$1,000 a day. That’s all you’re going to get out of a JP Morgan Chase ATM if you’re not one of the bank’s customers. It’s not the all-out bank run and ban on cash Tim Price started writing about last year. But it’s an evolution of the story.
It also has a twist. The US bank is replacing human tellers with automated tellers. But to do more of the banking a human being would rather do with another human being, the ATMs have to dispense larger wads of cash. Hence, Chase began modernising some of its 18,000 ATMs in the US to dispense $100 bills, rather than $20s.
The result should not surprise you. Non-bank customers quickly found a way to withdraw money from their accounts at Chase’s ATMs. And now we have the withdrawals limits, which may not affect that many people anyway. How many people are going to take $1,000 out of an ATM in one go? Or on multiple days?
The only time that sort of thing happens is during a bank run. That’s when you want as much of your cash as you can possibly get your hands on, as quickly as you can get it. It’s ironic that in the spirit of efficiency, Chase’s ATMs made a ban run easier.
The bank run hasn’t happened yet. And the other point is clear: your cash isn’t really yours unless it’s in your hands. ATMs can be programmed. And even a machine stuffed with $100 bills and no transaction or daily limit will run out of physical cash at some point.
A tax on savers
The simplest way to prevent a bank run is to ban cash. That’s the conclusion Tim reached last year in the War on Cash. Yesterday, my old pal from Australia, Satyajit Das, chimed in on the issue. I invited Das to speak at several conferences I organised over the last five years, including one on the future of money. That’s what makes this quote so interesting (emphasis added is mine):
Abolishing cash would require a revolutionary change. Despite the increasing acceptance of electronic payment, cash is still extensively used throughout the world. In effect, currency remains an important medium of exchange and means of payment for legitimate, legal transactions….
Cash use is especially high among both poor and older people. Accordingly, the elimination of currency would have implications for social and financial exclusion. The cost of converting these users to digital payments would be substantial…
Of course, banishing cash would likely meet stiff resistance. People are likely to object to the loss of the anonymity and privacy that cash provides. Where the elimination of cash is linked to negative rates, it would be seen as a tax on savers and the state confiscation of savings. The intrusion of the state and authorities on such a mass scale would undoubtedly become an explosive political issue.
You can say that again. It’s an important point not enough people realise. Economic liberty and political liberty are two sides of the same coin: personal freedom. The confluence of negative interest rates and the abolition of cash threatens both liberties. It’s an attack on freedom. What are you doing to defend yourself?
Category: Central Banks