A brief glimpse into an uncertain future….

Wednesday 13th June 2018

A glimpse into an uncertain future….

Cryptocurrencies lost billions in value earlier this week after hackers stole 10% of a South Korean Exchange’s digital currency….

Bitcoin fell back below the $7000 barrier – a long, long way below the heady days of $20,000+ just a few short months ago….

Emerging markets might be in trouble. The Brazilian real, the Turkish lira and the Chinese yuan are all well down against the dollar….

Some investors are worried that these declines are a signal of broader market risks – as similar declines proved to be in the second-half of 2015….

British manufacturing just suffered its worst month since October 2012. Output is down 1.4%….

That won’t help produce the improved GDP figures expected and required by the Bank of England….

  • A flood of news….

The news comes, and then it goes. Day on day. Relentless. Never-ending….

Stories seem important as they break. They create an initial splash of interest. But it rarely lasts….

As with any fast-flowing river, what is in front of you one moment is swiftly swept down the channel, out of sight and remembrance the next….

To be immediately replaced by more of the same. More water…. More noise…. More splashes….

The average attention span can only attend to so much. And there is so much important stuff competing for that finite attention….

Are Posh and Becks heading for the divorce courts? Who is canoodling with whom on Love Island? Where do Donald Trump and Kim Jong-un get their hair cut?

It’s an environment in which things get quickly forgotten. Or misunderstood. Or overlooked. Or not recognized for the important signposts they really are….

  • A non-functioning payment system….

Take the events of a week last Friday when a ‘technical failing’ left millions of VISA users across Europe unable to pay for goods with their credit and debit cards for more than six hours….

VISA put the incident down to a ‘hardware failure’ within one of their ‘European systems’….

I have no idea what that means. It really doesn’t tell us anything intelligible or specific….

But we were categorically assured that the failure was not the work of malicious hackers and that no unauthorized breach of the system had taken place….

Whatever the nature of the failure and whatever the cause of it, the upshot was that businesses large and small (including the likes of Sainsburys, Marks & Spencer, Morrisons and Aldi) were unable to process card payments….

Shoppers were forced to resort to cash or go without….

Some shops put signs in their windows saying: ‘Visa down. Cash only. Sorry for the inconvenience.’

  • A salutary warning….

It was a bit of drama that served to liven up an otherwise ordinary Friday afternoon….

It was something for the newspapermen and the media broadcasters to get their teeth into….

Then, just a few short hours later, the crisis was over. VISA made the relevant repairs to its network and things returned to normal….

The news machine moved on. New things came to light. Other stuff happened. Attention was soon focused elsewhere….

Those few hours without normal VISA service were swiftly forgotten. But they shouldn’t have been….

Because what happened on that Friday afternoon offered a glimpse into the future….

The events of that Friday afternoon provided a salutary warning about the dangers of buying into the idea of a cashless society….

  • Hostage to the system….

In a cashless society there will be no recourse to cash in the event of a ‘system failure’….

In a cashless society, shoppers with non-functioning electronic money cards will have no alternative way to buy lunch, pay a bill, get a tram ticket or pick up their prescription medicine at the pharmacy….

In a cashless society, consumers will be hostage to the system….

If the system doesn’t work – because of a fault or a cyberattack or because the government has decided to switch the system off to teach people a lesson about who is in charge – we will have no option but to sit it out and wait….

In a cashless society, a non-functioning payment system will render individuals and businesses essentially penniless – until such time it is up and working again….

In a cashless society, the system will be king. Consumers will have no choice but to be entirely dependent on the technology behind it – exposed to its vagaries and vulnerable to all its faults….

  • Wrong-headed myths….

A few weeks ago, the Moneybox programme on BBC Radio 4 conducted a discussion on the pros and cons of Britain going cashless….

They had all sorts of experts on the panel. Some arguing for cashless, others against and others still for a middle path….

I forget the names and roles of the individuals involved, but one of the proponents of a cashless system was asked by the presenter how much cash he had on his person….

He hadn’t got a single penny piece on him. In explaining why, he said words amounting to this:

‘I don’t need cash because I am not a drug-dealer or a money launderer.’

The people who want to remove the option of cash from the money system have a variety of agendas – all linked to the idea that cash is a tool that is only useful to criminals of one form or another….

Drug-dealers, black marketeers, fraudsters, gang masters, gun-runners, terrorists, tax evaders, pornographers, illegal immigrants, welfare cheats and other criminals get away with whatever they are doing because they use cash – which doesn’t leave a paper trail and enables them to fly under the radar….

That’s the argument. It’s got traction. How much mileage is in it exactly is up for debate. But my point is this….

The idea that cash is only useful to criminals is a myth peddled by propogandists who want to mislead the public into believing that the removal of cash from society will have no effect other than to eradicate crime….

The truth is that the removal of cash from society won’t eradicate crime. And the effects of going cashless will be felt well beyond criminal communities….

It won’t just be the criminals that suffer if or when an electronic payment system goes down for a day, a week or a month. We will all suffer….

And in the absence of cash, what simple, straightforward alternative currency or payment method will we be able to turn to get us through the crisis?

Your guess is as good as mine.

That’s how it looks from here….

All the best,

Dave Gibson

Money Truths