Australia turns toward a cashless society but could that result in the banks getting too much control?

November 21, 2016

By: Bobby Casey, Managing Director GWP

cashless agendaIn what appears to be one of the quickest U-Turns in currency history, Australia might give Sweden a run for its cashless money! It’s been just a bit over 100 years since Australia issued its first bank notes (around the same time the US instituted its Federal Reserve Bank), and now Oz is turning away from cash.

Government wastes no time in pushing its agendas. For example, while Americans are rioting in the streets over not getting their preferred president, Britain has enhanced its surveillance state:

Britain has passed the ‘most extreme surveillance law ever passed in a democracy’. The law forces UK internet providers to store browsing histories — including domains visited — for one year, in case of police investigations.” (Source: Zdnet)

And while theater casts and stylists diss Trump and Pence, Australia is promoting what looks to be a global cashless agenda.

The overall use of cash has dropped considerably worldwide, and Australia is no exceptions.

About 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits – and many, especially in rural areas, no longer have ATMs. Circulation of Swedish krona has fallen from around 106bn in 2009 to 80bn last year.” (Source: Guardian)

Obviously, a card is far more convenient and often more secure than cash. For example, if someone steals your cash… that’s it. It’s gone. If someone steals your card and starts racking up payments on it, you can report it lost or missing and you are not accountable for those charges.

Then there is the matter of bill paying. Certainly easier to have an auto debit from your account so you don’t miss a payment and have that immediate post to your account; as opposed to sending a check and hoping it doesn’t get lost in the mail and waiting for that to clear.

There are plenty of great incentives to go cashless as well! In some cases like a car loan or insurance, if you set up automatic payments, you get a break in price or interest rate. In the case of credit cards, you can get miles toward flights. For someone like me, that’s awesome! I’m buying the tickets anyway, I might as well get something back right?

I totally get all that. I do it. I’m not running around the world bartering hard assets and paying my bills in chickens. I don’t deny the convenience and perks of a cashless society.

Australia has seen a 47% drop in use of cash over the last 6 years. 82% of its transactions are cashless already. So it stands to reason that Citi among other banks, are moving away from cash handling. Starting November 24th of this year, Citi Australia will be the first bank to go 100% cash-free. The ATMs will certainly still offer notes… but the human staff no longer will handle cash. They are still honoring checks.

They will eventually do away with larger denominational notes like $100 bills, and perhaps even go so low as $50 bills. This is supposed to save money in printing costs. Which is true. But that savings isn’t something the people will see in their taxes or in improvement of government services. It’s laughable how people thinking that if money isn’t spent on one undesirable thing, that it would automatically be directed toward MORE desirable things. In theory, yes, it could. In practice? Not likely.

Here is how you either don’t win or stand to lose:

  1. Let’s say Australia does away with notes $100 and higher. Everyone carrying those notes will need to return them to a bank and either deposit it or exchange them for smaller denominations. Those who deposit might otherwise not have except for the threat of their large notes expiring. So the bank gets a boost in deposits. You don’t win, but banks do.
  2. Let’s say Australia goes 100% cashless. Where do you store your wealth? In a bank of course! You might be wondering about crypto currency; but even in that case, I take it with me. I’m essentially my own bank because the account follows me and I’m the only one with the means to access it. The same is NOT true with a bank. You don’t in fact keep any of it. You might have access to it… and notice I used the word MIGHT… but you don’t actually HAVE the money anymore. You don’t win, but the banks do again.
  3. Let’s say Australia decides to pursue a Zero Interest Rate Policy or a Negative Interest Rate Policy. If you keep your money in the bank, you’re literally losing it. You’re paying for the privilege of losing money. You lose money when you buy something too, but the difference is you get something of equal or greater value in return. Not the case with ZIRP and NIRP. You just lose money. You lose.
  4. Let’s say Australia has a banking crisis because all the money on the books is just 1’s and 0’s at this point. The banks need a bailout. Where do they go to recapitalize the banks? If you think what happened in Cyprus is an anomaly, think again. That was a template. You lose.
  5. There’s nothing secure or safe about keeping ALL your eggs in a banking basket. I think banks have demonstrated that over the last couple of decades. There’s no shortage of scandals in this industry. Only recently, Wells Fargo was brought up on charges of fraud opening new accounts in the name of existing account holders without their knowledge or consent.

When was the last time we discussed Australian Banks? Oh yes, when they rushed a law into effect to abbreviate the time to seize bank assets from inactive bank accounts from 7 years to 3 years. If you don’t trust banks, then a cashless agenda is a nightmare come true.

Where I get upset is when the option to pay in cash gets taken away. When the options to store my wealth are removed. Yes, I have a bank account. But if I don’t want to use a bank anymore and put it all under my mattress, that’s my prerogative! I’m no fool. I know that once I open a bank account and hand my funds over, it’s not my money anymore. So I don’t keep EVERYTHING in a bank account for that very reason.

Cash is one of the last remnants of financial freedom. I may have my grievances with fiat currency, but it’s a sight better than just 1’s and 0’s that only the banks control. Cash is a physical thing that I can control, an asset I can hold in my hand. The freedom it offers is portability and anonymity. Fiat currency isn’t ideal, but it still has considerable benefits over a completely cashless society. It looks like estimations for some countries is achieving full cashlessness by the 2020’s sometime.

Be careful folks. Diversify your assets and holdings. I know banks aren’t entirely avoidable, but they should NEVER have the power and control over private assets a cashless society inevitably bestows on them either.

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