By Stephen Buller
In my previous article, we discussed how you can give more of your hard-earned money to your neighbors when shopping at local businesses by avoiding credit card fees. We also touched on the reasons the banks want you to use credit cards – spoiler: they profit.
Now, let’s look at some other advantages of using cash, what money is, where it’s going, and why we should keep cash on Vashon … and beyond. If you read to the end, I give two specific tactics to navigate what’s to come.
In my opinion, the greatest advantages of cash center around privacy and control. In the big data age, whenever you make a purchase on your debit or credit card, or through Paypal or another online system, that information is associated with you and saved for the future. The transaction is processed on a network controlled by one or more entities that have the power to pause or reject it, along with the source of funding itself.
Banks, your government, and marketers see great value in collecting data to assess your spending patterns and sell you more. If you believe these entities want your data to serve you – rather than themselves … They may not even know exactly what they want to do with the data at first; the usual plan is to sell it to the highest bidder. Regardless, once they’ve captured your data, they can use it for the foreseeable future for purposes we may not even be able to imagine today.
It’s more likely that big data is used to assess trends over large populations and time periods. The issue of control is much more personal. You may have heard of a trucker protest in Canada that began in early 2022. Regardless of your position on that issue, law-abiding citizens in a western democracy had their donations confiscated and their bank accounts frozen by their government. Whether you and I ever come into the crosshairs of our governments can’t be known, but relinquishing control of your wealth is a real risk.
How did we get here? A big part of the answer is that most people don’t understand what money is. I’ve repeatedly used the word incorrectly above, and you do the same every day. Simply put, United States dollars are not money – nor is any fiat currency – because one of the necessary characteristics of money is that it is a store of value.
Today, it’s easy to see that the dollar in your pocket has less purchasing power than it did a year ago. Since the 1913 inception of the Federal Reserve, the third US central bank and a non-government entity, the dollar has lost 97% of its purchasing power. This is a disadvantage of holding too much cash.
Many tangible commodities have been used as money throughout human history, but for thousands of years, gold and silver were widely recognized as the best. There are many reasons for this, but the most relevant in this case is that you can’t print – or type – them into existence.
Today, we have intangible cryptocurrencies vying for the title of best money. A cryptocurrency that had the same monetary characteristics as gold, solved current problems like extreme energy demands and transaction costs, and that kept privacy and control in the hands of the user, would contribute greatly to a free and prosperous society.
But that’s not what we’ll get – without a fight. Governments prefer a monopoly on money, and they’re already implementing central bank digital currencies (CBDCs) the world over. FedNow is coming to a digital wallet near you.
Up to this point, central banks could fight deflationary forces by creating more currency units, but they feared letting the inflation cat out of the bag because the psychology of a society isn’t simple to reverse. To reduce inflation, they would have to do something like lock everyone in their homes … But with CBDCs, they could put a cap on how much you could spend in a day, and that’s only the beginning. In theory, they could limit what you can buy, how much of it, and where you could travel based on your social credit score or the whims of your current “representative.”
What can you do? First, recognize that cash gives you privacy. Second, when they implement a US CBDC, spend yours on only a few, large purchases, to limit the information you give. Third, spend this new currency as fast as possible to acquire something with real value, because you understand Gresham’s law: Bad money drives out good. In Roman times, the emperor would dilute the precious metal content of coins to create more units to spend on wars. Savvy people noticed the difference and would hoard coins with higher silver content, while spending those with more base metals. Today, it’s harder to see through the scam, but that’s what it is.
Stephen Buller, CPA, is a Vashon native who graduated from VHS before getting his graduate degree in accounting from the University of Washington. He worked for four companies over 10 years before starting his own firm serving small businesses. In 2021, he returned to Vashon with his wife and two daughters, and is happy to be part of his hometown community once more.