Cashless Society

[Sparko]

I was just thinking how little cash I use nowadays.

Basically I only use cash at fast food restaurants and vending machines, and now most FF restaurants take debit cards.

I wonder how long before we become a completely cashless society?

[John Goddard]

Maybe when those pesky homeless people asking for change finally die off.

[Sparko]

Maybe when those pesky homeless people asking for change finally die off.


or when we invent battery operated, pocket sized debit terminals so we can pay them with a debit transfer. :hehe:

"Please sir, can you spare a monetary debit transaction?"


edited to add: Oh heck, we already have something like that. PayPal. All they need is an email address.
"Please sir, can you paypal me some money to beggar123@homeless.com?"

heck, people already do something like that at www.cyberbeg.com

any more objections? :tongue:

[joel]

Maybe when those pesky homeless people asking for change finally die off.
I never have change to give them because I never carry change.

Also those who are good at it make above average incomes by it. In Santa Monica once a friend of mine gave money to a beggar, and then a street performer came over to tell us not to give money to that guy because he makes like $600 a day begging. If he is at all consistent with that, that "homeless" person could be easily making a six-figure income by preying on people's guilt.

[John Goddard]

I never have change to give them because I never carry change.

Also those who are good at it make above average incomes by it. In Santa Monica once a friend of mine gave money to a beggar, and then a street performer came over to tell us not to give money to that guy because he makes like $600 a day begging. If he is at all consistent with that, that "homeless" person could be easily making a six-figure income by preying on people's guilt.

Either that or his home sits next to mine, abandoned and foreclosed upon like dozens in my neighborhood driving my home price down half as much.

If I wasn't a Christian I probably would have beaten to death with my own clubby fists some stupid Republicans with Bush still on their bumpers, just for enjoyment.

Thank you Jesus.

[Sparko]

take the political crap to civics101

[joel]

As for a cashless society... Today a cashless transaction (check, debit card, etc) is an exchange not of Federal Reserve Notes (FRNs) but an exchange of promises to pay FRNs (or whatever the base currency is in whatever country). That is, I have a checking account with bank A, which means I have a promise from bank A to pay me a certain amount of FRNs on demand. If I go into a store and make a cashless purchase, I transfer some of the IOU that I hold to the seller. If the seller is also a customer of bank A, then it is simple bookkeeping to transfer the IOU from my account to the seller's account.

If the seller is a customer of a different bank B, then bank B will demand the balance of FRNs from bank A. Alternatively, bank A could transfer to bank B someone else's (e.g., another bank's) promise to pay FRNs, if B is willing to accept that. For example, both A and B may have accounts with bank C, and thus it just requires bookkeeping for bank C to transfer the IOU from A to B. In a cashless society, the latter would be the only option.

Now, the only thing keeping a given bank from issuing unlimited IOUs (account balances) is the fact that the IOU is a liability. Thus they only issue an IOU in exchange for an asset (like FRNs or a promise to pay FRNs).

So, if we assume a totally cashless society--a world in which everyone ceases to redeem their bank IOUs--then the account balances cease to be liabilities, and the banks can increase them without bound. Because these balances are the only thing that are money, that means the banks would be able to create money without bound, resulting in them having zero exchange value. People will then see that the FRNs promised are worth more than the promises, and thus will want to redeem them (otherwise known as "withdrawing cash out of their account"), which will divert society from being cashless.

I think the only way to prevent this would be for the government to impose strict reserve requirements on all bank deposits, where reserves consisted only of reserve accounts with the Fed (and no cash). This would put all non-Federal-Reserve-member banks out of business. That would have to happen first, before we could see a totally cashless society.

[John Goddard]

take the political crap to civics101

Ok, then 666 is on the back of the dollar bill under the pyramid of the god of the Egyptians, if you take away all the numerals under the points of the Trinity triangle.

So maybe a cashless society is better for you.

[Sparko]

As for a cashless society... Today a cashless transaction (check, debit card, etc) is an exchange not of Federal Reserve Notes (FRNs) but an exchange of promises to pay FRNs (or whatever the base currency is in whatever country). That is, I have a checking account with bank A, which means I have a promise from bank A to pay me a certain amount of FRNs on demand. If I go into a store and make a cashless purchase, I transfer some of the IOU that I hold to the seller. If the seller is also a customer of bank A, then it is simple bookkeeping to transfer the IOU from my account to the seller's account.

