Why Are We Still Using Cash ?

[?Impact]

2 hours ago, dre said:

A computer program could basically run the whole thing.

 

Cool, I will write that program for free; I am very productive. 

[msj]

I like this idea: recall $100's and $50's bills and then audit all the criminals who bring them in:

https://medium.com/@krogoff/james-s-henrys-important-early-approach-to-dealing-with-the-big-bills-problem-61a5c1274a40#.uct4lubbl

[dre]

On 10/23/2016 at 2:19 PM, msj said:

I like this idea: recall $100's and $50's bills and then audit all the criminals who bring them in:

https://medium.com/@krogoff/james-s-henrys-important-early-approach-to-dealing-with-the-big-bills-problem-61a5c1274a40#.uct4lubbl

Really bad idea. That would undermine confidence in the governments currency and that's the last thing they want. Those notes are legal tender... you cant just recall them you have to phase them out gradually. Criminals could just unload their notes at corner stores during this period.

Also like I said... If you think messing with the money system is going to stop crime you are just kidding yourself. Markets for illegal goods and services are driven by supply and demand. If the government refuses to provide exchangeable currency then someone else will step in and do it.  See for example the private barter networks that emerged in Venezuela after the governments shuttered the nations banks.

I actually see a big opportunity there. Start a company that sells little $100 dollar cards, and offers to buy them back. People who want to make private and portable transactions can then start trading those cards, and any time someone wants to redeem one they can cash it in. Sorta like Canadian Tire money, except bigger bills.

An even better idea though? Decriminalize and regulation recreational drugs and prostitution which would wipe out half the nations crime with the stroke of pen, and then start taxing all that activity.

[msj]

1) With $800 billion (or whatever the number is) in US $100 bills outstanding and likely 99% of them being used in criminal activity it is an excellent idea to remove them from circulation by recalling them. 

2) It is perfectly legal to do this - issue the recall, explain the reasoning behind it, the local mom and pop stores will immediately refuse to accept them (most don't accept them now anyway). 

3) Sure, smaller bills will lead to alternative methods to transact criminal activity - that is the point. To make it more difficult since barter sucks as an exchange mechanism. 

4) I agree about legalizing most drugs and prostitution.  I have no problem with those "crimes."

It is the tax evasion - the waiter and construction contractor who get cash tips and cash business who do not report it, the prostitute/drug dealer who conducts the cash business and does not report it (yes, legally they should be reporting it), the mafia/racketeers/money launderers who stay in business because the size of the bills is large enough to ensure a high enough profit margin to continue to conduct business. 

[Bonam]

32 minutes ago, msj said:

1) With $800 billion (or whatever the number is) in US $100 bills outstanding and likely 99% of them being used in criminal activity it is an excellent idea to remove them from circulation by recalling them. 

99% used in criminal activity? Cite?

[msj]

Just now, Bonam said:

99% used in criminal activity? Cite?

Ok, I was exaggerating. 

Although, at one time or another I do not doubt that any $100 bill you have touched will have been used in an illegal transaction or will be used in one after you have touched it (or perhaps even during your use of that $100  ).  

 

 

 

 

[Bonam]

14 minutes ago, msj said:

Ok, I was exaggerating. 

Although, at one time or another I do not doubt that any $100 bill you have touched will have been used in an illegal transaction or will be used in one after you have touched it (or perhaps even during your use of that $100  ).  

Clearly every bill gets used hundreds of times and so it is certainly possible that at some point in their life cycle, most of them are part of a criminal transaction. But I took your statement to mean that 99% of the time a $100 bill is used, it is used in a criminal transaction, which I found to be a very surprising claim. I would be surprised if it was 50%, or even 10%. 

Edited October 24, 2016 by Bonam

[msj]

Well, you do have a point. 

Considering that something like $120 million in US $100 bills were being held in Russia by the anti-corruption dudes (I think for corrupt purposes - no surprise there it is Russia after all) well, that leaves about 99% of USD $100 bills in use for others (which, of course, many are also held almost permanently by other criminals - something like 40% of $100 USD bills are held overseas and likely most of it is used by criminals). 

