One of the best things about covering payments news is that you never run out of stories where various myopic governments attempt to restrict the flow of cash in a squeeze for revenue.
France becomes the latest as Prime Minister Jean-Marc Ayrault plans to erect new controls on cash transactions in order to tighten up tax collection and meet the country's optimistic budget deficit target of 3% of GDP. The government needs euros and they need some fast.
In the government plan labeled "Fight against fraud," France's fiscal residents would see the cash transaction limit decrease from €3,000 to €1,000 per purchase. However, in a nod to the exiled wealthy and what Wolf Richter calls the "Depardieu exception," those fiscal residents of a country other than France would have their cash transaction limits reduced from €15,000 to €10,000 per purchase. Legislative measures could be finalized by the end of 2013.
Richter illustrates the ban's impact with an example of purchasing a used car: "two crisp 500-euro bills and a single coin -- voilà, an illegal transaction." Used cars could easily cost more than €1,000 and accepting cash protects the seller, but the larger problem may be finding those 500-euro bills in the first place. While the southern coast of Spain was once believed to have the highest concentration of 500-euro notes in circulation, the distinctive purple bill has become more like the unicorn of Europe because they are rarely seen. The UK banned the sale of 500-euro notes at exchange offices in 2010.
"It has long been the dream of collectivists and technocratic elites to eliminate the semi-unregulated cash economy and black markets in order to maximise taxation and to fully control markets," writes Patrick Henningsen at the Centre for Research on Globalization. "If the cashless society is ushered in, they will have near complete control over the lives of individual people."
The anti-cashists have escalated this sad drama to a point where it has become like boiling a frog. The limits are incrementally lowered and lowered until one day, people wake up and realize that only fully traceable transactions are permitted in the new cashless society.
In many regions around the world, a strong and vibrant cash economy is actually underpinning the faltering national economies that no longer offer sufficient mainstream opportunities for their citizens. By some estimates, the global off-the-grid economy represents trillion worth of economic activity per year. People will produce, consume, and trade in order to survive and bearer cash plays a critical role in that process.
The futuristic cashless society is marketed as being ultra-modern and at the forefront of technology. However, it is more like the last gasp of a dying behemoth and it is the poor that will suffer the most.
In responding to Simon's Black's description of Emperor Diocletian's 3rd-century tax reforms in All Transactions To Be Conducted In The Presence Of A Tax Collector, a reader commented that "Tax evasion always increases along with the tax burden." He continued, "In fact, it acts as a safety-valve against rebellion. Since the rich will always have means to escape heavy taxation, the burden of bloated government bureaucracy will eventually fall the heaviest on those of lesser means."
Is there anywhere left to go if you don't welcome the fully-traceable cashless society? Spain recently banned cash transactions above 2,500 euros and Italy banned cash transactions above 1,000 euros.
France and other anti-cashist countries could quickly become nations of smurfs, referring to the practice of smurfing, which is a method of structuring cash transactions into smaller deposits of money to avoid cash reporting requirements.
Source: The Monetary Future
