I.) Introduction: Definitions
We commence with the following definitions:
Money: ‘any medium which has reached such a degree of acceptability that no matter what it is made of, and no matter why people want it, no one will refuse it in exchange for his product.’
- Major Douglas, Economic Democracy, page 28.
Commodity Money: Money comprised of precious materials (usually metals) - i.e., materials with a not insignificant intrinsic value.
Fiat Money: All non-commodity money.
Physical Money: All money that is tangible. At present this primarily consists of notes and coins.
Digital Money: All intangible money.
An important point to note at the outset is that whilst all commodity money is physical money - and all digital money is fiat money, all physical money is not commodity money. We may thus classify all money into three categories:
Commodity Money: Metallic money (such as coins in a gold, silver or bimetallic standard), and various exotic forms of money.
Physical Fiat Money: Banknotes as well as coins that are outside a metallic standard.
This is what we mean by cash.
Digital Money: Intangible money, such as numbers in bank ledgers, and increasingly, electronic bits and bytes on the computer networks of the financial system.
These distinctions are important in order to avoid a possible misconception. What is being advocated here is the preservation of physical fiat money in the face of the onslaught of digitalization. There is absolutely no need to return to commodity money, whose ill effects have been amply and aptly demonstrated by Arthur Kitson and Frederick Soddy, among others: all that is written below should not be construed as such. It is to be noted that commodity money is often regarded as the alternative or the bulwark against digital money: in our view, this harmful superstition stands in the same relation to the digital danger as theocracy to autocracy. In the interests of economic democracy, (and ultimately, political freedom as well) it is the preservation of physical fiat money that matters. It is time to explain why.
II.) The Dangers of an All Digital Currency
The perils of an all-digital currency range from the fairly obvious to the altogether inconspicuous. In order to adequately appreciate the crucial importance of establishing and upholding the right to cash, it is necessary to explore them in some detail.
The clearest danger arising from the elimination of all physical money is the threat to privacy it entails. Purchases using digital money, be they via credit card, mobile phones or online banking, are never as anonymous as cash transactions: a record is invariably created and held by a third party - usually a bank or credit card company. While these entities may be obliged by law to keep such information confidential, such confidentiality can be breached by government pressure or broken by skilful hackers. In short, it is only cash that provides full anonymity - and the concomitant autonomy. Only with physical money may we say with Dostoevsky:
‘Money is coined liberty.’
Sadly, the convenience of using credit cards, the rise of online shopping and propaganda campaigns portraying cash as unhygienic or maligning it as an instrument of criminality have generally sufficed to overpower privacy concerns. In order to strengthen the case for establishing a right to cash, it is therefore necessary to study some of the less evident negative consequences of an all-digital currency.
With an all-digital currency, all money is held as bank deposits (or similar intangible forms), since there is no physical money whatsoever. This provides the banking system’s authorities with the opportunity to impose negative interest rates on ordinary accounts - something they have hitherto refrained from doing for fear that such a measure would trigger a wave of withdrawals as customers turn their threatened savings into solid cash. Such a measure is likely to be promoted as a means of escaping a liquidity trap by compelling savers to spend, though it is more likely to generate asset-price inflation as individuals opt to move their savings into forms that will preserve or even increase their purchasing power. Regardless, the imposition of negative interests rates would constitute a great inconvenience or worse for the general public - and the existence of physical money is the main bulwark against it.
The potential imposition of negative interest rates is the manifestation of a deeper threat: the extraordinary empowerment of Central Banks. In an all-digital money system, men are dependent entirely on the banks and digital payments systems for their welfare - and both are ultimately subject to the dictates of the Central Banks. Such a situation makes all men vulnerable to any and all actions taken by these unaccountable institutions, who can, by simply blocking their accounts, leave them literally penniless - and compelled to resort to barter in order to survive. With such power, Central Banks are free to impose whatever agenda they please on the general public.1
Finally, we have the recondite peril: the elimination of debt-free money, initially from the monetary system, and ultimately, from the minds of men. All physical money is created debt-free, (though whether it enters the economy as a debt-free input depends on whether it is spent into circulation or sold to the banks - but this does not concern us here) - and its very existence is a constant reminder to men that money can be created without debt. Though it is, of course, possible to create digital money debt-free (by the government exercising its coinage sovereignty), in practice virtually all our digital money is created as debt money - money that comes into existence as bank loans that need to be repaid, (usually with an interest charge to boot). With an all-digital currency - currency that has never had a physical form - the entire money supply is debt-money.
