People Not Amused by EU Efforts to “De-Cash” their Lives
But the IMF has suggestions on how to win the War on Cash.
In January 2017 the European Commission announced it was exploring the option of imposing upper limits on cash payments, with a view to implementing cross-regional measures as soon as 2018. To give the proposal a veneer of respectability and accountability the Commission launched a public consultation on the issue. Now, the answers are in, but they are not what the Commission was expecting.
A staggering 95% of the respondents said they were opposed to a cash ceiling at EU level. Even more emphatic was the answer to the following question:
“How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?”
In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.” In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits.
Granted, 37% of respondents were from Germany and 19% from Austria (56% in total), two countries that have a die-hard love for physical lucre. Even among millennials in Germany, two-thirds say they prefer paying in cash to electronic means, a much higher level than in almost any other advanced economy with the exception of Japan. Another 35% of the survey respondents were from France, a country that is not quite so enamored with cash and whose government has already imposed a maximum cash limit of €1,000.
By its very nature the survey almost certainly attracted a disproportionate number of arch-defenders of physical cash. As such, the responses it elicited are unlikely to be a perfect representation of how all Europeans would feel about the EU’s plans to introduce maximum cash limits. Nonetheless, the sheer strength of opposition should (but probably won’t) give the apparatchiks in Brussels pause for thought.
Respondents cited a number of objections to EU-wide cash restrictions, chief among them the convenience of using cash and the limited impact the measure would probably have on achieving its “stated” objectives of curbing terrorism, tax evasion, and money laundering. Of course, there are many other reasons to worry about living in a cashless (or “less cash”) society that were not offered as an option in the survey, including the vastly increased power it would give to political and monetary authorities as well as the near-impossibility of ever escaping from the clutches of the banking system or central banks’ monetary experiments.
The biggest cited concern for respondents was the threat the cash restrictions would pose to privacy and personal anonymity. A total of 87% of respondents viewed paying with cash as an essential personal freedom. The European Commission would beg to differ. In the small print accompanying the draft legislation it launched in January, it pointed out that privacy and anonymity do not constitute “fundamental” human rights.
Be that as it may, many Europeans still clearly have a soft spot for physical money. If the EU authorities push too hard, too fast in their war on cash, they could provoke a popular backlash. In Germany, trust in Europe’s financial institutions is already at a historic low, with only one in three Germans saying they have confidence in the ECB. The longer QE lasts, the more the number shrinks.
Bundesbank president Jens Weidmann has already warned that it would be “disastrous” if people started to believe cash would be abolished — an oblique reference to the risk of negative interest rates and the escalating war on cash triggering a run on cash. The IMF has also waded into the debate with a working paper full of sage advice for governments keen on “de-cashing” – as the IMF calls this procedure – their economies against the will of their citizenry (emphasis added):
The private-sector-led de-cashing seems preferable to the public-sector-led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation. The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash.
A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks.
It basically involves making it easier and cheaper for people to use electronic payment methods while subtly turning the screw on those who would prefer to continue using cash (for perfectly valid reasons, as the IMF itself admits), presumably by making it more difficult and expensive to do so. In many places it’s already happening.
But a surprisingly large number of people still appear to have a strong sense of attachment to physical money, particularly in Europe’s most important economy, Germany. And if the survey is any indication, they have little interest in changing those habits. By Don Quijones.
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