If the seller is a customer of a different bank B, then bank B will demand the balance of FRNs from bank A. Alternatively, bank A could transfer to bank B someone else's (e.g., another bank's) promise to pay FRNs, if B is willing to accept that. For example, both A and B may have accounts with bank C, and thus it just requires bookkeeping for bank C to transfer the IOU from A to B. In a cashless society, the latter would be the only option.

Now, the only thing keeping a given bank from issuing unlimited IOUs (account balances) is the fact that the IOU is a liability. Thus they only issue an IOU in exchange for an asset (like FRNs or a promise to pay FRNs).

So, if we assume a totally cashless society--a world in which everyone ceases to redeem their bank IOUs--then the account balances cease to be liabilities, and the banks can increase them without bound. Because these balances are the only thing that are money, that means the banks would be able to create money without bound, resulting in them having zero exchange value. People will then see that the FRNs promised are worth more than the promises, and thus will want to redeem them (otherwise known as "withdrawing cash out of their account"), which will divert society from being cashless.

I think the only way to prevent this would be for the government to impose strict reserve requirements on all bank deposits, where reserves consisted only of reserve accounts with the Fed (and no cash). This would put all non-Federal-Reserve-member banks out of business. That would have to happen first, before we could see a totally cashless society.

well basically, the limit is that you only have the "credits" available that you deposit in your account. The bank can't just poof more money into your account (at least not legally). And your credits come from people giving you credits from their "pool" - whether a private transaction, or your employer paying from their pool into yours as a paycheck.

Once the gold standard went away, the FRNs are basically just paper promises anyway, no better than an electronic "credit" or "IOU" would be anyway. Most high end transactions at this time are electronic anyway. Banks don't transfer cash back and forth to each other much anymore, most transactions occur via electronic transfers between banks and the government.

[Sparko]

Ok, then 666 is on the back of the dollar bill under the pyramid of the god of the Egyptians, if you take away all the numerals under the points of the Trinity triangle.

So maybe a cashless society is better for you.

will you please stop trying to derail this thread?

Thanks.

[joel]

well basically, the limit is that you only have the "credits" available that you deposit in your account.

What is the nature of a (cashless) "credit" before you deposit it in your account?



The bank can't just poof more money into your account (at least not legally).

This is not the case today. Suppose Alice has a savings account of $100 with a bank. The way the law currently works, this is not 100 actual FRNs, this is just an IOU that Alice holds. There is no law against the bank issuing additional IOUs to anyone, for example by suddenly increasing Alice's account balance to $200 without decrementing any other account. Increasing Alice's account by 100 is no different than the bank printing out a certificate saying "IOU $100, payable on demand" and handing it to Alice. That is legal.

Is this "poofing more money into existence"? Depends on the context. If, by money, we mean just the monetary base, in our case consisting of FRNs and reserve acounts at the Fed, then no, this is not poofing more money into existence. This is easier to understand if something like gold were money. Then it would be clear that the bank is not creating more money proper (gold). On the other hand, people can start buying and selling exchanging IOUs (such as printed on-demand certificates (banknotes), or deposit account balances). They are not exchanging money proper but fiduciary media, which can legally be created and increased arbitrarily. (I happen to think this should not be legal.) Sometimes we refer to the monetary base alone as the "money supply." Sometimes we refer to the monetary base + fiduciary media as "the money supply". (This results in varying money supply measures, such as M0-M3.)

Or are you saying that it should be the case that banks cannot poof more balances into existence?



Once the gold standard went away, the FRNs are basically just paper promises anyway, no better than an electronic "credit" or "IOU" would be anyway. Most high end transactions at this time are electronic anyway. Banks don't transfer cash back and forth to each other much anymore, most transactions occur via electronic transfers between banks and the government.
That is true. But the problem I was pointing out is that the number of FRNs (plus reserve accounts at the Fed, otherwise known as "Federal Funds") is under control of the Federal Reserve, while the totals of deposit account balances can be expanded by individual banks. Before we could transition to a cashless society, the account balance total would have to be strictly, centrally controlled.