It is worth reviewing what this entails. As I noted in ‘The National Dividend Solution’2:
MONEY HAS THREE MAIN PURPOSES IN A MODERN ECONOMY (WHICH REFLECT ITS FOUR MAIN FUNCTIONS):
1. IT FACILITATES TRANSACTIONS, (BY SERVING AS A MEDIUM OF EXCHANGE AND AN UNIT OF ACCOUNT).
2. IT PROVIDES ECONOMIC SECURITY (BY FUNCTIONING AS A STORE OF VALUE).
3. IT IS NEEDED TO PAY DEBTS (BY BEING A STANDARD FOR DEFERRED PAYMENT.)
WHEN MONEY ITSELF IS A PRODUCT OF DEBT, THEN IT IS NOT POSSIBLE FOR SOCIETY TO PAY OFF ITS DEBTS WITHOUT UNDERMINING MONEY’S ABILITY TO SERVE THE FIRST TWO PURPOSES. THIS SHOULD BE OBVIOUS IF WE TAKE THE MOST EXTREME CASE: WHEN ALL MONEY IS DEBT MONEY (WHICH WOULD BE THE CASE IN THE CASHLESS SOCIETY THAT WE ARE MOVING TOWARDS), AND ALL DEBTS ARE PAID OFF, THEN THERE IS SIMPLY NO MONEY LEFT FOR EITHER CONSUMPTION OR SAVING - UNLESS NEW MONEY IS CREATED EITHER IN THE FORM OF BANK LOANS (WHICH MEANS NEW DEBT) - OR IN THE FORM OF DEBT-FREE ELECTRONIC MONEY.
The need for constant lending has another implication, as noted by Major Douglas:
‘the existing economic system distributes goods and services through the same agency which induces goods and services, i.e. payment for work in progress. In other words, if production stops, distribution stops, and, as a consequence, a clear incentive exists to produce useless or superfluous articles, in order that useful commodities already existing may be distributed.’
- Major Douglas, Economic Democracy, page 69, (italics in the original).
Last, but not least, after a few generations under the spell of an all-digital currency mankind (barring a few obscure historians of money) will be left unable to conceive of a debt-free money system, let alone establish it. Physical money as a factor in shaping the minds of men is easy to overlook, yet without it, monetary reform may end up as difficult for future generations to conceptualize as an economy dominated by guilds rather than corporations is for the men of today.
III.) Key Elements of the Primary Right to Cash
A right will be defined here simply as ‘claim, title etc.. allowed or due’ (Collins Shorter Dictionary and Thesaurus, 1995), and thus, the right to cash is a claim due to the general public relating to physical fiat money. This claim is multi-faceted, with at least seven key elements, each of which may be considered a right in its own right:
1)The Right To Hold Cash
2) The Right To Be Paid In Cash
3) The Right To Use Cash In All Offline Transactions
4) The Right To Pay Governments In Cash
5) The Right To Deposit Cash In Banks And Other Similar Organizations.
6) The Right To Easy Convertibility Of Digital Money To Cash
7) The Right To Sufficiently High Denominations.
Each of these rights will be explained and defended below.
1) The Right To Hold Cash
This is the claim that the individual must be permitted to hold as much of his wealth (and the wealth of others entrusted to him) in physical fiat money as he pleases. It is the foundation of the primary right to cash without which the others are simply indefensible.
In order to use cash, we need to hold it, (if only for a split-second) and therefore, it is the legality of this right to hold cash that makes physical fiat money useful at all. However, the importance of the right to hold cash goes beyond this - it serves as a guarantor of protection against unlimited dependence on the banks, since it ensures that an alternative to holding money as bank deposits always exists: hence the stipulation that the individual should be able to hold as much of his wealth in this form as he likes. It is also a bulwark against nefarious schemes to compel expenditure, such as Silvio Gesell’s ‘stamp scrip’.
2) The Right To Be Paid In Cash
This is the claim that the individual must always have the option, irrespective of whether he avails of it or not, to receive his wages, salaries, dividends, tax rebates, welfare payments, etc.. in the form of physical fiat money, in a manner convenient to him (ex: he should not have to visit the North Pole in order to collect his cash).
The significance of this right lies in its existence, rather than its actual use, (given the convenience of digital payments, it is unlikely to be exercised much). The right to be paid in cash is the sole guarantee that enables the average man to be independent of the banking system - for without it, he is compelled to have a bank account of some sort, which puts him at the mercy of the banks. This right is therefore necessary for the individual to freely interact, not just with any given bank, but also with the banking system as a whole. An added benefit is that it assists those who lack easy access to a local bank branch, or simply do not have any nearby.
3) The Right To Use Cash In All Offline Transactions.
This is the claim that the individual must always have the option to pay for goods and services in cash, unless the transaction is primarily online. This claim extends as far as high-value items such as vehicles and property, and includes offline rental and mortgage payments.
