Herald: Fighting Money
Fight the cash
Neetant D Sinai Shirodkar
Governments around the world are waging a war on cash. It is a known fact that governments do not like cash. However, what is not clearly known is the reason behind this. What is it that makes governments around the world unanimously hate cash and pass laws to control or even limit its use? In this article, we will understand why the government is trying to block cash transactions or at least make them more difficult and inconvenient.
Examples of the war on cash
In November 2016, India demonetized 86% of its cash. This meant that all banknotes first had to be returned to the system and exchanged for newer banknotes. The program behind this massive exercise which killed hundreds was to push India on the path to a cashless economy. People weren’t prepared for such a sudden transition. However, this program was imposed by the government.
Greece levied a tax on withdrawing money from the bank. This means that every time you take money out of the bank, you lose value, however, every time you deposit more money, you don’t earn anything. Although the amount of tax levied by Greece is 0.10% and therefore insignificant. However, the principle involved is significant. They design systems to lock money in banks or financial institutions.
Sweden has also been continuously active in phasing out species from its system. In Sweden, it is now not possible to buy a bus ticket in cash. Bus tickets must be purchased through digital channels. In addition, some of the largest banks in Switzerland do not accept cash or give it away.
France has adopted a law guaranteeing that no transaction exceeding 1,000 euros can be made in cash. The limit previously was 3000 euros. This limit was lowered after it emerged that the terrorists were partially funding their attack in cash. However, the cash was only used to purchase items such as food, clothing, and vehicles.
Switzerland is a tax haven and is used by people looking to avoid taxes. The Swiss government is notorious for not collaborating with other governments. However, in this regard, even the Swiss government has joined with others. They have made transactions of more than 100,000 francs illegal.
Reasons to switch to cashless
The real reasons for going cashless are much more sinister than the government would have you believe. While it is true that if all payment transactions are made through a cashless system, it will be easier to trace who initiated these transactions. It will therefore break the backbone of drug traffickers, smugglers and even terrorists. However, it could be used for many other purposes as well.
End of banking races: Many critics believe the emphasis on liquidity all over the world is because banks are pressuring the government to change the system. Right now, if enough of the bank’s customers choose to withdraw money at one time, it can bankrupt the entire system. This has happened several times, and it’s called a bank run. Bank rushes were responsible for several banking crises until the 1980s. The fractional reserve banking system is in tatters all over the world today. It is likely that the bank races of yesteryear will return and bankrupt many banks. Therefore, to protect their interests and ensure business continuity, the banking lobby can force the government to do without cash. Once the company becomes cashless, cash cannot be withdrawn, and therefore the issue of a wire transfer does not arise at all!
Tax Collection: Finally, governments around the world are deeply in debt. They owe money to other governments and international institutions. Many governments, including India, have no way of paying off the debt unless they find a new source of revenue by raising and raising taxes. These initiatives that promote cashless societies are therefore seen by many as an intrusion into the private finances of individuals. Once the government knows the true scale of money in the economy and who holds it, tax revenues are set to increase due to the increased transparency of the system.
Personally, I welcome the move to a cashless economy, not only does it add convenience for the payer and the receiver, but it also provides for proper accountability. With the advent of digital payments, monetary transactions are no longer dependent on the exchange of physical cash, this change has also enabled the essential inclusion of the unorganized sector which represents 75 to 80% of GDP by encouraging them to open bank accounts. and accept payments through UPI based apps like GPay, Paytm, phonepe etc. So, to sum up as we learn to accept the ever-increasing cashless systems, it’s important to remember that while the change is sudden, if we look at the bright spots, it paves the way for a more robust economy and more transparent.