Home > Uncategorized > MasterCard, Bill Gates and their “war on cash”

MasterCard, Bill Gates and their “war on cash”

from Norbert Haering and the current issue of RWER

If people write about a war on cash, even well-meaning readers will tend to think of them as doomsayers with paranoid tendencies. However, many will have second thoughts if they hear that there is indeed a Better Than Cash Alliance, which has the goal of replacing cash by digital payments on a global scale, and that this Alliance is doing this with the explicit support of the government of the 20 most powerful countries. The term “war on cash” was coined not by critics, but by key members of this Better Than Cash Alliance, as a rallying cry in their drive to increase their profits.

At a conference on payments in 2005, representatives of credit card company MasterCard talked about a new generation of card solutions, with which they wanted to “go to war”. Competitor Visa was confident, that they would “win the war on cash”. Together, they wanted to “eliminate cash from the financial system”. In a friendly report on the conference in the industry-journal European Card Review with the title War on Cash, the author says that while banks and governments have a shared desire to eliminate cash, governments prefer to let the card companies take the initiative, because they are afraid that the public would not like the war on cash.[1] A department head of the EU-Commission is quoted saying: “We agree with the war on cash” and continuing with a plea to lower prices for card payments in order to be more successful in this war. 

Alexander Labak, President of MasterCard Europe said in a speech on The Future Beyond Cash that the war on cash had to be won and would be won, because these old-fashioned coins and bills were so expensive for society. The EU-Commission assisted with questionable calculations about the high cost of cash, while the leading US-consultancy McKinsey provided the rationale for the furor: They presented a study according to which the profits of the financial industry would increase massively, if cash could be pushed back.

At their industry meetings and in front of financial analysts, banks and card companies like to be bold and explicit about their goal to get rid of cash. However, if the general public is listening, the strategy is one of laying low. The International Monetary Fund (IMF) recommends letting the decline of cash appear to be a gradual and unplanned side-effect of unrelated measures and developments. The fund advises governments to let the private sector go ahead, because direct official action would cause popular resistance. If they did act, governments should start with harmless seeming steps like phasing-out large denomination notes or (initially) generous upper limits for cash payments. While measures against cash should be presented to be unplanned and independent, they should in truth be closely coordinated with the private sector, recommends the IMF-author.[3]

McKinsey also advised governments, banks and payment providers to cooperate in a “systematic war on cash”. The consulting company has conveniently provided a list of harmless-seeming steps for governments to take. Many of them have recently been enacted all over the world. They suggest are to require merchants to accept card payments and to prohibit them from passing on the cost to their card-paying customers. On the other side, cash-users should be confronted with the true cost of their payment-methods, including all indirect costs. Standards for security and maintenance in the cash circuit could be made more stringent, to make cash more expensive. McKinsey praises the Finnish who managed to push back cash by forming a cartel of banks and payment providers, which made cash more expensive. Also in Canada, Norway and Australia, they write, central banks and commercial banks together had achieved the same good result.[4]    read more 

[1] Jane Adams: “The War on Cash.” European Card Review. März/April 2006. S. 12–18.

[2] Alexander Labak: “The Future Beyond Cash – Europe’s Debit Alternative”. Speech to Delegates of the Fourth Annual MasterCard Debit Conference. Genf. 10.3.2005.

[3] Alexei Kireyev: “The Macroeconomics of De-Cashing”. IMF Working Paper 17/71. 2017.

[4] McKinsey & Company: McKinsey on Payments. March 2013.

  1. Rhonda Kovac
    December 15, 2018 at 1:17 pm

    In addition to being a bald power grab by the Financial Services Industry (which takes a piece of each cashless transaction one way or another), the War on Cash is also a war on the poor — penalizing and locking out people without IDs, bank accounts, credit.

    There are as well surveillance ramifications. In a cashless society absolutely every purchase goes into a massive, permanent, cumulative electronic record, along with personal identifying information of the purchaser. Given easy access by the government (and by powerful corporations), I shudder to think of all the harassing, invasive, predatory, corrupt and oppressive possibilities.

  2. Robert Locke
    December 15, 2018 at 2:58 pm

    And what if I lost my cc or it were stolen, during the time needed to replace it, I couldn’;t buy a bean.

    • December 16, 2018 at 1:41 pm

      Good to see you still around, Bob. As an advocate of a credit card solution I agree you are raising a critically important point here, which is why I am not arguing for a cashless society, and am very disturbed by the widespread closure here of local banks with cash dispensers, without which (or vulnerable internet banking) one is unable to check one’s remaining credit.