Depending on how exactly that is implemented, I might support or oppose such a thing. If we do it by abolishing fractional reserve banking, then I would readily support it.

[Sparko]

What is the nature of a (cashless) "credit" before you deposit it in your account?


This is not the case today. Suppose Alice has a savings account of $100 with a bank. The way the law currently works, this is not 100 actual FRNs, this is just an IOU that Alice holds. There is no law against the bank issuing additional IOUs to anyone, for example by suddenly increasing Alice's account balance to $200 without decrementing any other account. Increasing Alice's account by 100 is no different than the bank printing out a certificate saying "IOU $100, payable on demand" and handing it to Alice. That is legal.

Is this "poofing more money into existence"? Depends on the context. If, by money, we mean just the monetary base, in our case consisting of FRNs and reserve acounts at the Fed, then no, this is not poofing more money into existence. This is easier to understand if something like gold were money. Then it would be clear that the bank is not creating more money proper (gold). On the other hand, people can start buying and selling exchanging IOUs (such as printed on-demand certificates (banknotes), or deposit account balances). They are not exchanging money proper but fiduciary media, which can legally be created and increased arbitrarily. (I happen to think this should not be legal.) Sometimes we refer to the monetary base alone as the "money supply." Sometimes we refer to the monetary base + fiduciary media as "the money supply". (This results in varying money supply measures, such as M0-M3.)

Or are you saying that it should be the case that banks cannot poof more balances into existence?


That is true. But the problem I was pointing out is that the number of FRNs (plus reserve accounts at the Fed, otherwise known as "Federal Funds") is under control of the Federal Reserve, while the totals of deposit account balances can be expanded by individual banks. Before we could transition to a cashless society, the account balance total would have to be strictly, centrally controlled.

Depending on how exactly that is implemented, I might support or oppose such a thing. If we do it by abolishing fractional reserve banking, then I would readily support it.


basically the FRNs are just promissary notes right? They don't have to exist in any physical form. They can be just the unit of credit that the government creates, and then allows us and the banks to use. We can't create more ourselves but the government can. But that would increase inflation.

I think a cashless society would pretty much work the same way this one does except at one point the government would just say "we are not going to print paper money or make coins any longer"

Like I said, 95% of my life is cashless now. I pay bills online, use debit cards everywhere I go, buy stuff online with paypal and credit cards, etc. For all practical purposes my life is cashless. heck, even my paycheck is deposited electronically. If I could pay for everything without cash I probably would. eventually I think it will become that way. Once paper money becomes out of fashion, I think it would just go away.

The only exceptions I would think would be criminals who like to keep using cash to launder money and keep their transactions hidden.

[Hamster]

I hope it comes as soon as possible I hate not being able to pay with my bank card

[eudyptes]

What is the nature of a (cashless) "credit" before you deposit it in your account?


This is not the case today. Suppose Alice has a savings account of $100 with a bank. The way the law currently works, this is not 100 actual FRNs, this is just an IOU that Alice holds. There is no law against the bank issuing additional IOUs to anyone, for example by suddenly increasing Alice's account balance to $200 without decrementing any other account. Increasing Alice's account by 100 is no different than the bank printing out a certificate saying "IOU $100, payable on demand" and handing it to Alice. That is legal.

Is this "poofing more money into existence"? Depends on the context. If, by money, we mean just the monetary base, in our case consisting of FRNs and reserve acounts at the Fed, then no, this is not poofing more money into existence. This is easier to understand if something like gold were money. Then it would be clear that the bank is not creating more money proper (gold). On the other hand, people can start buying and selling exchanging IOUs (such as printed on-demand certificates (banknotes), or deposit account balances). They are not exchanging money proper but fiduciary media, which can legally be created and increased arbitrarily. (I happen to think this should not be legal.) Sometimes we refer to the monetary base alone as the "money supply." Sometimes we refer to the monetary base + fiduciary media as "the money supply". (This results in varying money supply measures, such as M0-M3.)

Or are you saying that it should be the case that banks cannot poof more balances into existence?


That is true. But the problem I was pointing out is that the number of FRNs (plus reserve accounts at the Fed, otherwise known as "Federal Funds") is under control of the Federal Reserve, while the totals of deposit account balances can be expanded by individual banks. Before we could transition to a cashless society, the account balance total would have to be strictly, centrally controlled.

