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Why cash will survive …

So I’m moving house – have I mentioned that before? – and have
house cleaning, clearing and removal services all hovering around doing work
this week.

Interestingly, all of them demanded cash.

I offered cheques.

Not interested.


No way.


Never ‘eard of it mate.

What’s going on?

Well of ocuerse, it’s the old dodge the tax man trick isn’t

You get paid in cash, and no-one knows.

Claim benefits and earn a few hundred in cash on the
side?  No worries.

We used to call it the black economy, but now we refer to
this as the shadow economy.

A bit like shadow banking, it’s under the counter, invisible,
untaxable … and about as big as the real economy for some areas of business.

It’s the areas where money launderers operate.  Why is the €500 note the most laundered in the
world?  Because it means you can pack the
most money into a suitcase under your bed, of course!

It’s the reason why over 90% of dollars have cocaine on
them, as it’s the most common currency used to trade and sniff drugs.

It’s the reason why no-one wants cash to disappear.

So you talk to me about a cashless society and I’ll talk to
you about a paperless toilet.

It may be feasible, but it doesn’t sit well with the consumer,
unless you like a shot of air up yer bum.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Exactly. Britain is in a recession which /inter alia/ gives Brits a chance to see how a divergent economy really works.
    As the economy goes down, a non-trivial group of people switch to the shadow economy. As the economy goes up, some many switch back again. The reason for this is that fundamentally work must go on in order for poor people to survive, and many forms of societal controls over poor people take a back-seat proportional to their need for survival. It’s rather Maslowian: Work comes first, and a strong tax base is a luxury that is not affordable by the poor when the going gets tough.
    The shadow economy is actually the norm outside the OECD-privileged group, so economists in these other countries understand a lot better about how this works. They have learnt not to push too hard, and they have learnt that the visiting WB/IMG economists don’t really understand economies in trouble, because they don’t understand the poor.
    Smart governments in the non-first world work with the division by creating incentives for people to get richer and move up to the white economy. For example, here in Kenya, the government and the central bank prioritise financial inclusion *above all else*. It was for this reason that mPesa was encouraged ahead, against the wishes of the banks, because mobile money helps the poor, and the banks exclude themselves from that market. For example, mobile phones were VAT-free until very recently, and the revenue authorities are only now just beginning to look at mobile payments as a source of information. They may yet be held back for sound economic reasons.
    Any proposal to get wealth to the poor gets precedence. Which means honest working, first, payments included. Cash must survive if the poor need it to work; only in rich countries where the poor are not fighting for today’s food can fallacies like ‘cash is for drugs dealers’ take root.

  • Pete

    There is another reason that authorities should continue to support cash as a payment method; disasters such as Sandy Hook, New Orleans, 9/11, the Haiti earthquakes and the Asia Tsunami.
    Electronic payment methods, including mobile, all require electricity at some point, and in a disaster situation there might be none, which would shut down the economy and impact the ability to survive or recover. This would be particularly bad if the disaster happens on a national or regional level.