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.
One 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.
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.
In 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
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