Depending on how exactly that is implemented, I might support or oppose such a thing. If we do it by abolishing fractional reserve banking, then I would readily support it.

If a bank starts "poofing" more money into accounts beyond what they've contractually agreed to (interest rates), they still have to account for the extra "money" to the Fed and calculate their reserve amounts at the Fed based on the new deposits. They have to have the "funds" on the books to do that....otherwise they are "cooking the books" and will get shut down by the Treasury Dept. Just "poofing" money into an account is basicaly a defaucation of funds....and will bring the auditors in screaming.

[joel]

basically the FRNs are just promissary notes right? They don't have to exist in any physical form. They can be just the unit of credit that the government creates, and then allows us and the banks to use. We can't create more ourselves but the government can. But that would increase inflation.

I think a cashless society would pretty much work the same way this one does except at one point the government would just say "we are not going to print paper money or make coins any longer"

True, FRNs are just promissory notes. (Or rather were. They aren't even promises to pay anything anymore. Though official terminology still refers to them as "liabilities" of the Federal Reserve.) The Fed could get rid of paper notes and coins. I'm just telling you what would be (or need to be) different.

The major difference: Right now anyone can own FRNs, but only Federal Reserve member banks can own Federal Reserve credits ("Federal Funds"). So, if we took our current system and changed it just by eliminating paper notes and coins, then we will have gone from everyone being able to own Federal Reserve credits to only banks who are members of the FR. And then checking accounts, which were promises to pay FRNs will have become promises to pay...what? A bank cannot pay out a Federal Reserve credit to an individual, because they can be owned only by member banks.

A checking account "dollar" is not (and would not be) a Federal Reserve credit. (This is clearly demonstrated by the fact that the sum total of bank deposits is multiple times larger than the total amount of Federal Reserve liabilities.)

So something would have to change in order to maintain a system like ours (though any such possible change will make a system not quite like ours). For example, fractional reserve banking could be eliminated, or everyone could be made a customer of the Federal Reserve, so that each person could have an account in order to own FR credits. The latter would be tantamount to the government seizing total monopoly control over banking, because everyone would be a customer of the FR. The only bank accounts would be FR accounts, controlled by the FR.

(In the case where everyone has a FR account, it's possible that private banks could then have deposit accounts where you "deposit" credits "in a savings account." Depositing with bank X would mean decrementing your FR account, and incrementing your checking account at bank X. Withdrawing would be the reverse. The checking account would be a promise to transfer credits to your FR account on demand. But, then why would anyone need a checking account anywhere but at the FR? Why would you opt for promises to pay FR credits rather than a checking account of actual FR credits?



Like I said, 95% of my life is cashless now. I pay bills online, use debit cards everywhere I go, buy stuff online with paypal and credit cards, etc. For all practical purposes my life is cashless. heck, even my paycheck is deposited electronically. If I could pay for everything without cash I probably would. eventually I think it will become that way. Once paper money becomes out of fashion, I think it would just go away.
Also, we might note that the ratio of M2 (we no longer keep track of the larger M3) to the monetary base is about 5:1. It is only this low because of the recent financial craziness and craziness of the Fed. The ratio has normally been about 10:1.

My point is that by simply eliminating paper money, then yes, FRNs will simply become credits. No problem. The problem is all the private bank deposit balances that would go from being promises to pay FRNs to being merely credits, not of the Federal Reserve, but of each individual bank. Your checking account balance of $100 is not 100 FRNs but a bank X credit for $100. This is--and after the change would still be--merely bank X credits, not FR credits. Each bank would have its own (unbacked) credits, which it would be able to increase without bound (because they are unbacked).



The only exceptions I would think would be criminals who like to keep using cash to launder money and keep their transactions hidden.And non-criminals who think the government simply has no business monitoring their private lives. Oh, wait, that makes them criminals.


If a bank starts "poofing" more money into accounts beyond what they've contractually agreed to (interest rates), they still have to account for the extra "money" to the Fed and calculate their reserve amounts at the Fed based on the new deposits. They have to have the "funds" on the books to do that....otherwise they are "cooking the books" and will get shut down by the Treasury Dept. Just "poofing" money into an account is basicaly a defaucation of funds....and will bring the auditors in screaming.
(For the purposes of this response, I will use "money" to refer just to the monetary base (Federal Reserve liabilities, or "credits").

