An irony is in the making. The basket-case economy mismanaged by near-dictator Nicolas Maduro in Venezuela is short of currency. The Bolívar fell to 108,279 against the dollar on Dec 4. Its plummeting value, coupled with regulatory caps on ATM withdrawals, finds citizens queuing hours for paltry disbursements.
Many now rely on their credit and debit cards for all but the smallest of purchases. This move from cash to digital money turns the Orwellian scenario of cashlessness as a step toward a totalitarian society on its head. It also reverses the argument that cash is still practical when digital systems fail to function.
The Situation in Venezuela
Some 40% of Venezuelans lack payment cards. Many of them will likely migrate to bank cards. If Bolívars sink to the point that no one accepts them, the monetary shift could have beneficial consequences. In a country racked by street crime, an absence of cash would discourage most robberies. This, in turn, would make it safer to conduct retail business. It would deter kidnappings for ransom as well as extortion and any crime in which cash plays a role.
If Venezuela’s ATMs become defunct, thugs will no longer force victims to withdraw funds from them. It would even deny cybercrooks their common means of converting hacked data into spendable money. Crooks in a cashless Venezuela, of course, might simply rob victims of bankcards instead of cash and take ransom and extortion payments in digital form.
Yet, the fact that Venezuelan authorities fail to control street crime doesn’t prevent digital payment processors from cancelling stolen cards and stopping unauthorized payments. Overall, there will simply be less crime, particularly the violent type.
Venezuela’s dire cash shortage contrasts sharply with the United States where tangible money is plentiful, ubiquitous and on course to circulate for decades. But, the two countries share common ground because a great deal of American crime is also tied to cash.
American policymakers are slow to recognize, let alone act on, the opportunity that this presents. The Fed and Treasury Department are, at most, just beginning to “think about” a digital currency. And even this belated idea doesn’t necessarily envision abolition of cash.
The incoming Fed chairman Powell has already reiterated the lame excuse for governmental disinterest in the digitization of the nation’s currency, namely, that intervention in digital money could “stymie innovation.” All the while enlightened governments around the globe are actively winding down their cash systems. America is foolishly becoming an odd-man-out.
The danger associated with cash is serious business. It’s why convenience and other store clerks keep loaded firearms aside their cash registers. One reads occasionally that a pizza deliverer or even an ice cream shop worker is shot, beaten or murdered. Some fifteen banks are robbed in the United States every day. It all adds up. America is violent, in large part, because most of its 1,000+ daily robberies target cash.
Easy to Steal
ATMS themselves are sitting ducks. Officials don’t keep statistics for this crime, but industry observers report that on an average day, thieves across the country use stolen vehicles to ram fifty or more ATMs and cart them off.
Apparently, this ‘crash and grab’ attack isn’t hard to pull off. Step-by-step instructions are available on YouTube. Structural damages to buildings, loss of the machines and cash plus public outlays for this activity alone may run some $2.5bn per year.
The greatest single economic cost of the cash system, however, lies in nonpayment of taxes “due but unpaid” per IRS syntax. It’s one of the rare areas of cash mal-usage that’s well researched. Yet, the fact that cash leaves no trail makes it difficult to estimate the deficiency.
Paying tax isn’t exactly popular, of course. But, paying someone else’s share should infuriate citizens. America’s cash-lubricated underground economy is estimated to run as high as $700bn per year – enough, if redirected, to make universal medical coverage quite inexpensive.
In the social context, the role of cash that deserves ardent attention is in drug abuse. It’s odd that health care strategists are silent about this. The fact that cash is the universal payment for street drugs and in narcotrafficking renders these activities vulnerable to disruption.
Of course, unlike the role of cash in bank robberies, for example, the essentiality of cash in drug abuse is speculative. Other means of payment, even if less secure for crooks, are available. Still, if the abolition of cash were only 10% effective, it would save some 5,000 lives annually. Given the paucity of other prevention methods and the horrific numbers of OD deaths, the ditching of cash should take centre stage.
These observations are a small window on the myriad socioeconomic benefits of ditching cash. Unfortunately, the idea hasn’t yet surfaced in serious discussion. Planning is years away and implementation is further off still. The concept is wholly suppressed by an overemphasis on payment anonymity and distrust of government – a mindset that ignores the profound costs and departs from reality.
It’s a remarkable phenomenon that economic mismanagement in the Bolivarian Utopia is set to undermine the position of American policymakers who embrace cash for its payment anonymity and fail to call for its abolition.
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