Over the last thirty years, we have witnessed a rapid transformation in the way that people pay for goods and services. Where we used to use cash for all but our largest purchases, many people now prefer credit cards, debit cards, cryptocurrency, and electronic services like Venmo, PayPal, or Alipay. And that's not necessarily a good thing.
In The Power of Cash: Why Using Paper Money is Good for You and Society, Professor Jay Zagorsky, former advisor to the Boston Federal Reserve, delivers a startlingly insightful and eye-opening discussion of the harmful and unintended consequences of the demise of paper money. The author convincingly argues that cash is an essential and helpful tool that's worth preserving for the long run.
You'll learn why using cash makes it easier to control your spending, secures your anonymity and privacy against bad actors intent on stealing your data, mitigates the chaos of climate change and war, and helps the poor, vulnerable, unbanked, and disenfranchised to navigate society. You'll also discover: - When business and governments can refuse to take your paper money - How cash maintains your privacy and anonymity from tech companies, hackers, banks, and others - How cash ensures companies cannot charge you a high “custom price” - The potential dangers of giving governments control and knowledge of your spending - How cash controls additional fees and costs associated with electronic purchases
Perfect for anyone with an interest in the way we pay for the things we buy each and every day, The Power of Cash is also a must-read for people interested in the implications of a truly “cashless” society on personal finance, technology, politics, and social justice.
Table of Contents
Preface xv
Chapter One
Introduction and Overview 1
Shift Away from Cash 3
Why the Shift? 4
Key Question - Is the Shift Good? 5
The Synopsis: A Dozen Reasons Cash Is Powerful 8
Conclusion 13
Section I
Is Cash Disappearing? 15
Chapter Two
Is Cash Disappearing? The Case of Spending 17
Cash Use Around the World 19
Why Do Some Places Use Cash More Than Others? 20
Trends in Paper Money Use 22
Who Is Leading the US Shift? 23
Is Cash Still Used for Small Payments? 25
Conclusion 26
Chapter Three
Is Cash Disappearing? The Case of Savings 29
Trends in Paper Money Holdings 30
Other Countries 32
The Changing Mix 35
What It Means 35
Conclusion 37
Section ii
Cash Provides Society with Resilience 41
Chapter Four
How Do Cashless Payments Work? 43
Communication Disruptions 48
Electricity Disruptions - Understanding Power Grids 50
Number of Electricity Disruptions 52
Cash is Environmentally Friendly 54
Computer Security 54
Conclusion 57
Chapter Five
Natural Disasters Prevent Cashless Payments from Happening 59
Trend in Natural Disasters 62
Floods: An Example from China 64
Hurricanes 65
Fire and Drought 67
Volcanic Eruption 69
Solar Storms 70
Conclusion 72
Chapter Six
Paper Money Boosts National Defense 75
Modern Examples 77
Counterfeit Money - Destroying Faith in the Currency 79
Power 82
Moving Money 83
Destroying Faith 87
Are Transactions True? 88
Conclusion 91
Section iii
Cash Helps People 93
Chapter Seven
Using Cash Helps Control Spending 95
Do People Spend More? 98
Impulse Control 99
Visualization 100
Endowment Effect 101
The Budget Constraint 102
Conclusion 104
Chapter Eight
Other Reasons Why Using Cash Helps People 107
Using Cash Saves Money 108
Using Cash Keeps You Healthier 109
Cash and Math Skills 111
Tipping 112
Nickel and Dimed 114
Conclusion 116
Chapter Nine
Using Cash Keeps Your Life Private 117
How Private Is Collecting and Distributing Data? 119
Who Needs Data Privacy? 123
Privacy Within Households 123
Spousal and Partner Abuse and Infidelity 125
Privacy Between Households and Businesses 127
Households and Businesses versus the Government 129
Problems of Being Incorrectly Identified 132
Potential Solutions 133
Conclusion 134
Chapter Ten
Using Electronic Payments Boosts Prices 135
Merchant Fees 136
How Companies Price 140
Merchant Views 142
Surcharging and Steering 144
Custom Pricing 145
Examples of Custom Pricing 148
Conclusion 150
Section iv
Cash Helps the Vulnerable 151
Chapter Eleven
Eliminating Cash Hurts the Poor 153
Exclusion from Stores 154
Reduction in Charity 155
Legal and Other Solutions 157
How the Poor Subsidize the Rich 159
Unbanked and Underbanked 161
The Unbanked Pay Extra Fees 163
How Many Unbanked Are in the World? 165
Unable to Pay for a Phone 166
Conclusion 167
Chapter Twelve
Cash Helps Immigrants, Refugees, and Tourists 169
Vulnerable Tourists 172
Dynamic Currency Conversion 174
Foreign Exchange Rates and Black Markets 176
Conclusion 180
Chapter Thirteen
Cash Puts Limits on Central Banks Hurting the Elderly 181
The Power of Interest Rates 182
Negative Interest Rates 183
Paper Money Is a Brake 186
Savings Problems 187
Cash Limits the Damage of Bank Runs 188
Real Interest Rates 191
Conclusion 195
Section v
Cash Is Not Causing Crime, Terrorism, or Tax Evasion 197
Chapter Fourteen
Does Cash Make More People and Businesses Victims of Crime? 199
Fraud, Scams, and Identity Theft 201
The Amount of Stolen Cash 203
Cashless Ways to Commit Crimes 204
Credit Card Crime 206
Debit Card Crime 208
Does the Cashless Society Reduce Bank Losses? 209
The Case of Sweden 212
Conclusion: How to Avoid These Types of Crime? 212
Chapter Fifteen
Does Cash Facilitate Corruption, Terrorism, or Organized Crime? 215
Corruption 216
Corruption Data 219
The Case of Sweden 222
Terrorism 222
Organized Crime 227
Conclusion 228
Chapter Sixteen
Does Eliminating Cash Reduce Tax Evasion? 231
India’s 2016 Elimination of Most Cash 233
The Tax Gap Around the World 235
US Tax Gap 237
Electronic Tax Filing 239
Inflation Tax 240
Can Tax Evasion Be Reduced Without Getting Rid of Paper Money? 242
Conclusion 243
Section vi
Control 245
Chapter Seventeen
Cash Prevents Government Control 247
Shutting Off Bank Accounts 248
Digital Currency 250
Government Control of the Unbanked 252
Currency Transaction Reports 255
Conclusion 256
Chapter Eighteen
Can Businesses and Governments Refuse to Take Cash? 259
Are There Laws Forcing Businesses to Take Cash? 261
Trying to Pay the IRS with Cash 263
Why Does the IRS Not Want Cash? 267
Conclusion 268
Chapter Nineteen
Who Is Pushing the World to Go Cashless? 269
Credit and Debit Card Company Incentives 270
Credit and Debit Card Company Growth 273
Smaller Credit Card Companies 275
Banks’ Incentives 276
Government’s Incentive 278
High Technology’s Incentive 280
Retailers’ Incentive 282
Financial Technology Incentives 283
Conclusion 284
Chapter Twenty
Conclusion: What to Do to Ensure Cash Does Not Disappear 287
Individual Actions 288
Collective Advocacy 289
Bureaucratic Fixes - ATMs 290
Inflation Adjustment for Currency Transaction Reports 292
Bring Back Large Bills 293
Legislation Designed to Ensure Stores Take Cash 296
Sin Purchases 298
Other Sin or Vice Purchases 299
Year-End Bonuses 301
Military Pay 302
Mandatory Preparedness for Financial Companies 303
The End 304
Acknowledgments 307
Notes 311
Bibliography 329
Index 351