      The whole scam depends, of course, on inversion of the meaning of words. Our debit card debits our credit, and our credit cards, while debiting our Effective Credit Limit, are said to indebt us to our bank.

      But where does the credit come from? By we (or our or some other employer) having our credit limit raised by banks, which the banks claim (with the support of laws their backers wrote) indebts us for their credit. Without going into the history of this in goldsmith’s hiring out notes permitting people to use other people’s gold, we now have them simply hiring out notes enabling people to buy other people’s property and find buyers even at inflated prices, writing this fictitious ‘credit’ into their own accounts as if it were real, and increasing it exponentially by both the inflation of property prices and service charges based on percentages rather than cost. Money in the old sense of a real valuable doesn’t enter into this.

      Another Copernican revolution is needed to get the meaning right way up again. I propose:

      Banks legally authorise CREDIT LIMITS, keep our accounts and advise on credit flows..

      Suppliers CREDIT consumers (so employees CREDIT employers when paid in arrears, and banks restore the CREDIT of suppliers, thereyby enabling them to restock.

      Money is a TOKEN of a CREDIT LIMIT, i.e. an indicator of CREDIT WORTHINESS (its owner’s value). Mathematically, it is no longer a quantity of a valuable such as gold but a variable with an upper limit. (If I have a £2 coin I don’t have to spend it all). Physically, it can be accounted as an expenditure by the cash dispenser, even though it is a local limit.

      Wages and profits are money, independently recognising credit worthiness, although not necessarily a good measure of it. A more universal concept is needed to provide for the unwaged, e.g. children, students, the old and otherwise incapacitated. I prefer CITIZEN’S INCOME rather than ‘universal basic income’, as being earned by good citizens looking after themselves and their communities. For exceptional services I prefer PRIZES after the event to high salaries presuming them and bonuses for unspecified [financial] services.

      Do the sums on the presumption of transitioning from wages and profits to Citizen’s Income’s supplied via credit cards. It then doesn’t matter if the CREDIT LIMIT is generous; what matters in the long run is that the rate of spending the credit does not exceed write-off of expenditure by the CITIZEN’S INCOME, which can be set by dividing half (say) a year’s shop purchases by the number of people, leaving the other half in reserve for Insurance and Prizes. Businesses not having to pay wages could operate on a ‘repayment of resource costs’ basis, competing for PRIZES rather than exponentially escalating profits. Banks can be local, but the banking system needs to be a national resource, not an international consortium. Most importantly, we could relearn from Nature that there is a time for rest and replanting our garden as well as trying to work for employers who still think trees are for growing money.

      • Craig
        December 16, 2018 at 7:53 pm

        Although they’ll fight it to the death also, (paradigms must not become conscious you know) the banks can countenance a citizen’s income so long as it doesn’t transform the scarcity ratio of total actually available individual incomes to total costs and so total prices. That’s one of the reasons a discount/rebate monetary policy at retail sale is so essential because it inverts the scarcity ratio reality via price.

      • December 17, 2018 at 8:01 pm

        Yes: well, are your discount and my ‘repayment of resource costs’ different ways of achieving the same result?

        I have realised I didn’t really offer a reflection on Bob’s dilemma of the lost or stolen credit card. Keeping money, we would be no different than we are now. The credit card being personal, money only available in doses small doses and banking local, (so unusual expenditure would be recognised as such), why should people thieve credit available freely from their own account? Doubtless a few nuts would try to play ‘beggar your neighbour’, but not so many as now only survive that way.

      • Craig
        December 17, 2018 at 9:08 pm

        It appears they intend to resolve the same problem, but your way of accomplishing it is not tied to the end of the economic/productive process at retail sale and so is open to being gamed by them via inflation. If the policy only takes effect at retail sale it negates the objection by conservatives that it intrudes on price discovery and being the terminal expression point for all forms of inflation, that is, where production becomes consumption….no more inflation can occur.

        Of course additional regulation of the economy and enterprise will always be needed, some of which I have posted here before, but if corporations want to be treated as if they are individuals then they must accept ethical restraints on their decisions….the same as the individual does.

      • December 18, 2018 at 11:30 am

        Your concerns are noted, but both your ‘discount’ and my ‘repayment of resource costs’ apply to retail pricing. I didn’t bother to say that as I thought it obvious from the discussion.

      • Craig
        December 18, 2018 at 5:46 pm

        “my ‘repayment of resource costs’ apply to retail pricing. I didn’t bother to say that as I thought it obvious from the discussion.”