Banks, when they "poof" additional checking/saving account balances into existence, are not poofing more money into existence. They are creating and issuing additional IOUs--promises to pay money, not actual money. There is no money "in" a savings account. It just happens that most people exchange these IOUs as money equivalents. It is established historically (as well as theoretically) that when banks (legally) increase the total of these IOUs it has all the same effects of inflation that occur when the government increases the amount of money.

I don't know what you mean by "beyond what they've contractually agreed to (interest rates)". You will have to explain that.

Yes, banks currently have minimum reserve requirements (for which they must report all deposits and have sufficent reserves), but only on things like checking accounts, not on savings accounts. But "just poofing" larger account balances into existence is not illegal (though I think it should be illegal). Minimum reserve requirements only set a limit on how much this can be done (not a total limit, because not all accounts have a reserve requirement). My earlier point is that FR liabilities are the required reserve media. If all the liabilities become electronic credits then all non-member banks would be put out of business because only member banks can own Federal Funds. (Well, the U.S. Treasury does too, but that's an exception.) Individual people would no longer be able to own FR liabilities.

[rogue06]

Being basically a paranoid person who loathes paper trails I use cash whenever possible. This has led to problems at places like doctor's offices where they've had to go through purses and even their cars trying to scrape together the change :hehe:

[Sparko]

Being basically a paranoid person who loathes paper trails I use cash whenever possible. This has led to problems at places like doctor's offices where they've had to go through purses and even their cars trying to scrape together the change :hehe:

but, but. but!!! The goobermint has tracking devices in the bills too! I think the eyes on the presidents portraits are really micro cameras too.

:noid:

[rogue06]

but, but. but!!! The goobermint has tracking devices in the bills too! I think the eyes on the presidents portraits are really micro cameras too.

:noid:
Easily taken care of by drawing little tin hats on the presidents :smug:

[Sparko]

Easily taken care of by drawing little tin hats on the presidents :smug:

pure genius!!

[apostoli]

I wonder how long before we become a completely cashless society?Probably never while the electronic systems is fragmatised and privatised.

The biggest hurdle has always been the networks fee structures (merchant fees & transaction fees). Here in Oz mrchants now (after a law change) are allowed to charge extra on EFT & CC transactions to recover bank fees. Small retailers who by necessity do, are put in a non-competitive position with big retailers who don't. There are other issues...

Credit/Debit Card fraud. The whole Card system is one of undeserved trust. Your card/s are not secure. Easily forged, easily stolen and the Net trans allow impersonation. Believe me I know! I worked in electronic banking for a lot of years. The banks work on a probability theory and absorb losses (hence high fees). Also the electronic banking system are fully automated. Thats why the banks tell you to check your statements. I had a fraud happen to me. Several years ago I'd signed a service contract that required monthly payments. An option was to have these automatically charged to my credit card. Contract expired, then three years later some dude reactivated the auto payments. I probably wouldn't have noticed but the trans was $500, so I noticed! Real hastle getting the bank to stop payments.

Then there is small transactions. The only real issue here is fees. Smart cards are suppose to solve this.

etc etc etc

Imu, world wide the banking system is similar. Each night financial institutions make net settlements, shuffle cash reserves. Though usually this is an exchange of IOUs.

The actual "money" is held by the Reserve bank. With the worldwide market crash legislation was passed to allow the Reserve to gaurantee all bank & credit union deposits and release the "money".

[seanD]

I've always considered that depotism was the reason for a cashless society, not necessarily for its practical uses. I believe that a cashless society will be a result of a total and absolute take-over of the IMF. This is the reason why we are seeing a dramatic consolidation and seizing of corporations by the Obama Wall street criminals, and why they've been funneling trillions through the FED with no oversight of where the money is going and what it's being used for. The dollar is already on the verge of a total meltdown once the Obama bailout bubble bursts. But I believe the total take-over won't occur until some major disasters affect the world and leave it in such disorder and disrepair, a global super IMF will be the only way humans can function as a civil and economically structured society.