Posted on 10/11/2017 9:43:03 AM PDT by markomalley
When Hurricane Maria knocked out power in Puerto Rico, residents there realized they were going to need physical cash — and a lot of it.
Bloomberg reported yesterday that the Fed was forced to fly a planeload of cash to the Island to help avert disaster:
William Dudley, the New York Fed president, put the word out within minutes, and ultimately a jet loaded with an undisclosed amount of cash landed on the stricken island...
[Business executive in Puerto Rico] described corporate clients’ urgent requests for hundreds of thousands in cash to meet payrolls, and the challenge of finding enough armored cars to satisfy endless demand at ATMs. Such were the days after Maria devastated the U.S. territory last month, killing 39 people, crushing buildings and wiping out the island’s energy grid. As early as the day after the storm, the Fed began working to get money onto the island,
For a time, unless one had a hoard of cash stored up in one's home, it was impossible to get cash at all. 85 percent of Puerto Rico is still without power, as of October 9. Bloomberg continues: "When some generator-powered ATMs finally opened, lines stretched hours long, with people camping out in beach chairs and holding umbrellas against the sun."
In an earlier article from September 25, Bloomberg noted how, without cash, necessities were simply unavailable:
“Cash only,” said Abraham Lebron, the store manager standing guard at Supermax, a supermarket in San Juan’s Plaza de las Armas. He was in a well-policed area, but admitted feeling like a sitting duck with so many bills on hand. “The system is down, so we can’t process the cards. It’s tough, but one finds a way to make it work.”
The cash economy has reigned in Puerto Rico since Hurricane Maria decimated much of the U.S. commonwealth last week, leveling the power grid and wireless towers and transporting the island to a time before plastic existed. The state of affairs could carry on for weeks or longer in some remote parts of the commonwealth, and that means it could be impossible to trace revenue and enforce tax rules.
Note the deep concern with "trac[ing] revenue" and "enforc[ing] tax rules" — as if making payroll for ordinary people were not the real problem here.
Puerto Rico has been fortunate that the United States, so far, has not attempted to implement many anti-cash measures that have been popular among central bankers in recent years.
Abolishing cash, of course, has become de rigueur among mainstream economists who have long argued that physical cash is an impediment to "nontraditional" monetary policy like negative interest rates. Moreover, advocates claim, physical cash makes it harder to control the flow of money, collect taxes, and control black markets.
This drive to supposedly fight crime and corruption was given as the justification for the disastrous war against cash in India in 2016. Hatched as a scheme to assert more government control over the economy, the Indian government removed mostly large bills from circulation in India, which accounted for 85% of its physical cash by value.
The demonetization badly damaged the economy. The Wall Street Journal reported in December:
Not surprisingly, shock waves from the announcement continue to crash through the economy. The Asian Development Bank cut its growth estimate for India for the financial year ending March 31 to 7% from 7.4%. JP Morgan expects growth to decline by half a percent to 6.7%.
Meanwhile, falling sales have begun to translate into layoffs spanning various sectors, including construction, textiles and jewelry. The Centre for Monitoring Indian Economy estimates the transaction costs alone of swapping out an estimated 14.2 trillion rupees’ worth of currency to be 1.28 trillion rupees, or about $19 billion.
India’s economy will eventually recover from this self-inflicted wound, but there’s no question that demonetization has created doubts about Mr. Modi’s competence. The decision, reportedly hatched in secret with a coterie of trusted bureaucrats, showcases the prime minister’s faith in the command-and-control ethos of the civil service rather than in the “minimum government” he once promised.
One can only imagine how much more grim matters would be for Puerto Rico if most physical cash were made illegal as happened in India.
It's unlikely, however, that any well-known economists — such as Kenneth Rogoff who has deemed physical cash "a curse" — will be recanting their anti-cash views.
If you want to make an omelet, you have to break some eggs, and while some of the "little people" like Indian peasants and Puerto Rican workers might have to suffer greatly whenever the power goes out, we all have to make sacrifices.
