Living in a cashless world, pray that you do not turn off the electricity

When Hurricane Maria [September 20, 2017] cut down electricity in Puerto Rico [a territory dependent on the US with the status of “unincorporated organized territory” (controlled by the USA, not being an integral part of it) / approx. transl.], residents realized that they would need physical money - and a lot. On October 9, Bloomberg reported that the Federal Reserve Bank had to send a whole plane of currency to the island to help prevent a catastrophe:

William Dudley , president of the Federal Reserve Bank of New York , issued an order, and soon a plane filled with an unnamed amount of cash landed on the affected island.

The director of a large company reported urgent requests from corporate clients for hundreds of thousands of cash dollars to pay salaries, and problems with the availability of armored trucks to meet the sharply increased needs of ATMs. These are the conditions on the island after the hurricane "Maria" in September caused damage to the territory of the United States, killed 39 people, destroyed buildings and swept away the power supply system from the face of the island. The very next day, at the end of the storm, the reserve bank began work on delivering money to the island.

For a while, if you didn't have a stash of cash under the mattress, it was simply impossible to get the money. As of October 9, 85% of Puerto Rico’s territory has no electricity . Bloomberg reports further: “When some ATMs from generators finally opened, they were lined up for hours in which people sat on beach chairs and covered with umbrellas from the sun” [The Governor of Puerto Rico promised to restore power supply by 95% in two months - approx. trans.].

In an earlier article , dated September 25, Bloomberg noted that without cash it was impossible to get basic necessities:

“Cash only,” said Abraham LeBron, a store manager who guarded the Supermax supermarket on Armagh Square in San Juan, the largest city in Puerto Rico. This place was well guarded by the police, but he still felt like a target, sitting on so many cash bills. “The system does not work, cards are not accepted. It's hard, but you have to find ways to work with it. ”
')
Cash economy rules the ball in Puerto Rico since Hurricane Maria destroyed the community last week, leveled the power grid and wireless towers with the ground, and sent the island back in time, back to the time of plastic. This situation may last for several weeks or even longer, especially in remote corners of the community, which means that it will be impossible to track the profits and calculate taxes.

Pay attention to this serious concern with income tracking and tax calculation — as if salary payments to ordinary people are not the most important problem.

Puerto Rico was lucky that the United States has not yet tried to implement many anti-cash measures that have gained such popularity among central bankers in recent years.

The abolition of cash has become a fashionable trend among economists, who have long been proclaiming that physical money hinders such “unconventional” monetary policies as a negative interest rate. Moreover, opponents of cash claim that cash makes it difficult to track cash flow, collect taxes, and control black markets.

This installation under the guise of fighting corruption and crime provided an excuse for the disastrous war against cash that unfolded in India in 2016. The action was conceived as the strengthening of government control over the economy. The Indian government removed the largest bills from circulation in India, and they accounted for about 85% of all cash.

This demonetization seriously hurt the economy. The Wall Street Journal wrote in December :

Not surprisingly, the shock waves of this ad continue to pass through the entire economy. The Asian Development Bank lowered India's growth forecasts at the end of the fiscal year from 7.4% to 7%. JP Morgan believes that growth will slow down by half a percent, to 6.7%.

In the meantime, a drop in sales leads to layoffs in various sectors, including construction, light industry and jewelry. The monitoring center of the Indian economy assumes that only the cost of withdrawing from the currency of 14.2 trillion rupees will cost 1.28 trillion rupees, or approximately $ 19 billion.

India’s economy will eventually recover from these wounds inflicted on itself, but there is no doubt that demonetization has created doubts about Mr. Modi ’s competence. This decision, made in the secret circle of trusted bureaucrats, demonstrates the prime minister’s inclination to command management, instead of the “minimum control” he once promised.

One can only imagine how much worse it would be in Puerto Rico if most of the cash were declared illegal, as was done in India. However, it seems unlikely that any of the well-known economists - for example, Kenneth Rogoff , who declared the cash a " curse " - would repudiate their anti-cash views.

If you don’t break eggs, you’ll not make scrambled eggs - and although some of the “little people” like Indian peasants or Puerto rican workers may suffer a lot if the power goes off, we all have to sacrifice something. Perhaps this is what Richard Thaler - the recent winner of the Nobel Prize in Economics - had in mind when he spoke in support of Indian demonetization.

Definitely, the abolition of cash would rather destroy a poor economy than a rich one. A rich country, with a more common and reliable infrastructure, with better access to resources, will be better able to withstand a shortage of physical money and natural disasters. But in general, a cashless economy becomes more fragile and turns ordinary people into targets in the event of natural disasters or even greater problems, such as wars.


I have long supported such a policy - the first step towards a cashless society, a good start to the fight against corruption

Ryan McMacken , editor of Mises Wire and The Austrian, has a degree in economics and politics from the University of Colorado, worked as an economist at the Colorado Municipal Housing from 2009 to 2014. Author of the book Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre .