Anyone who has been following trends in money and banking over the past several years has seen the increasing push for electronic, digital, and online payments. At all levels, from government to banks to private businesses, cash is increasingly being seen as a liability rather than an asset. And that has spurred fears of a war on cash.
Cash’s great benefit is that it is an anonymous form of payment. Money changes hands, goods are exchanged, and neither party needs to know who the other person is, what he does, or anything else. But governments hate that, and so they’re pushing electronic payments in order to de-anonymize as many business transactions as possible.
Cash allows people to trade on black markets and avoid taxation, thus providing an escape valve for those living in countries with draconian regulations or excessive taxation. It allows people to keep the government out of their business, and allows economies to function in the face of excessive government interference. And that’s why governments want to eliminate cash.
In a world without cash, and in which every transaction is recorded electronically, governments will have a record of every transaction that takes place, allowing them to tax whatever they want to, whenever they want to. Not being able to escape that electronic database means that individuals and businesses can be taxed at ever higher levels, with no recourse since cash no longer exists.
COVID and Cash
Fears of cash being a potential carrier of the COVID-19 virus led to many businesses banning the use of cash, and to fears among the general population that cash might be infected. Never mind that cash has been exposed to virus carriers of the flu, common cold, and other viruses for decades. And never mind that cash has been exposed to illegal drugs, feces, and other contaminants every day. All of a sudden cash became a potential vector for COVID, and its use plummeted.
Combined with the drop in face-to-face business as a result of nationwide lockdowns and the rise in online ordering, and more and more Americans are becoming comfortable with a cashless society. That may end up being the future, if current trends persist.
Digitalization of Finance
One glimpse of the future that faces us may be found in Sweden, which has probably advanced further along the road to a cashless society than any other Western nation. Cash purchases make up such a small portion of economic transactions in Sweden today that many banks don’t even have cash on hand anymore. And getting cash from an ATM? Forget about it, because many businesses don’t even accept cash anymore.
While many businesses today gripe about the cost of swipe fees and merchant agreements with credit card processors, the alternative in taking cash payments requires storage of cash, transfer to banks at the end of the business day, and the risk of theft or robbery. Digital payments render all of that moot, making it an attractive option for businesses looking to cut costs and reduce overhead. The downside to consumers, however, is that every transaction is now recorded, and can be positively linked back to a specific person. If the government decides years down the road to come after everyone who purchased XYZ good or service years in the past, that task is made infinitely easier through records of electronic payments.
Tangibles Win the Day
For those who worry about the war on cash and the threat to freedom that it entails, investing in tangible assets has become increasingly important. In a world without physical cash, where all transactions are electronic, and in which all money is digital, there are no checks or balances on the government’s ability to create money ad infinitum. Any problem the government comes across, the solution will be to create more digital money.
We’re probably 90% of the way there already, but once the process is complete, there will be no limit to the government’s ability to create money. That, in turn, will mean even greater devaluation of the dollar. If you thought the dollar’s value and purchasing power was low already, just wait until cash disappears.
The only way for people to protect themselves against that coming loss of purchasing power is by investing in tangible assets that hold their value in the face of inflation. That includes assets such as gold and silver. Many investors over the centuries have been protected by gold and silver, while others have had to learn the hard way that the paper assets or electronic assets they held are no match for precious metals.
Learn From History
In every hyperinflationary crisis in history, those with tangible assets have been able to survive, while those who prided themselves on their bank account balances, retirement account balances, or pension fund promises watched in horror as the value of their savings in many cases literally disappeared overnight. With the future increasingly becoming digital, and with the federal government demonstrating in its reaction to COVID-19 that it is only too willing to throw trillions of dollars at any problem, investors who haven’t protected themselves with tangible assets yet have been put on warning.
Investors today have even more options than investors in previous generations did in investing in precious metals. That includes investing through relatively recent innovations such as a gold IRA. With a gold IRA, investors have the same tax advantages as they would with any conventional IRA, only that their gold IRA invests in physical gold coins or bars rather than in stocks or bonds. Those investors can roll over existing retirement savings from tax-advantaged retirement accounts such as a 401(k) or 403(b) into a gold IRA. And when it comes time to take a distribution, those distributions can be taken either in cash or in physical metals.
It’s clear that the war on cash is ongoing and intensifying. Once cash is eliminated, the value of the dollar is very much up in the air, and rapid devaluation can’t be ruled out. Investing in dollar-denominated assets such as stocks and bonds risks seeing those assets devalue too, as the dollar slides further into worthlessness. Without investments in tangible assets like gold, your retirement savings risk becoming similarly worthless.