All across the world, many governments (especially the socialist-oriented ones of the West) are going broke because the flawed experiment in central and fractional reserve banking is finally nearing its conclusion. And what are the observations of that experiment? There are several, but below are some key ones that I have observed.

Since (central) banks essentially create money out of thin air (by pressing buttons on a keyboard), they subvert the rule of law through their counterfeiting, which permeates through the society begetting class warfare of mainly the rich vs. the poor. This occurs as the most well-connected insiders gain access to newly printed money first before purchasing power is diminished.
Since there are no restraints on the creation of money, there are no restraints on how to ~~blow~~ spend money by the political class. This entails all sorts of avenues for expenses. For example, creating new wars so that private contractors can make billions manufacturing death tools; increasing welfare and social spending programs to train people to get something for nothing (or to get more for less) thereby guaranteeing future votes from these people; or for bailing out failed businesses so that these entities can continue operating inefficiently.
Since manipulating the interest rates is the preferred method of "steering" the economy by central banks, businesses and consumers have learned to alter their behavior so that they can get ahead. For example, unnaturally low interest rates encourage consumers to take on more loans and higher amounts of mortgages which helps fuel real estate bubbles. Also, isn't it amusing how any financial broadcaster such as CNBC makes a huge deal out of any upcoming FED interest rate announcement? All markets cling to their every word and then, for a short while, react outrageously. How did it come to be that one institution can have such a dramatic effect on an entire economy?

Now with the moral and financial decay running its course, it has become evident that these same corrupt governments are realizing that their endless spending cannot continue unchecked. Many have debts in excess of yearly GDP and furthermore, many have unfunded liabilities such as Social Security and health care costs. Keeping up appearances only lasts for so long. Thus, the brilliant shill economists have started to recommend that governments do away with cash. We have seen evidence of this already with the EU removing the 500-Euro note. As well, recently the Indian government has scrapped high denomination notes too. On top of this, there is much rhetoric suggesting that other governments follow suit. Of course, the reason given is to combat terrorism (the other favorite, not used in this instance, is to save the children).

Could it be that by eliminating cash and moving to a strictly electronic currency, governments can completely control their citizens and play policy games with the economy? Consider what would happen in a purely cashless society.

Cashless Sucks

For starters, crazy economists could run experiments with our spending behaviors. If they want you to purchase a certain good, they can impose high taxes on the non-desired goods. This way, they can study the various effects of their policies on the economy. The Keynesian economists would have a marvelous time trying to coerce consumers to spend, spend spend...to get the economy rolling of course. Individuals would have little recourse in controlling their own spending (or heaven forbid, saving) because they would have disincentives to do so. And if there is an economic crisis, then you do not have the option of having an emergency spending hoard of cash in your home. You are at the mercy of the system.

Secondly, if all currency is strictly electronic, dissenters would simply be "turned off". That is banks, who already are in bed with governments, could simply deny banking services and thereby purchasing power to anyone they find disobedient to the system. Good luck paying for rent or food when you have no working bank card/chip.

Thirdly, your purchasing privacy would completely go out the window. Every transaction could easily be tracked and mined. This data could then be sold to third-parties who would solicit you endlessly. Some people nowadays don't seem to value their privacy, but I'm sure that many still do not want all of their spending habits published to strangers and corporations.

Lastly, a key evil of a cashless society would be the easy taxation of all citizens. If a bureaucrat deems that you owe money or extra taxes, you will find your bank balances smaller instantly. You cannot rely on having cash to be able to mount a legal defense as your account could be frozen on a whim. Furthermore, since all of your income and expenses would be tracked electronically, the government could milk you as much as they like.

Even though today many people use debit and credit cards for their day-to-day transactions, subconsciously they still know that they have a fallback to cash should the situation arise. In a cashless society, no such route.

Some possible good news

Even though I've outlined why governments are considering going cashless and what the negative effects on you can be, there could be a silver lining. Before 2009, I would have said a cashless society would be dystopian. However, since the advent of bitcoin and other crypto-currencies, there is hope. In fact, I'd even say that with crypto-currencies, governments who choose to go cashless would in fact be digging their own graves. Here's why.

Just a few years ago, only the tech-savvy and early adopters knew about bitcoin. Today, it is gaining much more popularity. I foresee this trend continuing. There is much innovation, investment and development happening in the crypto-space.

Should governments ban cash, I suspect word would spread very quickly about alternatives. At that point, I could see an economic shift materialize from government electronic fiat to a combination of bartering, possibly gold and silver money, and largely crypto-currencies functioning as money; of these, bitcoin would probably be the dominant player. Since it is so easy to use bitcoin to transact value, people could start negotiating contracts, make purchases, and even offer to pay wages in bitcoin. It would be very difficult for governments to clamp down on this as it is a decentralized currency.

Think of this as the infamous alcohol prohibition or the current war on drugs. These are simply substances that some people desire to consume. Even though they were made illegal, people still found access to these goods. Contrast that to money, which effectively, all of us use on a daily basis. Cash is not beer or pot; it is the lubricant needed by a functioning economy. How long before people get fed up with their electronic stipulation (see Cashless sucks above) and look to a friendlier solution? I bet not too long.

So if governments make the fatal decision to go cashless, we can witness a very different and hopefully better world. What are your thoughts? Do you think if governments go cashless that society can prosper with cryptos?