As with the right to be paid in cash, what matters is that the right exists, rather than how frequently it is exercised. Here again, the right provides individuals with freedom from the banking system - and it has two other benefits as well. First, it enables firms to operate without requiring bank accounts, credit card terminals, etc… Second, it enables economic activity (beyond barter) to continue in the event of a disruption of the digital payments infrastructure.
4) The Right To Pay Governments In Cash
This is the claim that the individual must always have the option to pay taxes, fines, charges for government services, etc.. in cash, and will face no penalty (financial or otherwise) for choosing to do so. While the convenience of digital payments makes it most unlikely that this right will be exercised much by the general public, what matters, once again, is that the right is recognized and upheld.
The right to pay governments in cash benefits both the citizen and the State. The benefit for the former is straightforward: he is not dependent on the banks for the payment of his dues to the authorities. The latter benefits in a similar manner, since payments in cash also reduce the State’s dependence on the banking system, but it also receives an additional advantage: thanks to this right, the government can continue to receive payments from citizens even in the event of a disruption of the digital payments system. In sum, the preservation of physical fiat money increases the resilience of an economy.
5) The Right to Deposit Cash
This is the claim that the individual must always be permitted to transfer physical fiat money into his bank account as well as his accounts in similar financial institutions. It also entails the right to pay any and all financial debt in cash (in this instance, physical fiat money is deposited to pay the loan). Last, but perhaps not least, it entails the right to use cash as collateral for loans. In all such cases, there must be no penalty for the use of cash.
This is a right of utmost importance, for without it banks could easily terminate physical fiat money by refusing to accept it, thereby effectively compelling the general public to relinquish cash altogether, given the inconvenience, not to mention danger, of holding large amounts of physical money on one’s person or property. However, for this right to be of any value, it must be supplemented by the one that follows.
6) The Right To Easy Convertibility Of Digital Money To Cash.
This is the claim that the individual must always be allowed to convert the wealth he holds in digital form, (ex: in a bank account) into physical fiat money, easily and effortlessly, at no additional expense. Though this is taken for granted today, thanks to the presence of Automatic Teller Machines (ATMs), we nonetheless owe it to future generations to enshrine this claim into law.
Unlike some of the other rights mentioned above, this one is likely to be exercised frequently, and the importance of upholding it should therefore be self-evident. Without it, all the banks need to do is to constantly reduce the number of ATMs, and the bulk of the population will be unwittingly pushed into the all-digital dystopia.
7) The Right To Sufficiently High Denominations
This is the claim that the individual is to obtain physical money in a convenient form that retains the purchasing power that it previously possessed. This right helps maintain the utility of physical fiat money in the face of inflation. Inflation - the continuous decrease of the purchasing power of money - reduces the usefulness of any given denomination (of cash) as a means of purchase or any other transaction. To compensate for this, higher denomination notes should regularly be issued to maintain the utility of physical fiat money: it would be even better if notes of higher and higher denominations were issued so that more transactions could be conveniently carried out with cash - though a practical limit would probably be applied, possibly at the £10,000 level.
An example should reinforce the point. Suppose a product cost £1000, and the highest denomination banknote is £50: at least twenty notes are required for the purchase. However, with inflation, the price eventually rises to £2000, and now, a minimum of forty notes are needed. To overcome this, a £100 note should be issued - and ideally a £200, £500 or even £1,000 note - to facilitate the convenience of using cash.
IV.) The Auxiliary Right To Cash: The National Dividend
American journalist A. J. Liebling noted ‘Freedom of the press is guaranteed only to those who own one’, and in a similar vein, the right to cash is of little, if any, interest to those who do not possess money or do not expect to receive any soon. Yet, it is a curious fact that human rights documents (such as the UN’s Universal Declaration of Human Rights, the European Union’s Convention on Human Right and the Islamic Declaration of Human Rights), have rights that can generally be secured by sufficient money, but make no mention of money, let alone of a right to it. Instead, what the declarations mention is a right to work.
Such a situation is a reflection of the Pauline dictum ‘He who will not work, shallnot eat’ (2 Thessalonians 3:10) which is clearly inapplicable to an age where automation, computerisation and the growth of artificial intelligence have made human labour - both manual and mental - increasingly unnecessary, and even undesirable. Under these conditions, the supply of a regular stipend to an adult, irrespective of his contribution to the economy, is not simply a right: it is a need.
