Saturday, July 22, 2017
Bloomberg, Going Cashless? Bad for Tax Cheats, Privacy, Poor:
Do we need cash? Humans have used 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 away entirely? Economists see great payoffs in a cashless society: lower transaction costs, new tools to manage economic growth and an end to tax evasion and money laundering. Critics see an end to privacy, frightening new powers for tyrants 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 showed one thing clearly: The end of cash is not likely to be a neat or simple process.
1. How much of money is cash?
Not that much, at least in terms of economic activity. According to the Switzerland-based Bank for International Settlements, there was a combined $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 percent of their combined gross domestic product, a figure that crept up about 70 basis points since 2011 because of more per-capita cash in the U.S. and euro zone. 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 percent. Of course, each dollar, yen, euro or kronor changes hands several times a year, creating a multiplier effect on the amount of money.