The ‘Cost of Cash’

In the piece above, N26 propagandists lay down a range of costs that the cash horsecart supposedly exerts on our society. They’re not alone in doing this. It’s common for fintech players to raise a concern about the ‘cost of cash’. These costs include the cost of printing it (incurred by money issuers), the cost of banking it, insuring it, moving it around, and the time taken to do reconciliation (incurred by businesses). They harp on the hassle of using it, the time taken to go to ATMs, and the interest not earned by not using bank accounts. They set that against their digital systems and invoke the illusory mantra that technology saves you time, rather than simply accelerating your life.

One of the reasons why the propaganda works is that it plays into existing weaknesses in economic literacy. An economy is an interdependent web of people who draw from the earth, but nowadays that takes the form of a giant transnational mesh structure underpinned by state legal systems and multi-tiered monetary systems. Modern corporate capitalism is a vast network vortex, with sub-vortices.

Rather than experiencing all the underlying connections within this vortex-of-vortexes, a person will experience themselves like a disconnected atom moving from one market to the next. At one point they’re a consumer in the goods market, the next an employee in the job market, and the next an investor in the financial market. In each of these spaces they’re but one tiny node, and rather than recognizing the interlocking nature of the markets they pass through, they experience themselves like a blindfolded person moving around an elephant, imagining each part they touch to be a unique object.

When someone is immersed in a huge system that’s too large to see, it’s easy to get them to fixate on the ‘phenomenological’ elements directly in front of them, rather than the reality beyond their perception. The interlocking markets of corporate capitalism are held together by monetary systems, but many people casually adopt the economics view of money as some kind of mysterious special commodity. We often fixate upon monetary cost, the amount of monetary credits handed over to get something in an act of exchange, while not noticing that the most primal cost of something is a real resource cost - the amount of human energy and natural resources that go into bringing it to life through an act of production. A monetary cost is one leg of an exchange, and the other is a real good or service which exacted a real resource cost on its producers, and which is the actual thing that (theoretically at least) gives us some benefit. The good or service gets used up, but money doesn’t. Once handed over, the money will continue on an onward path that may fork and make its way back to you somewhere else in the multi-dimensional vortex (or will be pulled out of circulation by its issuers).

Fintech propagandists, though, can mobilize misunderstandings about this structure to their advantage in at least three ways:

1. A modern money system is an ecosystem of issuers issuing money in multiple forms in multiple layers, and cash is one component of a balanced monetary foundation. Fintech firms, though, will use the economist idea of money as a series of evolving products, and imagine that ‘money’ will be upgraded if it lapses into one form (somewhat like imagining transport to be ‘upgraded’ if we got rid of bicycles and trains, and relied solely on Uber)

2. They place their audience into the position of the blindfolded person feeling the elephant and get them to fixate on an imagined cost that cash brings to each section (e.g. the investor loses returns by holding cash, the consumer finds it inconvenient, the manager finds it hard to account for, the shareholder loses profits, etc.)

3. They’ll suggest these ‘costs of cash’ are one-way losses without benefits, and then add them up into some total cost to society from this defunct product

Let’s take an example from the N26 article, where they claim that:

Cash needs to be printed, continually inspected, and then transported to and secured in safes. That costs the German economy over €10 billion each year

They’re trying to imply that the €10 billion is like a gas lost to space, but those monetary costs will appear on a bunch of income statements somewhere else as income earned from providing a service and will turn up in GDP figures. Indeed, everything that turns up in GDP ‘costs’ one party money, and another party real resources, but we tend to assume there’s also a reverse flow of benefit to these costs. Indeed, things often incur a higher monetary cost if they’re valuable.

High-quality jeans cost more than cheap shirts because they're better. Similarly, a monetary system with cash is a more resilient, balanced, and inclusive monetary system, which is better. Of course, there's a real resource cost to producing jeans, and maintaining the cash system, but there's also a real resource cost to maintaining an army, a logistics system, or stairs in a skyscraper. Sometimes we use resources for valid reasons.

The best way to understand our N26 propagandists is to see them like an elevator salesperson spinning stories about the wonderous innovation and efficiency of their automated solution while casting stairs as a wasteful and costly use of resources.

I could imagine an ancient Pharaoh ordering the creation of a colossal pyramid of gold-encrusted stairs in a wanton act of wastefulness, but on average our use of real resources for stairs is valid. While the elevator evangelist harps on about the exertion required to walk up them, fitness instructors would see that as a benefit. Moreover, the costs of stairs can prevent far more serious ‘social costs’, like people getting trapped in a building when it’s burning down.

An elevator salesperson would undoubtedly draw attention to people tripping down stairs and breaking their leg, much like our fintech propagandists who do everything they can to draw attention to the social costs of cash. In the N26 piece, they highlight ‘all the illegal activity in Germany associated with cash’, and the ‘astronomical sums of cash’ that are lost or stolen. They ignore the fact that digital systems are constantly used for cybercrime, hacking, extortion, and tax avoidance (ahem, the entire offshore tax system is facilitated via digital bank accounts), but the ‘cash as crime’ line is a major tool in the anti-cash lobby’s arsenal.

There are real costs to cash, but those come with real benefits, the absence of which can bring real social costs, which are just real losses to our well-being. Monetary costs, real resource costs, and social costs are not the same, albeit there are complex interconnections between them.

The shallow rhetoric of the fintech industry does no justice to these subtle concepts and shows ignorance of the actual monetary system. The actual monetary system is a politically anchored multi-layered web of IOUs, in different forms, that holds the so-called economic realm together.

Analyzing the separate elements of that foundation as if they were free-floating commodities subject to monetary cost considerations (that the foundation itself underpins) is delusional on multiple fronts.

Not only does the foundation get weakened if you remove cash, but we incur all those social losses: exclusion, centralization of power in too-big-to-fail oligopolies, inequality that stems from centralization, and data extraction used to disorientate us.

We can have a debate about the relative severity of these ‘political’ losses, but never let banks and their lapdog fintech industry tell you these are side issues.

Money is political, and that’s the starting point of the economics,

but, If our money is not private, we can’t be political…

Coming in part 3;

• The fundamental principle of counter-economics.

• Black and grey markets: the unconscious agora.

• The role of the intelligentsia and Establishment media

• Failure of counter-cultures and the key to success.

• Micro activity and macro consequences.