To this end, it is worth revisiting the ethical and practical logic behind the proposal of Major Douglas for a National Dividend. From a moral standpoint, since the development of technologies and improved production techniques is the result of the collective efforts of past generations, it is part of the common heritage of the entire human race, (much like culture) and therefore, the wealth thus generated also belongs to all. Consequently, the individual is entitled to a stare of it, given his status as an heir to these achievements - and this share, (presumably) is most easily allocated on a national basis.
The practical justification for the National Dividend is the existence of a gap between prices and incomes generated by the economy, which I have covered in some detail in my paper, ‘Visualizing the Gap’3. The National Dividend is a means of filling the gap, one which is considerably superior to the main current method of attending to it, (namely the issuance of additional debt), except perhaps from the perspective of the monopolists of credit. The auxiliary right to cash, therefore, is the right to a monetary stipend (that can always be converted to cash if it is issued in the form digital money) in the event that there exists a gap between prices and incomes.
The common thread that binds the primary and auxiliary rights to cash is their ultimate aim: the independence of the individual. This independence is gravely threatened by the gap itself, as we shall see.
V.) Conclusion: Dematerialization and the Gap
The global drive to eliminate physical money is well worth viewing in a wider context. As Russian scholar Andrey Fursov noted4: from as early as the 1960s, a section of the Western ruling class pressed for a 3D policy of deindustrialization, de-rationalisation and depopulation, to retain, and indeed, extend control over the general public. To these three, we can add a fourth ‘D’ - dematerialization, and the push for an all-digital currency is one example of this.
Dematerialization is defined here as the production of goods and services with the use of less material than before, and as such, may well be regarded as a salutary phenomenon from both an economic and environmental perspective, which it usually is - but not always. A distinction that clarifies this point is that between limited and total dematerialisation: limited dematerialization being the partial reduction of physical resources used, while total dematerialization entails the elimination of the tangible form altogether - in other words, digitalization.
As with deindustrialization, de-rationalization, and depopulation, the process is not merely the result of the machinations of nefarious, transnational cabals, but also the inevitable outcome of the price-income gap that Major Douglas identified over a century ago. This gap generates an additional artificial impetus to cut costs, (at the expense of, for example, improving product quality or durability) since the debt-money system saddles individuals with debt and interest payments, thus lowering their disposable income, while corporate debt simultaneously generates upward pressure on the price of goods and services, thereby making it difficult to sell to the mass market without resorting to cost-cutting. Dematerialization - especially, total dematerialization, promises precisely this. Indeed, part of the eagerness of banks to do away with cash is the cost of maintaining and running ATMs, as well as of handling physical money.
Nonetheless, the outcome of total dematerialization is more than merely a reduction in costs: it is the central control of previously decentralised consumption. The case of books is quite instructive in demonstrating this. Originally produced only with hard covers, the emergence of paperbacks reflected progress made in limited dematerialization. Total dematerialization, on the other hand, manifested itself in the form of ebooks, which, unlike physical tomes which are available in countless stores, both offline and online, can only be purchased online - and that too, from a few organizations. Furthermore, while physical books can be purchased anonymously, (thanks to the existence of bookshops), ebooks cannot. Last, but not least, the physical book is usually available second-hand, even after it is out-of-print: it is substantially more difficult, if not impossible, to buy an ebook second-hand. (Of course, the existence of online digital repositories like archive.org, mitigate these developments to some extent, but here too, we see centralization in the form of reliance on a single source).
‘Limitations always make for happiness’, observed the German philosopher Arthur Schopenhauer, and the right to cash may best be regarded as a means of setting a desirable limit to total dematerialization, through legislation such as Ireland’s Access to Cash Bill5. The importance of such measures cannot be overstated. For the individual to be independent in any meaningful sense of the word, he must have full control over his consumption, and it is this that digitalization threatens, especially with recent attempts to promote the use of subscription services6 over direct purchases. The greatest danger comes from the all-digital currency, which imperils not just one’s control over consumption, but one’s savings as well, as we have endeavoured to show in part II. Hence the importance of the primary and auxiliary rights to cash for not only preserving the liberty of the individual, but also for reversing the trends threatening it by tackling their underlying cause.
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1. Credit to Dr. Oliver Heydorn for this point, as well as Richard Hall’s video ‘Johnny’s Cash and the Smart Money Nightmare’.
2. Source: https://alor.org/Storage/Library/PDF/Arindam_Basu_The_National_Dividend_Solution.pdf
3. Source: https://www.socred.org/images/visualizing-the-gap/Visualizing-the-Gap-2.pdf
4. Source: https://youtu.be/Giz3-7TBBow
5. Source: https://data.oireachtas.ie/ie/oireachtas/libraryResearch/2024/2024-05-01_briefing-paper-access-to-cash-bill_en.pdf
6. Such as Netflix and GamePass.
