Date: September 3, 2022
To: Special Advisor to the President
From: Joint Committee Chair, David R. Warwick1
RE: Proposal to Eliminate Cash
Rapid advances in information technology such as the blockchain and personal communication devices have presented a unique opportunity to both dramatically reduce the federal deficit and many types of crime, as well as assist in the struggle to stop the funding of terrorist activities. A Joint Committee comprising the Deficit Reduction Task Force and Crime Reduction and Terrorist Prevention Task Force was formed at the beginning of the Covid pandemic and is now proposing that the federal government begin a five-year program to (1) to phase-out and eventually stop printing and minting currency, and (2) make the electronic money the new and sole legal tender for all public and private debts.
A full conversion to electronic cash issued by the federal government would virtually eliminate the underground economy based on cash transactions that currently goes untaxed and unregulated. The IRS estimates that this hidden part of the economy could account for around 15 to 20% of GDP. Additionally, a cash-less money system should lead to a reduction of crime involving theft of cash which are often the most violent type as well as businesses that cheat on taxes by accepting payments “under the table” in cash. If the electronic “money” system was designed to leave incriminating trails of data, there would be a strong disincentive for criminals and subsequent “enablers” to engage in criminal transactions that could be traced to them.
Already vast majority of payment transactions are handled efficiently and securely by digital means. Credit and debit cards are widely used and accepted. PayPal, Google Pay, and Apple
1 David R. Warwick, made a similar proposal on which this exercise is based nearly thirty years ago in The Futurist, Nov-Dec 1992, Vol. 26, No. 6, p. 19.
Pay are successful examples of technology companies provide consumers with digital payment systems that are widely seen as more convenient than cash. This proposal would also eliminate the need for the ubiquitous ATM machines that have to be constantly fed cash by means of armored cars and hired security.
Only cash would be replaced by electronic money. The use of credit and debit cards as well as checks, drafts, money orders, cashier’s checks, letters of credit, acceptances, and other financial instruments would be unaffected although it is expected that the associated fees and expenses in some of those legacy payment methods would have to further digitize or lose out to competition from the new electronic money.
Once such a system is in place it would have an additional benefit of making transfer payments to the poor and needy much more efficient. The savings in law enforcement arising from the cash-less society could be used to help fund research and development of the necessary electronic devices and the networks to connect them as well as help subsidize acquisition of the devices by the poor. Once such a system is in place it would have an additional benefit of making transfer payments to the poor and needy much more efficient.
Some might be concerned that a rogue cryptocurrency could appear that would take the place of cash, but that presumes that the rogue cryptocurrency would be accepted in the regular economy. If anti-money laundering laws were expanded to limit spending of a suspicious cryptocurrency or ban conversions into the electronic money this could severely discourage this work-around. And since most crypto currency systems are only pseudonymous not anonymous and have every transaction permanently and unalterably recorded, they would not provide the same level of “secrecy” that cash does.
We anticipate some adverse effects of the new money system some sectors of the economy. Cash-handling industries would suffer direct hits, including armored-car services and manufacturers of cash handling machinery and equipment. Retailers would have to equip themselves with terminals and perhaps pay for communication services to transact in the new medium, but this transformation has already largely occurred with the smartphone revolution and the fintech apps that are already available on that platform. On whole, it seems that the sum total of transitional damages suffered in the monetary transformation would be substantial smaller than the benefits generated by it. As a consequence, the Joint Committee recommends that adoption of the proposal.
David R. Warwick
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