India’s “Bold Experiment With Cash”: Debunking Myths

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends most of her time in Asia researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.

Earlier this week, the FT’s Martin Wolf wrote about Indian Prime Minister Narendra Modi’s demonetization policy in his article India’s bold experiment with cash.  Regular readers will recall that on November 8, Modi announced the decision to cancel existing Indian rupee 500  (about $7.50) and 1000 ($15) notes– 86% of cash in circulation, with immediate effect. Holders of the old currency had until December 30 to exchange old notes for new, legal tender currency. (I’v written about the Modi action– and the widespread chaos and suffering it has caused, in previous posts, on November 10, November 16, November 18, and December 31.)

Wolf writes,”In its boldness, this move by the democratically elected leader of so vast a country makes everything that US President Donald Trump has done so far look trivial.” On that much, I concur.  Unfortunately, we part company on just about everything else.  In order to keep this post to a manageable length, I’ll only address five problems with Wolf’s article.

Government Objectives: Is the Cure the Right One for the Disease?

Wolf writes:

According to the finance ministry’s Economic Survey 2016-17, the policy’s aim was fourfold: “To curb corruption, counterfeiting, the use of high denomination notes for terrorist activities, and especially the accumulation of ‘black money’, generated by income that has not been declared to the tax authorities.” These goals are popular with many Indians, who have tolerated the upheaval surprisingly calmly, in the hope that crooks would get their deserts. These are also reasonable objectives. Few would deny India suffers from corruption and tax avoidance on a large scale. Yet the action might also sow permanent distrust of government promises. The disease might be bad, yet the cure is costly. How costly might it be and how beneficial?

Wolf assumes the Indian government’s policy effectively addressed the stated objectives.  I beg to differ.  And why is that? As I’ve written previously in my December 31 post:

The basic problem stems from a failure to distinguish between “black money”– money on which tax due has not been paid– and the legitimate informal sector– the cash-based economy. Estimates of the size of that sector range from about 50% to around 90% (depending on how it’s measured, e.g., as a percentage of GDP, or in terms of the percentage of wages paid in cash and not paid into a bank account). Many people working in the informal sector don’t pay any income tax– not because they’re corrupt or tax evaders, but because their income falls below the threshold upon which tax is due.

No one denies that India has a serious corruption problem. But most experts agree that demonetization– especially as implemented since November 8— is not an effective way of addressing this problem. Far more difficult to achieve but considerably more effective would have been measures directed at illicit real estate transactions, tightened tax enforcement, or political and administrative corruption.

And allow me to make another point, again from my December 31 post:

It’s a staple scene in many Bollywood films to see stacks of illicit cash secreted somewhere in the villain’s lair. Demonetization was designed to flush out just such cash. Yet, unfortunately, mundane reality doesn’t conform to these Bollywood cliches. As I first pointed out in this November 16 post: black assets are typically not held in the form of Indian bank notes– but are either held off-shore, or if kept in India, are invested in real estate, gold, jewellery, art, antiques, or securities.

Suman Bery, most recently Shell’s chief economist, makes the same point in this January 31 post:

 [I]it has been widely, and correctly, noted that currency forms only one part and perhaps not the most important part, of untaxed wealth, with gold, jewellery and real property (in India and abroad) held by nominees being other popular assets for holding such wealth. Untaxed wealth can be generated by both legal and illegal activities, and there is (so far) no legal restriction on maintaining large cash balances provided their origin is not illegal activity. Attacking personal holdings of currency is a blunt, broad-spectrum intervention, but as noted below one with considerable symbolic significance.

Returning to my December 31 post:

The latest figures show that much of the outstanding currency has been redeposited into bank accounts. The possibility that there would be a big demonetization windfall– and an increase in income tax collected– has not materialized.

Well, Bery addresses the efficacy of the policy in ferreting out black money and notes that nearly all of the old notes were successfully exchanged for new, legal tender notes:

The second factor, of greater political significance than the first, has been the almost complete surrender of the specified notes into new notes. Evidence is anecdotal and may be revised as the authorities release more confirmed data. Press commentary at the time of the announcement suggested that many of those with large hoards not willing to accept this additional scrutiny would prefer to destroy their holdings of currency and thereby suffer a one-time loss in wealth, in the process possibly conferring a windfall gain on the government. Popular expectations were that a low surrender ratio would represent losses imposed on high net worth holders of cash; by implication a high surrender ratio implies that holders of illegally generated cash suffered only partial losses on these holdings.

