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View Diary: Evil: DEA Bans Armored Cars From Picking up Pot Shop Cash (180 comments)

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  •  We have heard for decades that the use of (8+ / 0-)

    cash is on the way out. The reality is that people using cash keeps increasing. Last year the Bureau of Printing and Engraving sent out more hundred dollar bills than every before (three hundred billion dollars worth).
    I thought that the federal government transition to electronic deposits of pension and welfare payments was designed to provide the banks with a reliable income stream that they could earn profits on via short-term investments--maybe make up for the fact that student loans were shifted from banks to the Department of Education to "save" the interest and fee expenses associated with delayed or non-repayment.
    Now it looks more like the predicted demise of cash was wishful thinking and the increasing size of the shadow or underground economy is leading to a prohibition on cash use by certain categories of enterprise. Cash does enable the shadow economy to thrive. Indeed, the only person that seems to be tracking the shadow economy, Edgar Feige, estimates that the U.S. version is now up to $2 trillion

    It used to be argued that the shadow economy was made up of illegal trade and exchange of contraband. Now it is being recognized as activity that's not being taxed.
    Most economists seem to think people avoid taxes because they can't or don't want to spare the money. I'd argue that avoiding the waste of time it takes to keep the records is a more likely rationale. Electronic payments don't take more time, but if you visit NH, where there is no sales tax and pay cash, you really notice the difference--if only because you can't be certain of what you have to pay ahead of time.

    I'm not sure why most economists don't focus on the fact that currency saves time. Maybe people attracted to the academic consideration of trade and exchange are people for whom time is not particularly significant. Also, many are more interested in human motivation and psychology, rather than the functional attributes of economic activity.

    •  It's not just the shadow economy (0+ / 0-)

      It's become substantially more difficult in recent years for people in certain social classes to access banking services, thanks to the PATRIOT act ID requirements and the increasing use of credit checks for basic checking accounts. So a lot of people don't really have many options: it's either cash or a prepaid card, and cash is cheaper.

      Also, it's gotten a lot harder to use checks, so most people don't have them, so large interpersonal transactions that used to mostly be done by check (subtenant rent, second-hand purchases, etc) are increasingly being done in cash because the alternative is paying fees for money orders.

      People who don't like debit cards are also using cash for small purchases where they used to write checks: groceries, clothing, etc.

      "Let’s just move on, treat everybody with firmness, fairness, dignity, compassion and respect. Let’s be Marines." - Sgt. Maj Michael Barrett on DADT repeal

      by kyril on Wed Aug 28, 2013 at 01:24:06 AM PDT

      [ Parent ]

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