Megan McArdle gets at what bothers me about attempts to move toward a “cashless” society. For all the advantages of going cashless, she says, a fully cashless society gives too much power to the government.

Consider the online gamblers who lost their money in overseas operations when the government froze their accounts. Now, what they were doing was indisputably illegal in these here United States, and I am not claiming that they were somehow deeply wronged. But consider how immense the power that was conferred upon the government by the electronic payments system; at a word, your money could simply vanish.

Now consider what might happen if the government made a mistake. When I was just starting out as a journalist, the State of New York swooped down and seized all the money out of one of my bank accounts. It turned out — much later, after a series of telephone calls — that they had lost my tax return for the year that I had resided in both Illinois and New York, discovered income on my federal tax return that had not appeared on my New York State tax return, sent some letters to that effect to an old address I hadn’t lived at for some time, and neatly lifted all the money out of my bank. It took months to get it back.

I didn’t starve, merely fretted. In our world of cash, friends and family can help out someone in a situation like that. In a cashless society, the government might intercept any transaction in which someone tried to lend money to the accused.

She’s not saying necessarily that we shouldn’t go cashless, just that we need to decide how to face this new power that cashlessness gives to the state.

I agree.

Category: Market, Statehouse

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18 Responses to McArdle on a cashless society

  1. Road Scholar says:

    There are definitely tradeoffs to the cashless society. This feels a bit like a companion piece to the one posted by Mr Cain over at that other blog, just substituting money for data. (Isn’t that all money really is in the final analysis? Just a type of information; data?)

    For the vast majority of us, though, is government really the biggest issue? I imagine for every person having their bank account dinged for taxes you can find a hundred getting dinged by debt collectors.

  2. Dr. Doom says:

    The government is drooling at this, because then they could tax you directly and you supposedly couldn’t hide your assets. However, like everything else Uncle Shammy is about twenty years behind the times. Bitcoin and other alternate currencies could bypass their whole system, and some people like freemen and libertarians might start using gold and silver they couldn’t trace at all. There is also old fashion barter of goods and services on a site like Craigslist. All these would fucking implode the banking system and reduce the government to begging for donations in a month.

  3. aaron david says:

    As I have gotten older, I tend to do more with cash, as it helps with budgeting. That and I looked at my wallet the other day, and realised that for everyday use, I have five assorted bank cards, for debit or credit. I was thinking of getting another credit card for debt consolidation/credit score upping, but that made me pause. It is not that I have so much debt, its that it becomes easier to loose track of your money and from wich pile I am taking from for any given thing.

    My father always carried a $100 bill folded and tucked away in his wallet, for as he said, no matter what, when things hit the fan, that will always help you out. Need a taxi? A tow? It can be done, and it will always help.

    • I try to use cash most everyday purposes for similar reasons to the one you cite. It’s easier (for me) to keep track of what I’m spending. With cards, it’s way too easy for me to overspend.

      My father always stashed money in places, probably for reasons your father did. I don’t know if he kept a $100 bill folded in his wallet, but it wouldn’t surprise me.

    • fillyjonk says:

      The $100 for emergencies thing is a good idea but I’d rather hold it as 10s or 20s….have you tried getting change from a $100 bill lately? Most shopclerks look at you like you’re a counterfeiter, and I bet most taxi drivers wouldn’t have enough change to break a hundred, at least for a short ride….

      I’ve even heard some low-grade prepper types saying to hoard change in a “safe space,” because if you can’t get to the bank, it will be easier to pay for something in quarters and have exact change, than to try to pay with a $20 and maybe not get any change back.

      I use credit cards for “big” things because I lived in a large city too long to be comfortable carrying much cash any more. I just pay the card balance off at the end of the cycle so I never pay any interest. (And I have cards through my credit union, and they never charge me an annual fee – I effectively get a “free loan” for a few days from the CC company.)

    • ScarletNumber says:

      You are being a dick Over There.

  4. RTod says:

    This reminds me just how unlike most online people I am.

  5. Joe Sal says:

    Enjoyed this Gabriel, keep up the good work.

  6. Peter says:

    One problem with using debit or credit cards for small transactions is the way more and more businesses have minimum amounts for their use. $15 seems to be a common minimum.

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