Does this mean that all money so exchanged was legitimate?  Not so fast. Bery provides a plausible explanation of how old notes– whether legitimate or not– were swapped into new:

It is widely believed that holders of large currency hoards turned quickly to India’s financial underworld for help. Those intermediaries in turn moved immediately to create trains of human ‘mules’ to break large cash holdings into smaller, less conspicuous amounts to be tendered into their own personal accounts. This process was sufficiently smooth and efficient that the initially large discount on accepting old notes through unofficial channels (around 40% on some accounts) declined substantially as the deadline for official exchange approached.

I want to close this part of my discussion by emphasizing Bery’s conclusion:

The near total exchange of specified notes is seen as partially undermining the black money goals of the initiative. It has also been interpreted by some in the press as a possible sign of corruption in the banks, both state-owned and private, with stray reports of bank officials diverting large volumes of new notes to preferred customers.

The bottom line: Demonetization at best partially addressed the ills it was aimed to remedy. And as articles like this one in The Wire– Three Months On, India’s Economy Remains Crippled By Demonetisation— spell out, the policy imposed crippling costs.

Who Suffers Most? Answer: India’s Poor

More now on those costs. Wolf writes:

The short-run costs are evident. As the Economic Survey puts it laconically, these costs have taken the form of “inconvenience and hardship”, especially for those in the “informal and cash-intensive sectors of the economy”. Since hundreds of millions of Indians are very poor, this is not to be trivialised.

I’ll say.  Both the government’s Economic Survey 2016-17 and Wolf gloss over the tremendous hardship that demonetization imposed. To be sure, India is a country with a rapidly growing middle class.  But I should remind readers that  it’s also a place where a chunk of the population goes to bed hungry every night. Each year, the International Food Policy Research Institute calculates the Global Hunger Index (GHI). In  October, the Times of India reported that India’s position on the GHI slipped to 97 out of 118 countries. Although the absolute level has decreased, India’s relative ranking has declined, down from 76 (out of 96 countries), as other countries have made greater stride in reducing hunger:

the 2016 GHI for India was derived from the fact that an estimated 15% population is undernourished -lacking in adequate food intake, both in quantity and quality.

The share of under-5 children who are `wasted’ is about 15% while the share of children who are `stunted’ is a staggering 39%. This reflects widespread and chronic lack of balanced food. The under-5 mortality rate is 4.8% in India, partially reflecting the fatal synergy of inadequate nutrition and unhealthy environments.

The poor were the ones for whom the “inconvenience and hardship” was most severe, as they  participate almost exclusively in India’s cash economy.

How Temporary Is the Effect?

Wolf writes:

Overall, [the Economic Survey] concludes, demonetisation might have lowered gross domestic product, temporarily, via its effect on the money supply, by between a quarter and a half a percentage point, relative to a baseline of about 7 per cent annual growth.

The jury I believe is still out on how temporary this self-induced deflation will prove to be, as  numerous anecdotal newspaper accounts suggest that the policy is still having considerable knock-on effects in employment in several sectors.

And I want to throw out one other point and suggest– albeit briefly– that this ill-considered policy could hamper efforts to attract foreign investment. Any outsider considering a substantial investment in India would certainly pause after reviewing India’s demonetization debacle and surely wonder whether investing in the country would expose such an investor so some similar future policy misstep.  The best that perhaps can be said is that the flaws in the policy have been so well-explored that no future Indian government would dare put forward something so ill-considered (however much issues of party loyalty might prevent the present government and its supporters from publicly acknowledging this criticism).

Wolf notes:

Yet even in the short run, there will also be benefits. The analysis suggests that as much as 2 per cent of GDP was held in notes reflecting black economic activities. Some of this ill-gotten wealth will have vanished and some will have been taxed. This is so because holders had to declare unaccounted wealth and pay penal taxes, lose it, or launder it. Overall, the policy allowed the government to tax black money, at least as a one-off and possibly permanently, given the enhanced risks of holding cash. Overall, there is a transfer of wealth from criminals to the government. It is hard to be sorry for these victims.

I’m going to give short shrift to this paragraph, except to say, first, according to my December 31 analysis quoted above and Bery’s post, most old money was successfully swapped for new, and the 2% of GDP mentioned by Wolf falls far short of touted benefits of  demonetization.  And second, for reasons of space, I’m not going to delve into the taxation point, except to mention that India’s tax collection system remains sorely deficient. If this were not the case, people would not risk flouting existing law and holding black assets in the first instance.

