China’s Predatory Lending
February 12, 2025
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Our monetary system has undergone a sea of change in the past century. If our great grandfathers were to see our lives today, they would not be able to relate to any form of payment. Fiat currency, plastic money, negotiable instruments are all creations of the financial innovation that has taken the world by storm in the past century. Although there is widespread skepticism about the fact that fiat currency has historically always declined to zero in value, it is currently in use all over the world.
However, if critics are to be believed, this innovation might be going too far. There have been some experts that have suggested that the government must adopt a drastic change in the way that we handle our finances. This drastic change is outlawing the use of cash! It may seem bizarre but many countries are already implementing these rules in a big way. If these rules do get implemented, for the first time in monetary history, we may have a society which doesn’t use cash!
Glimpses of what that would look like are already being seen in some countries.
In this article, we will discuss the pros and cons of living in a cashless society.
Financial innovation has caused a gradual reduction in the amount of cash in circulation. Less than 10% of the money supply today exists in the form of cash and bills. Majority of the money supply is in the form of digital currency. The cash that exists today is only to grease the wheels of commerce. Many believe that a demand to eliminate this balance 10% is simply absurd and bordering on infringement of privacy.
The government believes that removing this cash will have many beneficial consequences, the most obvious being reduction in crime. Cash is the fuel that powers criminal machinery. If the government can track all payments, crime would be reduced drastically. Drug dealers, weapon salesman, gambling syndicates etc all conduct their business because of cash. In the absence of cash, operating these criminal enterprises would be next to impossible.
The government also believes that a lot of other benefits will accrue as a result of implementation of this policy. The pros and cons analysis is as follows:
The benefits of living in a cashless society are as follows:
Therefore even though humanity is on the verge of adopting a cashless system, many questions remain unanswered. How will the system deal with the possible misuses and threats that this system may impose is yet to be seen.
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