Who will benefit when America goes cashless

Cash or Card? Who will benefit from the abolition of cash?

Cash, lobbyists claim, no longer has a future. Paying is actually more and more common with cards or smartphones, even the smallest sums at the bakery or at the kiosk. But cash is important and can protect us - from expropriation and data trading, for example.

Cash protects against penalty interest and loss of money

Paying with bills and coins is seen by some as old-fashioned, disreputable, filthy - since the corona pandemic anyway. But many arguments against cash have long been refuted. Paying with cash does not involve a higher risk of infection, and electronic transactions or tax havens are more likely to be used for criminal business.

A frequent argument of the financial lobby against cash is the dreaded “bank run”: If customers no longer trust their bank and if they all try to withdraw their money at the same time, the bank will go bust. Because banks do not have the money that customers entrust to them as cash. And: Money that is in the bank no longer belongs to the customer, but to the financial institution. The bank customer only has the promise that the bank will pay him the money.

In the financial crisis of 2008, major bank failures and the collapse of the system threatened Germany. Only a billion dollar rescue package from the government and the assurance that the savings would be secured by the state prevented a bank run. Since 2015, savings amounts up to at least 100,000 euros have been covered by the Deposit Protection Act.

Banks create money, more precisely: deposit money or book money, for example when they grant loans. The customer is promised a certain sum that must be payable at any time; But the bank only needs to have one percent of this amount in reserve. Much of the money only exists on paper.

So there are good reasons to stay loyal to cash: In 2013, the government in Cyprus closed all banks in a crisis and then levied a compulsory levy on savers in order to avert national bankruptcy. Those who had their money in the bank lost part of their savings; those who had hoarded cash, on the other hand, were on the safe side.

The situation is similar today with negative interest rates, which many banks are already charging: Only the fact that there is still cash and that customers can simply withdraw their money prevents very high negative interest rates. Without cash, this “penalty interest” and also the fees for cashless payments would probably rise sharply, as there would be no alternative for customers. All they could do was watch their money get less and less.

Cashless payment: the consumer in the data trap

Those who shop cashless quickly become “goods” themselves, because buyer data is valuable. Who bought what where, is interested in what, who has what preferences, habits and character traits - all of this is behavioral data that is collected and used. They are the basis for personalized advertising, behavioral predictions and for very precise profiles that are created to get customers to buy and to make them manipulable.

Even the youngest ones are stuck in the data trap, for example in smartphone games like Pokémon Go. It inconspicuously attracts the players to the vicinity of restaurants, shops and other companies that have paid for it as sponsors and thus want to increase their sales.

Cashless payment is huge business. And so Internet giants like Google, Facebook & Co. are trying to gain a foothold in the industry: with their own payment systems and, in the future, possibly with their own currency.

Actually, the data protection laws of the countries and the EU should protect consumers from data collection, but the reality is different: Who reads the eternally long texts, peppered with incomprehensible terms? And even if: Every time they make a purchase, even when looking at the goods electronically on the Internet, customers have to agree to the company's terms and conditions - and disclose their data.

An alternative to the data collection frenzy during electronic shopping could be the planned digital euro of the European Central Bank, which is still in the test phase at the end of 2020. It is to be introduced as a supplement to the cash euro. But even with this payment system, data is generated, albeit not as much as with commercial companies. And the digital euro, like all other electronic payment systems, depends on the technology working properly.

The only way out is still cash. Only coins and notes still offer the possibility to go shopping anonymously, to travel and to enjoy leisure time.

The end of the gold standard and the consequences

Until 1971, the Bretton Woods Agreement regulated the world economic system and made it easier to see through compared to today. The real money that was in circulation had gold. But the agreement had its weaknesses that ultimately led to failure.

In 1944, 44 countries in the American Bretton Woods agreed on a currency system with fixed exchange rates and the US dollar as the reserve currency. The dollar, in turn, was secured by gold: the United States undertook to exchange US dollars at any time for gold, which was mainly stored in the famous Fort Knox. In 1945 the United States held 70 percent of the world's gold reserves; a troy ounce of gold was worth $ 35 at the time.

However, this system did not take into account necessary economic growth or the inflationary policies of the United States in the 1960s. The likelihood that the US could still exchange the US dollars, which were in circulation around the world, for gold, decreased. France had already exchanged its dollars in 1966. In 1971 the then US President Nixon finally terminated the Bretton Woods Agreement.

Since then, money has no longer had a fixed value, but is based solely on the trust that it has value. The consequences: After the end of the Bretton Woods system, states can get into debt more easily, more new money can be put into circulation: money for which there is not enough equivalent, which increases the risk of speculative bubbles and financial crises.

Correct use of money

Real estate is still considered one of the best investments in Germany. Savings books and cash are also popular with one in four people. Although they hardly bring in any money, they are considered safe. And only eleven percent of all Germans dare to invest in the stock market.

It is noticeable that men deal with money differently than women, and they also differ in their self-assessment: men rate their financial literacy higher than women. In fact, they are more knowledgeable about finance and more interested in money.

According to a survey, men would be more likely to invest in the money market than women if they had money at their disposal. They are more likely to lose money because they are risky or careless; Women lose money because they tend to be too cautious and, for example, accept loss of interest, according to the experience of Prof. Hartmut Walz, behavioral economist and economic expert.

The correct handling of money not only includes risk assessment, but also a few simple arithmetic skills. In a non-representative survey by odysso, only about 60 percent of all respondents were able to correctly calculate or estimate how much it costs to overdraw the current account. Many were ready to overdraw their accounts in order to be able to consume more: vacation, entertainment electronics, expensive clothing and more. In 2020, 6.8 million Germans were over-indebted, with young people living beyond their means, while older people had to struggle more with problems such as illness or unemployment.

First comes the market, then morality

Do markets cause people to act against their moral standards? They buy goods knowing that they were made under unacceptable conditions. Is the market to blame for creating a distance between the decision and its consequences?

The Bonn economics professor Armin Falk made an experiment in which 1000 students took part: They had the choice of giving life to a laboratory mouse or earning ten euros. Given the choice alone, 46 percent decided against the mouse and took the money. In the situation of buyer and seller, two students each had the choice of dividing 20 euros between themselves or saving the mouse. 72 percent decided to have the mouse killed. Some were even willing to do this for a little less than ten euros. In the third experiment, the test subjects were market participants. 16 students should agree on the distribution of 20 euros - or save the mouse's life. 76 percent opted for money, with the price dropping to five euros.

Conclusion: Markets make it easier to forget morals. Armin Falk sees several causes. At one point, all participants see that the others are also participating. And there is always the argument: "If I don't do it, someone else will".

BlackRock - the secret power

BlackRock rarely occurs in our everyday life. But the asset manager and financial service provider has power - not only economically, the influence of the globally operating giant also extends into politics. BlackRock, based in New York, is involved in the management of equity funds in all major companies in the world, including the rating agency Standard and Poors, which assesses the financial strength of entire countries - with far-reaching consequences.

In Germany, he holds over ten percent of the shares in the 30 largest companies. Founder and CEO Larry Fink is now considered the most powerful man on Wall Street. Black Rock creates and sells reports that banks and sometimes entire states rely on. A power in the background whose actions ultimately have an impact on each individual.

But something else than concentrated financial power makes BlackRock so dangerous: While

Banks are subject to national laws and controls, the financial services provider from the USA is uncontrollable and opaque. This becomes particularly problematic when state and pension funds use the services of BlackRock and, for example, invest money in the high-risk area of ​​“alternative investments” from which pensions are actually to be paid later.

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