        All income can only purchase consumer goods at retail sale that is true, but if you do not have a discount/rebate monetary policy at that point you do not and cannot resolve the income erosive problem of inflation. You do not automatically double everyone’s potential purchasing power and thus also double potential business revenue for any enterprise.Then you have to rely upon flimsy liberal orthodoxy that inflation will not occur if there is a balance of income and production.

        It WILL occur because money is not the most basic cause of inflation. The most basic cause of inflation is NOT HAVING a better and more prosperous alternative to the current situation where the system has a scarcity of available individual income, commercial agents see more money coming into the system and attempt to capture more revenue by raising their prices. The discount/rebate monetary policy at retail sale provides that better and more prosperous alternative.

  3. December 15, 2018 at 9:44 pm

    If and when these nasty trends start to adversely impact the true ruling elites there will be changes made to the electronic payment system. The Panama papers, the troubles at HSBC and now Deutche Bank with money laundering, seem to be accelerating. The privacy afforded by cash will not be easily supplanted. I predict innovation will produce new forms of electronic money that restore the cash properties of privacy, convertability, efficiency, and security with better portability than cash. Or it’s a jack boot pressed on the face of humanity forever.

  4. December 18, 2018 at 8:12 am

    As the hacker group Anonymous might argue, the issue in the campaign to rid the world of cash isn’t the ridding part but rather who/what controls the computer networks that control the credit schemes that replace cash. If the credit card companies and big banks have that control, then that’s a serious problem for all of us who don’t fit in the top 10% of wealth and income, and maybe even for some who do. If it is well regulated public utilities, the problem is smaller but still exists. If it is co-ops governed by independent management outside any control by credit card companies and big banks, then we ought to throw a party. If the independent co-ops also regulate the credit card companies and big banks, then we ought to throw a bigger party.

    • December 18, 2018 at 11:48 am

      This doesn’t get rid of the problem of not knowing one’s current credit status: perhaps most obvious now when kids unwittingly run up huge charges on their parent’s phone bills. One knows if one has spent all one’s money. If there are no cash machines and fewer banks then one is dependent on (as of now) monthly statements, and if these are eliminated in favour of internet banking, then not only is one at risk from hackers, how are the kids, illiterates, dyslexics and indeed the blind going to learn how to manage when their accounts are only partly visible and there one minute, gone the next?

      • December 19, 2018 at 6:52 am

        Dave, there are a lot of what-ifs in this comment. Most of the issues you list are addressed currently by credit card companies and banks, although sometimes not so well as could be. I argue that the main issues are control, and secondarily trust. If the control systems for the credit cards, debit cards, cash machines, etc. are outside the control of big banks and credit card companies in the hands of independent, public welfare-oriented agencies, then most of the problems can be addressed effectively and fairly. The agencies can also control the profit level of the banks and credit card companies and ensure poorer users and those with special needs are not disadvantaged. We just need to have the courage to pass the laws and hire the enforcement agents to get this done. So far, courage has been the biggest deficit.

      • December 19, 2018 at 11:35 am

        Ken, the problem I am pointing to is the ability of bank system users to control theirselves, especially children who haven’t yet acquired the necessary understanding and wisdom, and old folks beginning to lose their mobility and sight and to forget their passwords. I am surprised that as a civil rights advocate you are not a defender of the availability of cash.

        See https://www.bbc.co.uk/news/business-46596154

      • December 19, 2018 at 12:40 pm

        Dave, I’m not suggesting the operating systems be turned over to “children who haven’t yet acquired the necessary understanding and wisdom, and old folks beginning to lose their mobility and sight and to forget their passwords.” I’m suggesting it be turned over to government agencies whose primary duty is to public welfare, not private profit. These would be staffed like Health and Human Services, Department of Homeland Security, Food and Drug Administration, etc. even today and certainly before Trump with smart, tough, and experienced professionals. Much like what FDR envisioned with the New Deal. Some of these “children” and “old folks” would certainly sit on advisory boards for these public service agencies. I pursue here what I believe is a major necessity for our times, to return focus to public service, public welfare, and the common good. It’s my view that going cashless is less expensive, helps deal with fraud and robbery problems, and allows people to feel safer and more secure.

  5. Craig
    December 21, 2018 at 2:59 pm

    Cashless payment systems is a problem, but only because of the financial instability due to a 5000 year old monopolistic paradigm of Debt Only and the indirectness of monetary policy.

    In other words money can only be distributed as debt which incurs a cost even at 0% interest, and even if you throw all manner of money into the economy but only via enterprise whose rate of total costs exceeds the rate of take home incomes it distributes to its employees the system is unstably cost inflationary.

    Direct to the individual and reciprocal monetary gifting at the point of retail sale is necessary to stabilize the economy and make it prosperous for all….is necessary.

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