War on Cash or Privacy

pancakesI started thinking about the War on Cash recently over a giant plate full of butter, syrup, and pancakes.

You see, I spent part of my summer vacation in Gatlinburg, TN, which some think of as the jumping-off point to Great Smoky Mountains National Park, but I prefer to think of as the Pancake House capital of the world.

What microchip manufacturers are to Silicon Valley and M&A banks are to Wall Street, pancakes houses are to Gatlinburg, Tennessee. Swing a dead cat on the main drag and you’ll probably hit a pancake house.

Anyway, my family and I enjoyed a meal at the oldest pancake house in Gatlinburg and lo and behold, they only accept cash.

smoky_mountainsOne of the great benefits of visiting a cash-only pancake restaurant with your children is they might ask “why cash only?” and you might get to explain tax-evasion and money-laundering to your 7 and 12 year-olds. You see, sometimes dear, a nice pancake restaurant likes to under-report its sales, which allows them to under-report profits, which allows them to pay less in federal income tax. Or, sweet child, sometimes bad men with profits from illegal businesses like to “launder” their money by teaming up with a restaurant, which traditionally has a lot of cash transactions. You see, sweet pea, credit cards create a reportable electronic record and therefore less wiggle room to make up however much in legitimate profit a restaurant owner might want. More all-cash transactions means more room to cheat The Man. Pass the syrup when you’re done, love.

I should point out that even as I explained money laundering and tax evasion to my pre-teen children, I have no specific reason to think anything untoward happens at the specific restaurant we visited, only that they provided a nice learning opportunity to go with the meal, because of their unusual cash-only policy. And the pancakes were simply delicious.

Of course, the pendulum between cash-only and cash-less is swinging steadily towards cash-less. Despite the “self-reporting benefits” to a restaurant of an all-cash world, we’re more likely these days to experience cash-less transactions.

Do you take cash?

I remember just a decade ago one of my smart-ass friends used to facetiously ask at regular stores “Do you accept cash?” just to cause the double-take reaction at the checkout counter. With the swift evolution of technology and ubiquity of plastic and electronic transfers, however, that question becomes less goofy every year.

In fact, around 2009, first airlines and then other stores began refusing cash in favor of plastic, for both convenience and safety. Flight attendants presumably save time and hassle by not fishing around for exact change for our snack boxes and in-flight headphones.

Credit card companies have a clear vested interest in the payments war between cash and credit. Card companies like Visa, MasterCard and American Express charge venders hefty fees to accept cards at the same time that they charge us consumers high rates of interest if we carry a monthly balance.

Earlier this month Visa launched a direct assault on the use of cash, offering some restaurants a $10,000 incentive to go cash-less. The restaurants in this trial only qualify for the $10,000 payment if they refuse to accept cash from customers.

dsA business accepting credit cards pays an average of 2 percent in fees for credit card payments – an expensive proposition – in addition to the loss of “flexibility” with respect to reporting sales. Maybe $10,000 will be enough of an incentive from Visa to overcome these hurdles? Somehow I doubt that would be enough to entice my favorite pancake place in Gatlinburg.

While credit card companies have a clear stake in the move towards a cash-less society, so do governments. In November last year, the government of India instituted a sudden assault on cash transactions, specifically intending to combat tax evasion and money-laundering, by banning the use of “high” denomination bills, which included the 500 rupee and 1,000 rupee bill.

People and businesses who trafficked in bills with a face value at and above $7.70 (!) equivalent in rupees, according to the government’s theory, most probably are doing it to under-report income or to engage in illegal business. Holders of cash in India were given a very short window of time to deposit their bills into banks, thereby becoming visible and trackable to Indian financial authorities. The war on cash quickly hurt the Indian economy, and by June 2017 the government began to reissue and authorize larger cash denominations, a set-back in its war on cash.

cashIn the US, the government phased out high-denomination bills of $500, $1000, $5,000 and $10,000 back in 1969, as they realized these bills were rarely used, except by tax evaders and criminals. Last year prominent Harvard economist Kenneth Rogoff attacked the $100 bill as mostly useful for illegal activities, urging its banishment in his book The Curse Of Cash.

Despite Rogoff’s encouragements, cash seems unlikely to go away anytime soon – it’s still just too darn convenient. I’m sympathetic to the idea that where you fall on the cash vs. cash-less spectrum of preference might have something to do with how much you want to hide your economic activities from the government. On the other hand, a certain type of skeptic believes the move to cash-less transactions foretells a more authoritarian society, one less free from the prying eyes of big government in league with big banks. The War on Cash, in that alternative view, is really a War on Privacy. They have a point as well.