Digitalization of Finance

Wolf writes:

A significant result might be increased “digitalisation” of finance, though this would require complementary reforms, notably ones that make it easy for Indians without smartphones to make digital payments. Another would be more effective taxation. Against all this must be set the recklessness of the action. What might a government that dares to do this not dare?

There are multiple problems with even this short paragraph. I’ll focus only on the first claim. Assume for the moment that increased digitalization of finance– to put it in simpler terms, the war on cash– is a war worth waging. I recognize that many Naked Capitalism  readers reject this assumption (as do I, for the record; see more in the excellent December 22 post by Clive, Naked Capitalism’s authority on cash, payments systems, and the practical aspects of payments transactions).

Yet proceeding for the moment with the assumption that the increased digitalization of finance is a worthy objective, Wolf clearly has little experience with the considerable obstacle India’s existing deficient digital infrastructure presents.  The problem is far greater than merely insuring that those Indians who lack smartphones can make digital payments– although that is certainly not a trivial concern. As I wrote in a December 20 post, India is now the world’s second largest smartphone market, with more than 220 million users, second only to China– but that’s still only about one-third of Indians with mobile phones.

India is a crowded country, where formidable queues often materialize, even when things work more or less normally. Some obvious advantages of using cash for transactions are ease, simplicity, reliability, and speed– not inconsequential factors considered against such a backdrop. This cannot be said to be the case for any transaction that must rely on India’s highly deficient digital infrastructure. As Clive emphasized to me via email:

A digitised payment system also requires additional infrastructure to support it — a reliable power supply, telecoms backhaul to name the most important ones. Expecting to transition to a digitised payment system without these pre-requisites being in place is impractical.

I happen to be writing this post while visiting Kolkata. Fortunately, a reliable power supply is now in place for most of this city. Yet the same cannot be said for the telecoms system. During the  course of today, I’ve either made or received 14 mobile calls, about a third of which were dropped.  As for the telecoms services that provide internet coverage, don’t get me started. “Most Indians use mobile wifi to connect to the internet, and for those for whom reliability is important, it’s necessary to have at least one back-up system,” says art dealer Anirudh Chari with whom I was speaking to earlier today (three calls, two dropped). “Today, my primary system failed– as it does at least at least three or four times a week, and in order to get any work done, and meet some deadlines, I had to rely on my back-up system.”

And that’s sitting in Kolkata, which has both a reliable power supply, as well as– at least in theory– complete digital coverage.  The situation is far worse for much of the Indian countryside– significant portions of which lack a 24/7 electricity supply, not to mention that  in many places digital coverage is either nonexistent or erratic.  Thus, necessary conditions are far from in place to allow most rural transactions to shift away from cash, and the barriers are both far more formidable– as well as costly to address– than the smartphone issue, which appears relatively trivial in comparison.  (Not to mention that I’ve neglected another serious obstacle to digitilization– banking coverage. Many Indians lack bank accounts, a point I addressed in my November 16 post, and many rural areas are not served by banks, nor ATMs, as discussed in The Wire article quoted above and linked to here.)

Assume a Policy Framework 

Wolf writes, “government must provide the policy framework and support needed to secure financial inclusion of the population, including epayments.” In the words of Clive, this qualifies as “amazingly naïve hand waving”. And let me turn to him to explain at length exactly why:

“Policy framework” implies that all a government has to do is to make appropriate legislative changes and all will be fine. But epayments or the digitisation of finance (by which the author means the payment system) is not a merely substitution for one sort of payment method — cash — with another, equivalent one — electronic settlement. Cash has unique properties which are simply not replicable with electronic payment systems. With cash, settlement is final and irrevocable. When you hand over cash to a merchant, and the merchant accepts your cash, there is no going back in terms of having made the payment. Cash always does this. But with any electronic payment, there is always the possibility of the payment being revoked for certain specified reasons (disputes, fraud, lack of funds held by the payer, mistakes by either the person making the payment of the merchant, technical issues and so on).

The lack of irrevocability gives rise to the need to a disputes resolution system which is inherent to the provision of an epayments system. In a cash transaction, the payer can get into a dispute with the merchant over the supply, quality or performance of the service which the customer has paid for. But there can be no dispute about payment having been made — or not.

