|Alexei Kireyev, the cashless society maestro|
This is big.
A Russian-born senior economist with 24 years at the International Monetary Fund, who is now based in Washington D.C., Alexei Kireyev, has issued IMF Working Paper WP/17/71 titled. "The Macroeconomics of De-Cashing."
In the abstract for the 26-page paper, Kireyev writes that his report is "purely illustrative and is designed to provide a roadmap for a systematic evaluation of de-cashing."
Rather than "purely illustrative" for "evaluation" of the concept of de-cashing, though, I would call it a detailed exposition of what governments need to do to advance towards a cashless society and why it is beneficial for governments to do so.
To be sure, Kireyev couches his paper in a cautionary form with regular use of "on the one hand this and on the other hand that" analysis, but a government technocrat tasked with eliminating cash is going to ignore all that and go to the meat of the paper which will provide him with a checklist of what he needs to consider to take a nation cashless.
In the paper, Kireyev defines "de-cashing" and explains why it would be beneficial to governments (my highlights throughout):
De-cashing is defined as the gradual phasing out of currency from circulationHe then lists obstacles that may occur in moving toward a cashless society and how to deal with the obstacles:
and its replacement with convertible deposits.
De-cashing may help improve the transmission mechanism of monetary policy.... In particular, the negative interest rate policy becomes a feasible option for monetary policy if savings in physical currency are discouraged and substantially reduced. With de-cashing, most money would be stored in the banking system, and, therefore, would be easily affected by negative rates, which could encourage consumer spending.
In principle, de-cashing should improve tax collection by reducing tax evasion.
In Sweden, for example, with de-cashing the government has benefited from more efficient tax collection, because electronic transactions leave a trail. To the contrary, in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem.
De-cashing should help reduce illegal migration. With less currency in circulation,
employers that attract illegal immigration by cash payment would have fewer options to pay for their services off the books.
[S]ocial implications of de-cashing can be substantial. Carrying cash is a human right and is written into constitutions, which therefore have to be changed. Social conventions may also be disrupted as de-cashing may be viewed as a violation of fundamental rights, including freedom of contract and freedom of ownership.He then suggests coordination amongst countries to advance de-cashing:
[H]ouseholds and small private businesses may see carrying cash and conducting anonymous transactions as their constitutional right. Their discontent can lead to social tensions, strikes, and, therefore, GDP losses...
A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks. The de-cashing process would acquire more traction if it were based on individual consumer choice and cost-benefits considerations.
Coordinated efforts on de-cashing could help enhance its positive effects andHe then provides some insight into an early step taken by the United States to move toward decashing:
reduce potential costs. At least at the level of major countries and their currencies, the
authorities could coordinate their de-cashing efforts. Such coordinated efforts are, in
particular, important in the decisions to phase out large denomination bills for all major
currencies, to use ceilings and other restrictions on cash transactions, and to introduce the
reporting requirements for cash transactions or their taxation. For currency areas, a single decashing policy would be clearly preferable to a national one. Finally, consensus between the public and the private sector and outreach on the advantages and modalities of gradual decashing should be viewed as key preconditions for its success.
The U.S. Treasury considered re-issuing a US$500 banknote when the Euro 500 banknotes began circulating. However, after the recognition that such a banknote would fuel worldwide criminals, it was decided not to pursue this option.He also tells us what Israel has under consideration in a move toward full decashing:
In Israel, a special committee recommended a three-phase plan to restrict theBottom line: Technocrats at global organizations, with the IMF spearheading, continue to push the advance of a cashless society which will make it easier for governments to monitor, control and tax their subjects. If there is one policy that must be moved to the forefront and battled, it is the cashless society policy. Decashing would be a major step on Hayek's road to serfdom.
use of cash, limit the use of checks as a means of payment and exchange for cash, and
promote the use of electronic means of payment. Any violation of these limits would be a criminal offense.