As for myself, of course I use electronic transfer services, credit and debit cards, and have happily experimented with money-transfer mobile payment apps like Venmo, SquareCash and ApplePay (although the latter seems rarely available at merchants in my part of the world). For small in-person payments, I tend to pay for everything with $2 bills, $1 coins, and Kennedy half-dollars, just to mess with merchants’ cash registers. But that remains mostly an affectation rather than a declaration of my relative criminality or privacy, or my stake in the ongoing war between cash-only and cash-less commerce.


A version of this ran in the San Antonio Express News and Houston Chronicle

Please see related post:

I have a thing about paying with $1 coins


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Mint the Gold Coin(s)!

Lincoln Presidential CoinNerdy finance blog nerds, Nobel Prize winners, and political satirists spent early January discussing the Mint The Coin movement, a currency trick to allow the Obama administration a way around the pesky debt ceiling, via a platinum coin with a  $1 trillion denomination.[1]

The $1 Trillion coin suggestion came about because the debt ceiling allows Congressional leaders another crack at pushing a fiscal austerity agenda.[2]

What if I told you about a different Mint the Coin movement we can all participate in, that could save $5.5 Billion over the next 30 years that could be applied toward the federal deficit? What if I told you that it wouldn’t cost you or any taxpayer anything at all? On the contrary, what if I told you that your simple actions would actually save $ millions in storage costs for the federal government?  Would that be something you’d be interested in?[3]

For the past 2 years, I have personally led my own Mint the Coins movement, by ordering and paying virtually all of my cash transactions with $1 Presidential gold coins.

Because ethically I am a Neo-Kantian,[4] I believe it’s my moral duty to act as a one-person Mint the Coin(s) proponent.  If everybody else ordered and used the $1 gold coins, we could all help reduce the deficit at precisely zero costs to ourselves and the government.

I will now admit that when I first began ordering the $1 coins directly from the US Mint, I acted more from a Locke- or Smith-style enlightened self-interest, not Neo-Kantian ethics, as the US Mint created a perpetual airline miles accumulator by offering free shipping for credit card orders.

But even after the US Mint shut down that opportunity for enlightened self-interest, I continued to order the coins from my local bank.  My bank teller always looks at me funny when I order the next box of coins ($1,000 minimum per box!) but it’s their obligation to request them for me, for free.[5]

My Sunday night poker competitors know that my buy-in will consist of a $25 roll of Lincolns.[6]  Or Jacksons.  Or, like a month ago, the dreaded Buchanans.[7]  My dry cleaner knows she’s getting the gold cha-ching.  The guy at the local coffee place tells me has an entire jar full of my $1 coins.  The new bakery, with those amazing scones, gets paid with my special gold pirate booty.  In all of my local neighborhood cash transaction, I’m that guy.  The gold coin guy.

And I’m the only one in my city of 1 million plus who does this.[8]

By the way, how do I know nobody else uses these $1 gold coins, besides the fact that the US Mint has a warehouse full of $1.4 Billion of untouched, unwanted gold $1 coins?

I know because 99.5%[9] of the time I pay with $1 coins the recipient reacts with surprise[10] and announces a plan to pull the coins out of circulation and save them in a special drawer.

And so, my spent coins never get placed back into circulation.  Thereby ensuring the failure of the program.  Also, at least as of a few years ago, Americans reported an overwhelming preference for $1 bills, despite the fact that no other country keeps paying such small denominations in bill form.

With the $1 Presidential coin program a flop, the US Treasury announced a roll-back of new Presidential $1 coin minting, following the issuance of the highly sought-after 21st President Chester A Arthur’s coin.

Oh…it’s a lonely road out here, pursuing my own mint the coin(s) project.

[1] You may have paid attention, or you may not have paid attention to the #mintthecoin Platinum coin movement.  Mostly it depends on how much of a nerdy finance blog nerd you really are.

[2] One side claims fiscal prudence, the other side claims ‘hostage taking.’  Can’t we all just get along?

[3] Is that something you might be interested in?  It’s so worth your time to watch those scenes from Entourage.  But I digress.

[4] How should one act, according to Kant? “Act only according to that maxim whereby you can at the same time will that it should become a universal law without contradiction.”

[5] For that matter, did you know that you can ask your bank to specially order $2 bills for you?  They’ll do it for free.  Stacks of them.  $2 bills are rare now, but they wouldn’t be if we just asked for them at the teller and circulated them normally instead of giving them to our kids under the pillow when the tooth fairy visits.

[6] In a related story, about a dozen guys in the neighborhood regularly find themselves carrying around $25 rolls of $1 Presidential coins.  I got poker skillz.

[7] Dreaded because he’s the worst president in history.  So I figure it’s only a matter of time before those $1 Buchanan coins trade for less than $1, right?  Or have I misunderstood something?

[8] Ok, there’s actually one other guy, who told me about the airlines miles scam 2 years ago.  But he and I are it.  I’m sure of it.

[9] I rounded down, to be conservative.

[10] And I’d like to think, momentary delight

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