With an epayment, however, the payment itself can be disputed. A “policy framework” might put in place rules to govern how such disputes are handled, but they cannot prevent such disputes from arising in the first place. A dispute resolution system is essential to an electronic payment system but these dispute resolution processes rely on often complex rules and a court or tribunal system to arbitrate them. For a society which has widespread access to legal representation — and the wealth, if needed, to utilise it — or a regulatory body with the scale and sophistication to handle free dispute cases combined with high levels of literacy, this isn’t so important. But in a society with lower levels of literacy, access to and the ability to use a legal or procedural fall-back is lessened. In short, just having a regulatory and/or a legislative framework is completely inadequate if the population is not able to avail themselves of it due to lack of a basic education.

What Comes Next?

Finally, Wolf concludes:

It is often hard to draw the line between decisive leaders who take unpopular decisions for the benefit of their country and those who make arbitrary decisions for the benefit of themselves. Historians may judge the shock of demonetisation as an example of the former. That is still uncertain. Let us see what Mr Modi dares to do next.

I say, given demonetisation’s huge costs, weighed against its modest benefits: Don’t encourage him.

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  1. altandmain

    Bottom line is that it is a total failure and should never have been attempted.

    It has done a lot of damage to the Indian economy and to the livelihoods of ordinar6y Indians. In some cases, there have even been deaths. Worse, it has not lead to the original promise of getting rid of “gangster” money.

    The reality though is that they won’t stop it because the bankers want economic rent.

    – No cash
    – High bank fees
    – Negative interest rates

    Pretty much the perfect storm for rent seeking. Cash puts limits on transaction costs and means that people can’t skim off the 1-2% on credit transactions. Other transactions have even higher fees.

    1. Disturbed Voter

      The conjoining of banking and government … monetary fascism (international socialism). Everyone will be a government employee. Every expenditure into and out of personal accounts, or business accounts … is internal accounting within the government, to and from itself. Accountants become demons … you can’t buy or sell anything, without your boss’s permission (same as spending department money within a company now). Guaranteed employment like it or not, doing what the government tells you to do, for what wages and benefits the government chooses to provide. A comprehensive social safety net, but without any freedom. India has been tending to fascism/socialism ever since independence … it will have to try comprehensive fascism/socialism (aka communism) eventually. Everything will be forbidden, except for what is mandatory. Coming to other countries near you. Dictatorship by King Rama. All government money is gangster money.

  2. dcblogger

    There is a wonderful scene in Dick Tracy where Al Pacino, in the character of Big Boy Caprice explains to his fellow mobsters that they should form a commission to shakedown the local citizens for a payment on every transaction in the city. If I had YouTube skills I would create a short on that scene, because it perfectly explains the cashless economy from a bankster’s point of view.

    1. Clive

      From the same era, I remember as a schoolboy during the long, long summer breaks we have here watching the 1930’s (I think) vintage “Flash Gordon” series — I’d have to check but I believe it was in black and white! (kids these days, they don’t know how much they luck they have…)

      Anyhow, being of their time, Ming The Merciless was styled as a gangster kingpin leading mobsters trying to take over earthlings (it might have been Mongo, it was 40 ago so a little bit hazy) and turn everything over to mafia rule (it was of course highly propagandaised, being required to kowtow to the needs of pro-prohibition law enforcement messaging).

      Now, it all sounds like reality TV.

      1. paul

        1953 but as free and fresh as a daisy : The Syndic

        Also “they walked like men”

        Money was worthless; it had no value! It couldn’t buy housing, clothing, or food. Someone with enormous quantities of cash was buying houses and tearing them down, buying stores and closing them.

        Perhaps a few people could have stopped the transactions before it was too late. They could have said that Earth was being taken over by alien beings in the shapes of bowling balls, talking dogs, and dolls that walked like men.

        In fact, they did say it. The trouble was, no one believed them!

        UBER predicted by clifford d simak 1962

        We didn’t know how lucky we were in those days

  3. Sally

    The Financial times and Martin Wolf are apologists for fiat currencies and the global elites desire for one world govt, and striping nations and their people of their privacy and their wealth. Hence they are constantly attacking gold as money, Trump, and BREXIT. Wolfe is a bore on the subject of talking down gold and cash. Who pays his wages?

    Modi is a puppet of the global elite, and his attempt to remove large amounts of cash was a trial run for the elites to see how easy it will be to remove it from the world. Exactly what Wolfe and his masters support.

    Gold is huge in India, and the people save not in corrupt fiat banks, but physical gold. Modi’s first idea, (no doubt with the backing of the global elites) was to try and persuade Indians to hand over their physical gold in return for paper bonds. It failed miserably. So next was the removal of the two most popular paper notes.

