Dr. Sumner predicts the elimination of cash would make it easier for governments to impose negative interest rates and could lead to increases in values for gold and alternative currency, such as the Bitcoin.
"Surprisingly, despite the increasing use of credit cards, cash holdings are about 8% of Gross Domestic Product, which is actually a larger share of the US economy than a decade ago, indeed even larger than 90 years ago. The amount of cash in circulation (paper currency and coins) is roughly $4500 for every man, women and child in America. It is believed that roughly half that total is held overseas, but even $2000 per person would be a surprisingly large figure, far higher than people admit to in government surveys. Ironically, it is this increasing popularity of cash holdings that helps explain why governments are so anxious to discourage the use of cash," wrote Dr. Sumner.
He pointed out that until a few years ago, most economists thought negative interest rates were virtually impossible, but that now is reality in some European countries and Japan.
Another implication of a cashless society is the loss of privacy.
"The anonymity of cash is what makes it appealing to many people, but it's also what makes it increasingly unpopular with governments. They see cash as a way of evading taxes, as well as facilitating drug dealing and other nefarious activities such as terrorism…. But regardless of how you feel about privacy, this seems to be the direction the world is moving," Dr. Sumner stated.
He concluded: "The removal of cash would not have a major impact on the overall economy. It would slightly increase the government's ability to collect taxes, and it would somewhat increase the effectiveness of monetary policy during recessions. Banks would benefit from increased use of credit cards. For investors, it might lead to an increased demand for cash substitutes, such as Bitcoin and precious metals, pushing their price higher."
The entire 1,700 word commentary is available free online at www.rcwfinancial.com/cashless-society.
About Scott Sumner, Ph.D.:
Dr. Scott Sumner studied economics at the University of Wisconsin and received a PhD from the University of Chicago. He has done extensive research on the role of the gold standard in the Great Depression and is Professor Emeritus of Economics at BentleyUniversity in Waltham, Massachusetts, where he has taught since 1982. Dr. Sumner received national recognition in 2012 as one of the "Top 100 Global Thinkers" by ForeignPolicy.com and was named "The Blogger Who Saved the Economy" by The Atlantic magazine.
About RCW Financial:
RCW Financial of Irvine, California provides estate planning and wealth preservation services focused on the acquisition of the most popular and exclusive numismatic rarities. For additional information, visit online at www.rcwfinancial.com, call Michael Contursi, President of RCW Financial, at 949-679-1222, or email at firstname.lastname@example.org.
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