering with the free market. A bit of a stretch, I'd say, human nature being what it is. But strangely enough, unless one makes that naive stretch, one is automatically labeled a "conspiracy theorist." Go figure.)

If we lived in a truly free market, I'd say, "Awesome! Give me the option of cashless transactions so I'll never accidentally 'leave my wallet at home' again. Who needs privacy? Privacy from whom?" If businesses can guarantee privacy to the consumers, what's not to love about the speed and efficiency of cashless transactions? Consumers would lose their anonymity only in a limited sense, because it would be illegal for businesses to exchange their customers' information with other businesses without the customers' express approval. Think doctor-patient confidentiality.

But alas, we do not live in a free market. In the West, we live in societies where quasi-socialist, quasi-fascist governments are packed full of bureacrats who make careers out of dreaming up bigger and better ways of interfering with the market. In societies like these, "cashless society" would not imply merely having the option of electronic transactions; it would imply that non-electronic transactions would be illegal. There would be various bogus reasons put forth by the bureaucratic elite to justify outlawing non-electronic transactions; my guess is that it would be vaguely related to "national security." We can't have terrorists running around making naughty purchases anonymously with cash. After all, the price of freedom is eternal vigilance -- by the State, not by you.

The danger is that if the market puts a largely cashless financial infrastructure in place (as it already appears to be doing), it can easily be coopted by the government to be used as the ultimate tool of social control. Some "crisis" or "emergency" occurs, and with a single stroke of the Executive pen, suddenly your every transaction is now accessible by government bureaucrats. Every purchase, every sale. What and where you eat. How much gasoline you use. What books you read. How much toilet paper you use. How much money you borrow from or lend to friends and family. Are you prepared to live in that kind of a world? If not, then don't follow the U.K.'s example. Keep using cash.

Cash is king. Using paper cash instead of credit or debit has a couple of positive effects:

• Cash gives you privacy since it is anonymous.
• Cash can be used anywhere, any time -- even during a power outage or natural disaster.
  
• Cash cannot be frozen or confiscated by a click of a government bureaucrat's mouse.
• Cash represents money that is not in a checking account, meaning the bank cannot pyramid fraudulent loans on top of it and thereby contribute to inflationary booms. The more cash you have in your hands, the less fraud the bank is able to commit.

Hail to the cash, baby!