08:34 GMT +317 December 2018
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    Brave New World

    Proceed to Cashless Society With Great Caution

    Brave New World
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    John Harrison
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    This second program on going cashless concentrates on potential systemic problems of living in societies without coins and banknotes. We concentrate on the affects of the digitization of cash on banks, governments, security and consumers’ privacy.

    Professor Steve Keen from the School of Social and Behavioral Sciences at the University of Kingston in the UK joins the program.

    The effect of going cashless on banks is discussed at the beginning of the program. Banks are highly secure establishments with massive doors and secure vaults to store physical money, metals and valuables. The security aspects of banks, however, are probably going to change. Steve comments: "The main security that banks need now is electronic….These days money is digital, so robbery tends to be more digital. I can't remember the last time I heard of somebody breaking into a bank….Reserves [in cash] that banks held were there in case there was a problem with the monetary system or with a particular bank, and customers wanted to take their cash out. That's where the reserve ratio that banks still have around the world comes from. We need some sort of security, and that's the real problem. The computer systems that we develop never had security systems built into them in a fundamental way, which is why you can have break-ins and frauds still occurring, because our systems were set up in a semi-trusting fashion, rather than a skeptical fashion….This again worries me when we are trying retrospectively, to build digital cash system."

    Cashless operations are not free of course; banks charge a commission on each and every transaction we make. Perhaps banks will now become more powerful and acquire new financial and even political power? Steve says: "The main problem now is the political and financial complex. What we are doing is empowering the banks with more power…. I'd rather see us adopting something like the Japanese Postal Service system for transactions. I‘m happy to see banks having a role in money creation and credit, and extending money to commercial ventures and so on, and taking a risk themselves in doing so, but this sort of activity should really be part of a publicly owned infrastructure for transactionally based commerce, which we don't want to be affected by the ups and downs of credit…"

    If all of our wealth becomes visible to us on a computer screen, doesn't that mean that it is also visible to a government agency? Steve comments: "We surrender any concept of privacy once we go totally digital, because we never built the systems up in the first place to give you that privacy and security. I'd be extremely worried about back doors been built into systems and the CIA having access, as well as many other agencies…"

    There is also the question of the different status that different currencies possess — the Chinese Yuan having different status than the US Dollar, for example. To the question: "does whoever control the most powerful online currency also control the universe?" Steve says: "The financial system in America has benefitted very much out of being the global reserve currency. This financial system is decrepit and needs replacing. Whether gong cashless is going to replace or weaken that system? I am more inclined to say that it will give more power to that system than it takes away…"

    On a security front, currencies which are digitally based are perhaps more amenable to be weaponized than cash based currencies, at least this is a theory put forward by host John Harrison: Steve comments: "If you were told you couldn't use your money in America if you are a Russian going shopping there, that's panic stations and a level of control which I expect will appear."

    In general, Steve feels that the process towards cashless societies is inevitable, but we should proceed with caution and keep cash as a reserve system. "That's pretty much my feeling, and I would also like to reform the foundations of the monetary system globally, because the whole system which was based on the American dollar was a disaster. It was a system put forward by the dominant US, and proposed by Harry Dexter White, the American representative at Bretton Woods Agreement, rather than the artificial currency which was also proposed called 'Bancor'. If we had the Bancor (suggested by economist John Maynard Keynes and the UK) and a truly international payment system, that would allow us to evolve responsibly towards a cashless world in the future. But instead we have the totally rickety system which we currently have, with all of its abuses, and we are building more potential for abuse on top of it. So a cashless system is going to happen, but I hope we build as many safeguards a possible into it before it rolls out to a global level…Nobody expected the 2009 economic crisis. Any system has faults in it; whether it is a cashless system or a system based on people carrying bucket loads of cash around with them. We have to be aware of the fundamental instability of the capitalist economy, not that that is necessarily a bad think, crises can lead to creativity but we have to make sure that it doesn't lead to breakdown…."

    We'd love to get your feedback at radio@sputniknews.com

    Tags:
    digitalization, Economy, cashless society, plastic cards, money, Steve Keen
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