So who knows. 

The point remains - transacting with $20's is much more difficult than $100's if only because it is five times heavier and five times more volume. 

Edited October 24, 2016 by msj

[Bonam]

28 minutes ago, msj said:

The point remains - transacting with $20's is much more difficult than $100's if only because it is five times heavier and five times more volume. 

In how many criminal transactions is this an issue? Above, you mentioned contractors and waiters as examples of tax evading criminals you are concerned about. In how many transactions that a waiter is involved in is the weight and size of $20 bills an issue? How about contractors? '

While criminals obviously use cash, I am gonna go out on a limb and guess that the vast majority of cash transactions, including with $100 bills, are legit. 

Edited October 25, 2016 by Bonam

[dre]

2 hours ago, msj said:

1) With $800 billion (or whatever the number is) in US $100 bills outstanding and likely 99% of them being used in criminal activity it is an excellent idea to remove them from circulation by recalling them. 

 

3) Sure, smaller bills will lead to alternative methods to transact criminal activity - that is the point. To make it more difficult since barter sucks as an exchange mechanism. 

4) I agree about legalizing most drugs and prostitution.  I have no problem with those "crimes."

It is the tax evasion - the waiter and construction contractor who get cash tips and cash business who do not report it, the prostitute/drug dealer who conducts the cash business and does not report it (yes, legally they should be reporting it), the mafia/racketeers/money launderers who stay in business because the size of the bills is large enough to ensure a high enough profit margin to continue to conduct business. 

Again, you are assuming that people engage in crime because large bills exist. The demand for these products and services will not go down one bit if you recall bills.

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2) It is perfectly legal to do this - issue the recall, explain the reasoning behind it, the local mom and pop stores will immediately refuse to accept them (most don't accept them now anyway). 

I never said it was illegal it would just be very stupid. There's about 40 billion dollars in cash out there. They are basically promissory notes and people hold them because they have faith in the Canadian government to honor its own legal tender laws, and faith in the Canadian economy to maintain the purchasing power each one represents. Steps to encourage vendors to refuse this money as payment would undermine the governments own money, and encourage an alternative form of currency to replace it. They would simply never do it.

Any kind of phase out would more likely look like this... The government would stop distributing new bills, and then just wait a few years for banks to collect the ones in circulation.

Quote

 

The estimated savings for taxpayers from phasing out the penny is $11 million a year.
The cent will remain Canada's smallest unit for pricing goods and services.  This will have no impact on payments made by cheque or electronic transactions—only cash transactions will be affected.  Moreover, pennies can still be used in cash transactions indefinitely with businesses that choose to accept them.

Important Dates
To help consumers, businesses, charities and financial institutions to plan, a transition date of February 4, 2013 has been set after which the Royal Canadian Mint will no longer distribute pennies. 

On this date, businesses will be encouraged to begin rounding cash transactions.

Rounding Guidelines
As pennies exit circulation, cash payments or transactions only will need to be rounded, either up or down, to the nearest five-cent increment.

The Government of Canada will be adopting a rounding guideline that has been used successfully by other countries for its cash transactions with the public.  

Under this guideline, when pennies are not available, cash transactions will be rounded in a fair and transparent manner, as illustrated below

 

:

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It is the tax evasion - the waiter and construction contractor who get cash tips and cash business who do not report it, the prostitute/drug dealer who conducts the cash business and does not report it (yes, legally they should be reporting it), the mafia/racketeers/money launderers who stay in business because the size of the bills is large enough to ensure a high enough profit margin to continue to conduct business. 

Once again... those people can trade without government currency, and if there's demand in the market place for physical exchangeable units, then there will be supply. The government would rather it be them, then google, or microsoft, because at least if they are the ones minting money they can control the size of the supply.

Anyways its not as simple as you make it out to be. That currency is legal tender, and a government that moved to invalidate it would be making a big mistake. Its the kind of thing done by failing states.

Even the penny is still legal tender.

Quote

While businesses do not have a legal obligation to accept any particular Canadiancoins or bank notes in a retail transaction, the penny will continue to be legal tenderlike all other Canadian coins, and businesses may accept the coin as a means of payment if they so choose.