    He did this without warning, and plunged the poorest people in India into meltdown. The fact Wolf cheers this on shows what a piece of work he is. The timing of this is also suspicious as it was just as the Indians gold buying season was about to start. Most Indians pay cash for their gold. So in effect this helped in reducing the price of gold on the international markets. The Fed is fighting to keep the price of gold down by selling huge amounts of paper shorts in New York and London as China, Russia buy enormous amounts of physical gold as they try to de dollarise. All of this happened under Obamas watch who also is part of the globalists desire to end cash and gold.

    People need to start to understand how dangerous the elites plan for the removal of all cash. Your money will then be held prisoner in a corrupt banking system which you will never be able to escape From. The banks will be free to charge endless fees and bring in negative interest rates when the banks go bust and the govt t can’t bail them out again.

    By the way isn’t it funny how govts in the west try to force the value of gold down, and their propagandist like Wolf tell us that gold is an ancient relic? Yet within 48 hours of the removal of Saddam in Iraq, and Gaddafi in Libya, and the fall of the Ukrane govt their gold reserves were flown out of the country to the U.S? So much for an ancient relic of no value.

    Gold has risen quite a bit since Trumps victory it will be interesting to see if he pushes the anti cash anti gold message. Hopefully he won’t. Which is why the elites and their tub thumpers like Wolf attacking him.

    1. Clive

      There’s some good points in there, but I think on occasions it gets a teensy-weensy bit Zerohedge-ish with all that gold buggery. Whenever I read Zeorhedge (not often, it must be said) it always makes me think that a gang of Gollums has been let loose on a computer with some of the keyboard keys missing.

        1. skippy

          Ahhh…. value add a naturally occurring common pool resource that has excessive bottle neck dynamics and then proclaim it – real – money….

          disheveled…. strange how one of golds first bench marks was a few gains of wheat… which makes it a second or more order proxy for stuff that enables life….

          1. Clive

            Perhaps you have to wipe it, like, with a cloth. Or am I getting myself totally confused with something else?

            1. skippy

              Wellie my Britannic friend its a bit strange from an anthro point of view… many religious camps glorified gold as ever lasting… as a testament to their views ever lasting validity…. and whom could argue that…

              disheveled… my personal grievance is those that by nefarious means attempted to imbue fiat with gold like property’s…. self interest like….

    2. Foppe

      I don’t understand: why does it matter economically that indians prefer gold over bonds? Gold is economically irrelevant unless most everyone’s suffering from collective lunacy, and even then it should be possible to “develop” one’s society by just working around the nutters and/or distracting them. (Sure, gold has value, and is fetishized, etc., but that doesn’t make it economically useful.)

      The removal of cash, otoh..

      1. Sally

        Gold and silver have been money for thousands of years. And gold has held its value. The U.S. dollar has risen against other paper currencies over the last 40 years, but has lost 97% of its value against gold since Nixon took America off the gold standard. I think it was Voltare who said all fiat currencies will return to to the value of their paper.

        Gold, like land, is a physical asset that you can touch and if you have paid cash for has no counter party risk. Good luck expecting your paper bonds to keep their value when nobody belives the US can pay back its debt.

        This is the problem with all paper currencies. Politicians and central bankers just can’t help racking up debt. You can’t just create gold and land out of thin air. Yet paper and digital currencies can be created at the touch of a keyboard. It’s how bankers make their money.

        Interesting to see the Germans have repatriotised their gold store from the US. And German financiers telling Greece this week that they must come up with gold and real estate if the want more debt. Why would such a relic be of such interest to bankers who always boast about the strength their paper fiat?

        1. skippy

          So how did the great crash occur under a gold standard – ?????

          disheveled…. not that you had rolling boom and busts for over a hundred years prior or anything, not to mention gold goes up due to a fear trade and then falls off a cliff thingy…. store of value…. chortle…

          1. bob

            “So how did the great crash occur under a gold standard – ?????”

            They made the gold mad. Gold has a hell of a temper. Agency, as well as intrinsic value. What else can you want from your best buddy?

  4. bronco

    Anyone who isn’t constantly seeking to minimize the taxes they pay is an idiot. Every transaction that can possibly be made without a paper trail should be. Every time you can purchase with cash without anyone knowing your name you should do so.

