23 Jan 2018
Paper currency… its final countdown has begun

You might think I am writing about Cryptocurrency… but that would miss a much bigger picture.

Back in 1999, as the Y2K scare approached, I spent a lot of time diffusing potential panic from people who not only did not understand technology, but also did not understand the book of Revelation and what it actually says about the end times prior to Christ’s return.  It was a big challenge, because of lack of knowledge or misperception.  But the argument was actually quite easy and simple: cash was the major method of payment and would be for quite some time.  Why?  Because there were too many gaps in electronic commerce which only cash could fulfill.  You can read about them here, in a post I wrote about Square the year it made its debut (2012).

Two major developments have occurred since that article.  First, device apps for payment have multiplied and improved, even to the point of making a credit card reader obsolete. Second, the amazing rise of crytpocurrency enabling a true form of electronic cash.

To understand a new third event which just occurred, I have to go back to 1999 again for an argument I made on how the switch to a cashless society would occur.  It is based on a 4-step program, similar to how a manufacturer or service company gets a new product or service into the market.

Step 1: Introduction and adoption … I have this great and convenient new thing, which is better than the thing you currently use… try it for free or a ridiculously low cost.

Step 2: Tap rooot … You like my product or service so much, and it benefits you so much, now you start paying something for it.  It’s too valuable and convenient to go back to the old thing.  This step can occur after the new thing has proven itself to the buyer/user, and the old thing is no longer needed or is now too inconvenient to go back to.

Step 3: Deprecation of the old… You holdouts using the thing which my thing replaces, you now get a disincentive or penalty if you refuse to make the change to my new thing.

Step 4: Elimination of the old… You hard-core holdouts now no longer have access to the old thing (grandfathering ends), and must switch over to the new thing.

A great example of this is paper checks switching to electronic checks, which began over three decades ago in the 1980’s:

• Step 1: Direct-depost began to appear mostly for government employees and some large corporations.  People who adopted it loved saving a trip every payday to the bank.
• Step 2: Not completely following Step 2, banks began to actually reduce fees for customers who used direct deposit.  The cost savings compared to paper processing were so great, that they needed to provide a strong incentive for direct deposits to become widely accepted.  It is the B-side of step 2 (exceptionally strong incentive for the new), but accomplishes the same goal.
• Step 3: The holdouts for checks have generally seen a rise in the cost per check or, when not willing to accept the fee per check model, the minimum balance in the checking account was raised substantially to offset the processing cost.  In the 1980’s, you could get free checks and no service fee for as low as a $100 minimum average monthly balance.  Today, that number is easily $1,000 at most banks.  Note: I am excepting Credit Unions for this, since their rules are different than banks.
• Step 4 will be arriving soon for checks.  The number of checks processed has dropped dramatically over the years.  I’ve seen only one thing which is truly blocking it.  Certain companies (mostly utility companies) try to charge a convenience fee of about $5.00 for processing a credit card or ACH payment electronically instead of check.  This is mostly motivated by protectionism, and sometimes there are laws preventing the company from rolling a processing charge into the bill, but the days of these practices are numbered as well..due solely to basic economics.

So what about cash?  If anyone paid any attention to the value of the US Dollar in 2017, the next two paragraphs will make sense.  We hit step 3 for cash during this decade, due to the increasing use of credit cards and online payments for regular, everyday commerce.  In fact, there are quite a lot of stores I have seen that either add a charge for using cash, or provide a discount for using a credit or debit card. The predominate payment method at the local farmer’s market here is credit card via a Square reader in an iOS device.  That’s quite a change from only five years ago.

So what is the transition  to Step 4?  It will be driven by a factor that will soon make its way into the United States: hyper-inflation.  Last year, the United States Dollar lost about 10% of its value.  While that measurement is from comparing it to the values of a set of dominate currencies, you can easily see the effect in the prices of the meals you are eating out as well as the prices on the grocery shelves.  And there are other economic impacts about to make it even worse.  All in all, the stage is ripe for hyperinflation.  One of the driving factors of cryptocurrency, besides removing the middleman between the buyer and seller, is to store liquid assets in a vehicle that is more stable than fiat paper currency.  And the US dollar, one of many fiat currencies, is becoming a vulnerable currency.

So once the amount of denomination increases and volume of currency printed to meet basic demands can no longer be economically sustained, the need to eliminate paper currency to keep up with hyper-inflation will be unavoidable… and step 4 will be completed.  After all, increasing the money supply in the digital world involves updating some bytes.  In the paper world, it involves endless printing and transportation costs that are prohibitive.  Just ask anyone (if they are still around) who lived in the Weimar Republic in Germany in the 1920’s, and anyone in modern day Zimbabwe.. of which plenty are still around.

Brace yourselves… it’s ugly, and it is not very long before it arrives.

UPDATE (Feb 25, 2018): The IMF late last year published “The Macro Economics of De-Cashing”, which provides good detail of the motivations and challenges to remove cash from a society. Currently two countries are aggressively working to eliminate cash (Sweden and India), and the reasons they quote are listed in the document.

Don’t be deceived by the apparently benign nature of this document. The truth is, the world government system being manifested for its role in the near future, requires that cash be eliminated to enforce its agenda through economic “incentive”. Read this document with Revelation chapter 13 in mind.