A " Cashless " Society ?

One of the options that will be considered at this years mid-year budget update is removing the hundred dollar note from legal circulation.  Despite low inflation, demand for this measure of money has been increasing at a much faster rate than for fifty dollar notes or even the twenty dollar bill. Economists predict that it is fuelling the "black  "economy and seriously taking a part in tax evasion.

It can certainly be argued that hundred dollar notes play a big part in the drug trade.  When drug busts occur in the full glare of television cameras it is usual to see the proceeds stuffed into suitcases - and they consist of hundred and fifty dollar bills for sheer convenience of size.  A huge industry exists laundering this drug money and returning it to circulation in a sanitized form.

If Australia takes this step and reduces the value of banknotes in circulation it will be following moves in many overseas countries.  In France, cash payments in excess of a thousand Euros are illegal and in Sweden shops that deal in cash must register all sales through a certified cash register.
Perhaps the boldest move to curtail the cash economy was taken by India.  The Indian government gave a bare three months notice that its biggest banknotes - the equivalent of our twenty and ten dollar bills - would cease to be legal tender.  The public was ordered to exchange these notes for smaller denominations in the hope that it would stifle the cash economy and drive traders to embrace electronic money transfers.

It is evident that world government is seriously looking at the way we do business with the intent of driving even moderate transactions into an accountable form.  A century or so ago the only form of money was actual gold or silver coins and the value was in the amount of precious metal they contained.    The first printed banknotes were actually a written promise to redeem their face value in gold if presented at their issueing bank.   This was a more convenient way of carrying money than heavy bags of coin.

Originally, a pound note was considered a considerable amount of money because the average worker was paid a wage of a few pence a week.  Many older Australians will remember when a ten shilling note was close to a weeks wages.  Decades of inflation saw the money supply increase until that ten shilling note became the basis of our conversion to decimal currency.

Some Australian Reserve bank officials suggest doing away with both the hundred and the fifty dollar notes.   Our biggest banknote would then be the twenty dollar bill and they think the sheer inconvenience of shuffling wads of such money would drive us to embrace card or mobile phone methods of settling bills.   The big advantage for Treasury is that all electronic money transfers leave a trail that makes  avoiding tax impossible.

That Indian experiment seems to be ending badly.  Treasury found that it lacked the ability to print new money quickly to enable smooth replacement and in many places trading ground to a halt, damaging the economy.   It quickly became evident that criminal elements had the reach and ability to exchange their old money for new and that they took precedence over legitimate shops and traders.

If withdrawal of big banknotes does get serious consideration it would need to be very carefully orchestrated.   For some time untraceable currency like Bit-Coin have been waiting in the wings and they have developed a blockchain methods of security.   The criminal fraternity consists of clever people.   In closing one door of opportunity it would be very easy to open another door - to something worse !