There is much talk about how Covid-19 will change the world. There is less about how it is simply accelerating trends that were already underway (think everything from a cold war with China to rising levels of home working). One to keep a particular eye on is a theme we have been watching for some time – the death of cash.
No one wants to touch cash today. It’s always been known to be pretty filthy stuff; now it isn’t just grubby, it is potentially lethal. No wonder, then, that the use of cash has halved in the last week and that “card only” signs are appearing everywhere. Some large chains stopped taking card payments altogether (even before lockdown) and the contactless upper limit has been moved from £30 to £45.
You might think this is no bad thing. After all, cards are quicker, easier and cleaner than notes and coins – as are all the many ways to use phone apps to pay. Central bankers will agree with you.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Back in 2015, Andy Haldane, chief economist at the Bank of England, made a speech in which he explained what an irritant the likes of you and me holding cash is for him and his colleagues. It would be much easier if we weren’t allowed it; that way, the Bank could have significantly more control over how and when we spent our money.
We would all hold our wealth electronically. So if they wanted us to spend more, they could charge us negative interest rates (effectively confiscating our unspent money – note that we spend more when we use non cash money anyway). If they wanted us to pull back they could pay us interest at whatever level they fancied. Much easier – particularly in times of crisis when banks would like monetary policy to work faster than it currently does.
Getting rid of cash also suits HMRC down to the ground: the tax gap is largely about the cash economy. No cash equals no cash-in-hand work equals no tax avoidance.
Anyone who thinks the chancellor isn’t thinking about this hasn’t been concentrating: his four-week amnesty for those who have not filed last year’s tax return is a clear message to cash workers (see my last blog on this).
We have never been mad for the idea that cash is a burden, not a benefit. Cash allows us some degree of financial freedom and privacy; 100% digital money removes both completely. We are moving into a world in which the authorities can force the speed of change. There is a good chance this will be one of the things that gets forced.
-
8 of the best houses for sale for around £500,000Some of the best houses for sale for around £500,000 – from a 19th-century stone farm cottage in North Yorkshire and a two-bedroom apartment in Edinburgh’s New Town to a converted Methodist chapel in Norfolk
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
-
Would a food price cap actually work?Analysis The government is discussing plans to cap the prices of essentials. But could this intervention do more harm than good?
