Revealed: Corona crisis serves as a pretext for abolishing cash

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The corona pandemic and the measures imposed by politicians to contain the disease have given new impetus to apologists for cash abolition. Since the beginning of the crisis, more and more consumers have been making their payments electronically. The most important reason for this development is the sharp increase in online orders, which is both a consequence of the lockdown and the fear of many people of catching the virus while shopping locally. This is why people prefer to order on the Internet and have the goods delivered to their homes. However, electronic payment methods such as EC cards, credit cards and mobile phone apps are also increasingly being used in stationary trade. Customers are often even asked to make cashless payments at the checkout to avoid the risk of infection allegedly posed by banknotes and coins. In recent weeks, Corona has thus helped to make cash noticeably less popular with consumers.

No banking run without cash

This was already apparent before the start of the Corona crisis, but has been considerably exacerbated by the weeks-long economic lockdown. Negative interest rates on current, call money and savings accounts would, however, result in a bank run. To avoid interest-related capital losses, customers would liquidate their credit balances and deposit the money at home. If there were no more cash, this escape route would be blocked and the negative interest rates would have a full impact on citizens’ savings. Because the value of the account balance would then permanently decrease, the willingness of consumers to spend more money on their consumption would increase and thus stimulate the economy, according to the calculation.

But the existence of cash also runs counter to the interests of governments and thus to politics. This is because the states are confronted with the problem that the corona lockdown will cause a massive collapse in tax revenues on the one hand and that high spending will be necessary to prevent an economic meltdown on the other.

In order to meet this historic challenge, finance ministers will have to borrow on a large scale, further inflating the already gigantic public debt burden. In the long run, the resulting interest burden for the national budgets can only be borne if interest rates are low, preferably in negative territory, which would even generate additional revenues for the debtors. For the reasons mentioned above, however, negative interest rates would only be possible without risk if there were no more cash.

The pressure is increasing

The pressure on cash is likely to increase in the coming months because the economic consequences of the lockdown will only take full effect with a time lag. The true extent of the crisis is therefore unlikely to become apparent until late summer or autumn at the earliest. Then those responsible could resort to an instrument that has been discussed for years as a “last resort” to save the economic and financial system: “helicopter money”, i.e. the payment of money directly to consumers, which was newly created by the ECB shortly before.

The additional purchasing power is intended to stimulate the economy and prevent the plunge into destructive deflation. But even this instrument can only work if consumers actually spend the money they have been given and do not hoard it. But because it is not possible to withdraw notes and coins from circulation virtually overnight without causing collateral damage or provoking considerable resistance among the population, the helicopter money would have to be made available in electronic form for a specific purpose. Corresponding concepts have been lying around in the drawer for some time.

The Bank for International Settlements (BIS), for example, is working on a “digital wallet”, a special account set up for each citizen. Governments’ helicopter money could flow into this account, which could be used solely for consumer spending, if necessary with an “expiry date” so that the credit balance is used quickly to meet demand and is not “stashed away” by the recipients. A first test run of this concept will take place in Sudan. There the government has announced a support programme for families: each family member is to receive five dollars a month, with the money being transferred electronically to the recipient’s mobile phone.

Bill Gates involved again

Behind these and other projects to abolish cash is the “Better Than Cash Alliance”, a worldwide association that aims to accelerate the transition to digital payment. It was founded in 2012. Its current membership includes 30 countries, several corporations (including Coca-Cola and Unilever) and various international organizations. Donors include the Bill and Melinda Gates Foundation, the Omidyar Network and the payment service providers Mastercard and Visa. Although not a member itself, Germany has supported the Better Than Cash Alliance with a total of 500,000 euros between 2016 and 2018.

According to critics, the alliance primarily serves the economic interests of large companies from the financial and IT sectors. Its strategy is aimed at establishing digital payment processes, initially in developing and emerging countries in Africa, South America and Asia, in order to gain experience there. Building on this, the new payment methods are later to be introduced in the rich industrialized countries, where they will replace cash.

What is being considered is an evolutionary process that may extend over several years, if not decades. But what happens if the deepening recession threatens to cause an acute crash on the financial markets, forcing politicians to act quickly to prevent an economic collapse? – Then the abolition of cash could be pushed much faster without the need for a ban.

A corresponding plan has already been developed by the International Monetary Fund (IMF) and made public in 2019. It envisages the introduction of a digital currency in parallel with cash, with virtual money being permanently revalued. This would be tantamount to a tax on cash and make it unattractive for citizens to hold cash.

They would therefore exchange their financial resources for the digital currency, which would allow the central banks to withdraw notes and coins from circulation in a timely manner. In a worsening crisis, this could be sold as an unavoidable emergency measure to prevent a collapse of the system.

“Money is coined freedom”, wrote the Russian writer Fyodor Dostoevsky as early as the 19th century. By this he meant cash, because modern means of payment as we know them today did not exist at that time. Dostoyevsky’s principle, developed during his imprisonment in a Siberian penal camp, is more valid in the 21st century than ever before. For in the digital world, only cash can protect citizens from persecution by the state and surveillance by powerful corporations. With its abolition, people would lose their financial self-determination and become the plaything of politics and economic interests.

Therefore, cash is not just money, it is lived freedom that must be defended!

Important:

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