Hell... you can still spend a nickle minted 100 years ago if you want. Or a one dollar bill.

Edited October 25, 2016 by dre

[dre]

15 minutes ago, Bonam said:

In how many criminal transactions is this an issue? Above, you mentioned contractors and waiters as examples of tax evading criminals you are concerned about. In how many transactions that a waiter is involved in is the weight and size of $20 bills an issue? How about contractors? 

Not only that but 10k in 20 dollar bills only weighs about a lb. It has to be a pretty big transaction before someone says "Naaaaaa. The payments for my services are too big and heavy! I'm just going to stop my profitable enterprise!" 

[dre]

It also seems like this would literally force people to keep all their money in a private commercial bank all of the time, and lay the framework for the government monitoring every single persons transactions. What if someone wants to extract their wealth from that system? Who is the government to take away that right? The ability to go into the bank, close your account, and walk away with your wealth is a fundamental component of the financial system. If they cant do that, its not really their money.

Anyways... this is all a non starter.

[msj]

The fact remains: lower denominations means it is harder to conduct business for criminals while having little to no effect on legitimate business. 

Why not either eliminate the large bills over time if not all at once? 

 

 

[msj]

26 minutes ago, dre said:

 

Anyways... this is all a non starter.

The elimination of the 500 euro note means that it has already begun. 

For that matter, the elimination of the $1,000 Cdn years ago also was a move towards this. 

Edited October 25, 2016 by msj

[dre]

13 minutes ago, msj said:

The elimination of the 500 euro note means that it has already begun. 

For that matter, the elimination of the $1,000 Cdn years ago also was a move towards this. 

It wasn't "eliminated". They just stopped making more. There are still a million thousand dollar bills in circulation and all of them are still legal tender, and can be traded between buyers and sellers that choose to accept them. That was my point...  that's how a "recall" would work, so the idea of "auditing people that bring them in" is kind of silly. After the mint discontinues production they have to go on a "hunt" to find all the outstanding notes and redeem them. It takes decades.

And you still have not addressed the point that these black market transactions, are driven not by the existence of government issued tokens, but real supply and demand. Phasing out big bills is not going to stop what makes people want to take drugs, or have sex hookers, or buy smuggled cigarettes. Solutions will emerge.

Those transactions could be made in almost any of these units... And the last thing the government wants is to lose control of the money supply to an alternative currency.

• American Open Currency Standard (AOCS)
• BerkShares
• Bitcoin - well known cryptocurrency
• bnote - Baltimore local Scrip^[3]
• Bristol Pound
• Brownie points
• Calgary Dollars
• Canadian Tire Money
• Commercial credit circuit^[4]
• Community Exchange System (CES) - global exchange network
• Detroit Community Scrip
• Digital gold currency
• Dash - Digital Cash
• DigitalNote - cryptocurrency with blockchain-based deposits
• Eusko - used in parts of the Basque Country
• Eko - used at Findhorn Ecovillage
• Fair4All - Developed in The Netherlands.
• Favabank - UK Favour exchange, based on mutual credit.
• Fourth Corner Exchange
• Ithaca Hours - Ithaca, NY
• Kelantanese dinar (gold) in Malaysia
• dirham (silver) in Malaysia
• Local Exchange Trading Systems (LETS) - an example of mutual credit, is a type of local currency used in a number of small communities worldwide.
• Monero - a decentralized cryptocurrency that provides anonymity along with untraceability.
• NuBits - the world's first stable value digital currency.
• Rábaközi Tallér^[5]
• Sardex, alternative currency used in Sardinia^[6][7]
• Stroud Pound
• Time Dollar - a state-sponsored alternative currency in the U.S
• Tumin - alternative currency in El Espinal, Veracruz, Mexico
• Toronto Dollar is another example of a backed local currency.
• Ven - a digital currency used in Hub Culture, a private social network^[8]
• WIR Bank - founded in 1934, oriented towards small and mid-sized corporations

Edited October 25, 2016 by dre

[msj]

In time it will be eliminated.  Just like the Euro $500 note will be. 

