Running Cashless? Bad for Tax Cheats, Privacy, Poor

Do we need cash? Humen have utilized all sorts of things to exchange items of economic value — rare metals, strings of shells and even sunken boulders. Those objects have gotten more ephemeral, with paper money replacing most coins, and digital forms increasingly supplanting paper. Could physical cash go forth solely? Economists insure great payoffs in a cashless society: lower transaction costs, new tools to manage economic growth and an objective to tax evasion and money laundering. Critics consider an objective to privacy, frightening new powers for dictators and costs that would fall disproportionately on the poor. The giant, if unintended, experiment that followed India’s attempt to withdraw 86 percent of cash in circulation proved one thing clearly: The aim of cash is not likely to be a neat or simple process.

1. How much of money is cash?

Not that much, at least to its implementation of economic activity. According to the Switzerland-based Bank for International Settlements, there was a blended $4.54 trillion worth of cash circulating in the countries of the euro zone and 17 other major economies at the end of 2015. That accounted for only 8.9 percentage of their combined gross domestic product, a figure that snuck up about 70 basis points since 2011 because of more per-capita cash in the U.S. and euro area. The U.S. had the most notes being used, at $1.42 trillion, but Japan had the highest banknotes-to-GDP ratio, at 19.4 percentage. Of course, each dollar, yen, euro or kronor changes hands several times a year, creating a multiplier impact on the amount of money.

2. What would it mean to go cashless?

With a swipe of a card, a click of a mobile-phone app or an impress of your forefinger, you’d have instant access to your entire wealth. Invisible networks connecting banks, shops, governments and industries would handle the flow of transactions, changing the face of banking eternally. A glimpse of this future is already evident in India, where 255 million people use Paytm, a seven-year-old startup backed by China’s Alibaba Group Holding Ltd ., to make payments through a virtual wallet.

3. Who’s gone the farthest?

In the homeland of ABBA, the band whose “Money, Money, Money” induced waves in the 1970 s, cash is vanishing . Sweden is the most cashless society on the planet, with banknotes and coins accounting for only 1.7 percentage of its GDP. Even God has run digital there, as churches accept donations via mobile phones. Nigeria has signed up with MasterCard Inc. to deploy a new national-identity card with a prepaid payment system.

4. Who’s in favor of going cashless?

A wide range of institutions, including 😛 TAGEND Governments. With every financial transaction recorded, they can taxation us better, choke the financing roads of bad guys and stimulate transactions like drug trafficking easier to track. Direct transfers to beneficiaries of official programs can be more efficient by cutting out middlemen. Central banks. Records that don’t miss any fiscal activities are more useful in devising appropriate monetary policies. Business. The costs and risks of storing cash will be eliminated and pay bottlenecks in the render chain is likely to be history. Technology providers. Imagine the power that comes from running the economic backbone of a society. Credit-card companies. They’re already pushing merchants to ditch paper currency. Numismatists. Their coin collectings would be that much rarer.