Joining me to talk about this is Professor Steve Keen from the School of Social and Behavioral Sciences at the University of Kingston in the UK.
Professor Keen starts off by talking about the many benefits of going cashless: "There are many obvious advantages, you no longer have to carry a physical substance round with you anymore. It started with checkbooks; I haven't signed a check in the last 20 years, now it is no longer necessary to carry coins and cash around. You do not have to hunt for money like you do, for example in the UK, when you want to use a public toilet that costs 50p. Clearly, the convenience is extremely important. Depending on the data system, it is also faster than cash. I have spent quite a lot of time standing in cappuccino lines behind somebody trying to get their card or their phone to work when the mobile systems experience teething problems, but I think the obvious advantage is that it is convenient…"
"The dangers are that there is cash in your pocket until somebody robs you. However, if you have cash, which is dependent on the internet, and the internet fails, then you do not have cash, and so you are much more dependent on the infrastructure than you are at the moment. There is also the issue of the scale of the transaction, which is something that I feel we do not pay enough attention to. One of the elements present on the internet is the denial of service attack, which may be because of malicious software; the system breaks down and information does not transmit. It would be a very stupid person to say that we will never have a financial panic again, because of the sheer number of people wishing to convert their assets from one form to another. It's quite possible that that could develop a level of transactions which could overload the systems…"
An example of India is discussed where going cashless went wrong. "It was quite disastrous. Indians had 4 hours to get to the bank and hand over their 500 and 1000-rupee notes, as a decision was made to abolish them….That was a disaster but one thing you have to say about Indian culture is that it is extremely adaptive, and people worked their way around it. A year later, the level of cashless transactions has not particularly risen, but the decision-making process was insane…"
The question of whether countries whose currencies are not linked to traditional three-dimensional forms of value storing such gold would be in more trouble if their cashless payment systems were to go wrong, is discussed. "I am not a great fan of gold; I see it is a hedge against something going wrong the monetary system. Many cultures in Asia store their wealth in gold and jewelry. In that sense they have a buffer which we don't have in the West because we have become so used to having our money either in the bank or in electronic form, or in the form of assets which will appreciate, so we are not prepared for a sudden shock….So, we could well see a return to commodities as a way to store value just in case the monetary system fails."
Many other related issues are discussed in this program, however, a conclusion is reached that going cashless is inevitable, but it should be done step by step and that it is necessary to have a fallback unless the internet monetary system fails.
In next week's program, the increasing power of the banks and governments thanks to the digitization of cash and the possible weaponization of digital systems for geopolitical aims is discussed.
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