Most people conduct legitimate business using $20's or less. 

In fact, most people conduct business using interac and credit cards. 

While bitcoin and such may be a threat let's face reality: we all know that vast majority of their use is for illegal transactions which means they will never be accepted in the larger legitimate economy and governments will defend their currencies to ensure this. 

But it's simple: legalize soft drugs and prostitution and only have $5/10/20's as your paper bills. 

Most people will see no impact on their lives. 

Criminals and waiters and perhaps even contractors will hate it.  

Edited October 25, 2016 by msj

[bush_cheney2004]

2 hours ago, msj said:

Ok, I was exaggerating.

 

Ya think ?    U.S. $100 bills are in great demand around the world.

http://www.npr.org/sections/money/2013/04/12/177051690/most-100-bills-live-outside-the-u-s

 

[msj]

Rogoff, in his book, The Curse of Cash indicates that the number is now believed to be closer to 40%. 

But even then I would think that the bills outside the US are more likely to be used for crime. 

[Wilber]

I like 100's and 50's when I travel in the US. I hate their 1's.  Paper change, that makes you think you have some real money in your pocket, until you realize how many of them are ones.

[Boges]

People make more impulse buys if they can use Plastic. 

[msj]

12 minutes ago, Wilber said:

I like 100's and 50's when I travel in the US. I hate their 1's.  Paper change, that makes you think you have some real money in your pocket, until you realize how many of them are ones.

I prefer $20's but I'm not a big spender so if I do spend lots then I whip out the visa. 

But using plastic in the US was still a pain when I was there in August. Had to call Visa and have them take the block off the account: "yes, I am in the US right now and yes your policy of don't call us when you travel is complete and utter BS."   

But I blame the US still being in the 20th century - I mean, they pre-authorize everything down there which triggered Visa to block the account. 

Had I entered my pin like I do in civilized Canada then I doubt there would have been a problem.

Now, when I travel outside the US I have been surprised by a couple of things: 

1) May as well not bother bringing $50/$100 to Laos/Vietnam because they don't like them (well, for legitimate business they don't).

2)  They don't really like USD's in those countries and I was surprised that even in Thailand they preferred we use the baht instead. Really, could just bring $200 USD into those countries (for Laos to pay the fee at the border) and then just use ATM's the whole way. 

They are definitely still cash economies. 

 

[Boges]

Actually I was in Spain and I split the money I brought into more than half cash and the rest in a pre-paid Euro Visa. The card worked like a charm, but cash was still nice to have.

It was funny though, I did bring 200 Euros in 50s just to minimize the wad of cash I had on me. I wanted to break it by buying a drink at a convenience store and thought I'd get grief. They did it no problem. May stores in Canada don't even accept anything larger than 50s. 

Until banks make Interac transfers free (which I doubt they'll ever do) there are many reasonable uses for cash and large denominations of cash. 

It'll be awhile before they're completely phased out. 

[Wilber]

My most frequent larger purchase in the US is fuel which makes the larger bills more useful. Pay at the pump in the US often asks for a ZIP code to be entered and I don't like leaving my card with a gas station attendant. Hopefully it won't take them forever to finish their transition to chip and pin and be like the rest of the world. It's fun watching them try to figure out their new chipped cards like we were almost ten years ago.

Visa also applies a surcharge to foreign currency transactions over and above exchange. 

[bush_cheney2004]

During a recent visit to San Diego, I stood behind a family comically trying to use Canadian coins in a bottled water vending machine at Costco.  After several failed attempts, I offered them a U.S. quarter to try, and they were amazed that it worked.   So cute !

[Bonam]

2 minutes ago, bush_cheney2004 said:

During a recent visit to San Diego, I stood behind a family comically trying to use Canadian coins in a bottled water vending machine at Costco.  After several failed attempts, I offered them a U.S. quarter to try, and they were amazed that it worked.   So cute !

In WA state, I've found that about half of vending machines I encounter take Canadian coins while the other half do not. Of course, more and more also take cards these days so soon it will be a non-issue. 

Edited October 25, 2016 by Bonam