[American Thinker] The Wall Street Journal recently ran pro and con articles on the idea of abolishing cash -- that is, paper currency. If that were done, all transactions would have to be carried out electronically via means such as credit and debit cards or other electronic payment means. The supposed advantage is that it would make it difficult for criminals and the underground economy to carry on their business, because the government would know exactly what they are up to.Another supposed advantage is that it would make it easier for the government to impose negative interest rates to fight deflation. Negative interest rates means that the government steals some percentage of your bank balance each year. Negative interest rates are difficult to impose if people can hide their money as anonymous currency.
A Puerto Rican commentator on the Wall Street Journal article pointed out that Puerto Ricans without cash were in difficult straits because the failure of the electric grid due to hurricane Maria made it impossible to use credit or debit cards.
The prospect of total and long-term failure of the electric grid due to electromagnetic pulse suggests that everyone should keep $500 or more cash in their house. Electromagnetic pulse, EMP, can result from a natural solar flare, or from the detonation of a single nuclear weapon in near outer space above the USA. The North Koreans have threatened to use EMP against the USA.
The government has already taken some steps to make the use of cash more difficult. The largest U.S. currency is now the $100 bill. Formerly $500 and larger notes were available.
The U.S. $100 bill is a de facto international currency. About $1.1 trillion in $100 dollar bills are in circulation, 75% outside of the U.S. Citizens of countries with unstable money often keep savings in $100 bills, out of sight of their governments. This money is an interest-free loan to the U.S. government. If the $100 bill is recalled, the loan would have to be paid off. When I traveled to South America in the 1970s with $100 bills, I was able to obtain favorable exchange rates from citizens of various countries eager to hoard $100 bills. The U.S. government is already profiting from the international underground economy.