Perhaps this is what Richard Thaler — the newly announced economics Nobel-Prize winner — had in mind when he came in out in favor of demonetization in India.
Certainly, abolishing cash is likely to devastate a poor economy more than a wealthy one. A wealthy country, with more advanced and reliable infrastructure, and with greater access to resources in general, is more fully able to weather a shortage of physical cash, and natural disasters. Overall, though, going cashless makes an economy more fragile, and makes ordinary people sitting ducks whenever there is a natural disaster, or even worse disruptions such as wars.
Of course in the modern age of cellphone to cellphone money transactions that’s just not really true anymore.
Use it or lose it. I do about half my buying in cash. Just because ...
One other function of cash is that it serves, during no power situations, to allow commerce rather than forcing people to trash grocery stores in order to feed their families.
A cashless society is a major step on the road to abject tyranny.
During Ike we had no power for three weeks. Cell phones were empty after three days.
Most people have cell phone charger adapters for their cars, don’t they? There are solar and hand-crank chargers, even camp stove chargers powered by heat from the fire also.
I wasn’t talking about the power, I was talking about the track-ability. There’s so many paths to e-commerce now with so many transactions it’s almost as anonymous as cash.
I recently had one of those Wal Mart branch banks request my name when I simply asked to make change for two twenty dollar bills. That one kind of threw me back. Really? To make change? Freakin’ Orwellian.
I have that novel “Warday” in my personal library.
Rather terrifying, but very well-written.
I always use cash in restaurants too. I had a prepaid debit card drained after eating at a restaurant. Only had about $100 on it.
Eventualy got it back but the debit card company wanted me to contact all the vendors and demand the money back. That got about half of it.
The remainder came after I sent letters to the remaining vendors and the debit card company that if funds weren’t restored within a week I would be writing the FTC, the banking commissions in both the vendor’s state and the debit card companys state, and filing complaints with the better business bureau in both states.
Money came back.
“My credit card was cancelled after someone tried to buy something expensive. Try being overseas when that happens. Having electricity doesn’t help. No such things as travelers checks anymore. Might as well stand on the corner and sing.”
I’ve traveled internationally a lot. Also, family and I were expats in Shanghai, PCR two years. You can purchase/charge up to whatever your credit limit is just about anywhere in the world. However, before you go overseas you must call your credit card customer service and inform them where you will be traveling to and approximate days you will be there. Even though you’ve done these things if an unusually large purchase is made or a purchase is made that doesn’t align with your buying history profile expect CC security to send you a text asking you to confirm or deny the purchase. A good practice as far as I’m concerned.
Same here, though we are cashless for most other purchases. The 1% Visa rebate is an incentive.
Was that “Warday and the journey onward / by Whitley Strieber and James W. Kunetka”? It was the only one on file at the library.
You do not waste the gas in your car to charge your cell phone. The car has only two functions after a hurricane:
To get food and medicine.
To get out of the area.
That's the one.
I live in an area that has fairly frequent power outage due to storms, sometimes even hurricanes make it inland this far. I've had the roof blown off my house before due to a hurricane. If you have no other means of charging the thing, yes you certainly do use your car charger to power up your cell phone.
If the roads are clear enough to even get out of your neighborhood, if they're clear enough get groceries or medicine, then they're clear enough to do a heck of a lot of things like going to find gas. Might be quite a drive, but still. And if you've got vehicles sitting in your drive that are low on gas in the aftermath of a hurricane, somebody's either not paying attention or pretty dumb. That's the only fuel storage a lot of people have, the gas tanks of their cars.
If you’re in an area that gets power outages, get a solar cellphone charger.
Gas is too valuable and hard to get then to waste on charging phones.
That ‘hurricane high’ you get after the storm passes means clear hot days so you can keep those devices charged while you wait for the power to be restored.
Thanks For THAT!
Governments will always cloak their goals with what you've stated and for security/crime fighting reasons.
Think of the implications to a ca$hle$$ society. The government will know every single transaction, every purchase, every movement. Scary if ya think about it for a spell.
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