    Any time you need a roofer , or a concrete guy or a mechanic you should ask for a cash discount. If your dentist will fill your teeth for you if you mow his lawn you should do that.

    If you can go into a department store and negotiate marked prices down you should do that too.

    Seriously make them work for it , they are not entitled to the fruits of your labor . The government and the drones that make it up are parasites and need to be starved relentlessly.

  5. Hemang

    Good piece. Mr. Wolf reinforces my notion that economists talk through their hats. He obviously has no clue about India: people are calm about demonetisation not because they appreciate it but because there is obedience among people of whatever the government does.Also, it is incorrect to say that the poor with lower income operating in the informal sector do not pay taxes; they do not pay income-tax but do obviously pay all indirect taxes on all products they buy, even a match-box. People have not shown anger so far of any kind; the ruling party has done well in Bombay local election results yesterday. In fact some smart poor people have made money out of demonetisation: They would stand in queues on behalf of rich people who needed to change their black money and charge Rs. 1000 a day for doing so. That amount is more than double of the going rate for non-skill labour! Poverty teaches one to erect architecture of gain out of every opportunity.

    1. Jerri-Lynn Scofield Post author

      Excellent point about the poor and indirect taxation. I also appreciate your points about obedience– although I might describe it as resignation– and poverty.

    2. bob

      ” In fact some smart poor people have made money out of demonetisation: They would stand in queues on behalf of rich people who needed to change their black money and charge Rs. 1000 a day for doing so.”

      What do the banks charge for this service? They’re the ones REALLY making money out of this mess.

      Can’t get an offer? You can’t afford if you have to ask for the price.

  6. lara

    excellent article above
    a littl elaboratrion on two points,

    Have hardly seen studies on what proportion of corruption is attributed to govt and bureaucracy, neither will hardly be reduced by any “war” on corruption. Nearly every transaction with the govt involves some payoff if the transaction is to be prompt/ complete, whether it be obtaining a driving license/ a passport/ a court date/ a property transaction/ a residence permit/ a manufacturing license. The govt has no incentive to investigate itself. None of this will be affected by a transient demonetization.

    The poor income tax collection is reflective of this. The IT dept is aware of all property transactions reported below market price/ all weddings(expensive in India) at commercial wedding halls and hotels/ foreign trips taken/ expensive cars bought/tutions at private colleges in and out of the country. If an audit is threatened, the IT dept is paid off, which is less than the tax owed on undeclared income. It is often cheaper, and does happen, to pay to stave off an audit even if the income is legal and tax paid, since the application and interpretation of law is often capricious. The monies paid just go into private coffers rather than the govt. All this is common knowledge.

    the percentage of cell phone penetration is overestimated. 33% of the population is 65. They do not and cannot use smart phones. Of the 800 million remaining, 250 million women (mainly rural) have no use of a smart phone. 220 million smart phone users assumes that 2/5 remaining people use smart phones.
    This just seems high, as both the cost of a smart phone and its operation as a smart phone is considerbale in a country with 1/3 below the poverty line, and yes, there is considerable urban poverty.

  7. Charles 2

    Paper cash payments may be “final and irrevocable”, but the problem is that there are also very easily repudiated, and cash register machine are an imperfect solution to that problem. It is also the poor that are subject to non recorded payment scams (especially when paying back “informal” loans).

    Also, one should not be fixated on developed countries “credit card” infrastructures when talking about electronic cash. M-PESA for instance only requires SMS to be sent, no data plan needed. Actually, the purchaser only need to have a SIM card and use the seller phone to complete the purchase. Even with one bar on the sh…iest mobile network, SMS go through.

  8. Rahul

    This is first order of thinking. Think harder.

    FT still has similar opinion as this column. Wolf has a different take – though not entirely positive.

    Still, think more..

  9. amousie

    So what is the end-game of the battle for cash?

    Is the idea that eventually there will be a digital global currency? That once physical currency goes away, a country will eventually outsource management of their currency (or move to a global currency) via a financial services firm? If so, are local banks / bankers / banking regulations still necessary? How long before US styled arbitration clauses are pushed out globally via a digital global currency system? How many physical currency blocks will remain? Will there be global physical currencies Cold War styled-blocks? Will Greece’s financial woes become more of the norm? Will national governments become more like regional governorships under such a regime? Is this just another avenue to push TPP style systems out globally?

    I don’t really expect any answers. It’s more that I’m pondering out-loud.

    Eliminating physical cash is just the first step in a multi-step / multi-tier game to where exactly…

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