Cash-abolition advocates say paper feeds the shadow economy, tax evasion, and bank-run instability, and that most payments can be electronic. The author answers from Mises and Rothbard: money is a commodity that won the market as the most saleable good—not a token, unit of account, or “claim on society.” It had to have a prior use-value before it could price other goods. Gold won historically; today’s stock is notes, coin, and bank demand deposits. Storing cash in a bank does not change the total; a loan only moves existing money.

Electronic transfers and cards are ways of moving money, not money itself. A $1,000 wire or a MasterCard grocery buy still traces to cash that exists. A central-bank digital currency cannot become money by decree; if forced, people will reach for something else, and heavy enforcement would damage the market.

Phasing out cash, in this view, is phasing out the medium of exchange and sliding back toward barter. Crime and evasion fall if taxes and big government shrink, not if wallets are banned. A run on banks is a verdict on fractional reserves, not a reason to abolish cash. Tech can change how money travels; it does not retire the need for a general medium of exchange.

According to certain experts, there is an urgent need to remove cash from the economy. It is argued that cash provides support to the shadow economy and permits tax evasion.

Another justification for its removal is that, in times of economic shocks which push the economy into a recession, the run for cash exacerbates the downturn (i.e., it becomes a factor contributing to economic instability). Moreover, it is held that, in the modern world, most transactions can be settled by means of electronic funds transfer. Money in the modern world is an abstraction.

The Emergence of Money

Money emerged through voluntary exchanges of barter goods wherein one good eventually became a generally-accepted medium of exchange. Certain exchanges would be difficult, if not impossible, under a system of pure barter. A butcher who wanted to exchange his meat for fruit might not be able to find a fruit farmer who wanted his meat. The fruit farmer who wanted to exchange his fruit for shoes might not be able to find a shoemaker who wanted his fruit.

The distinguishing characteristic of money is that it is the general medium of exchange. It has evolved as being the most marketable commodity. Mises wrote,

There would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money. 

There would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money. 

Similarly, Rothbard held that,

Just as in nature there is a great variety of........

© Eurasia Review