The Federal Reserve’s FedNow instant payment system officially launched on July 20, 2023. This new system aims to address the frustration many individuals and businesses face when it comes to the slow clearing times for traditional wire, ACH, and e-check transactions. According to the Fed, FedNow allows for near real-time interbank clearing and settlement, enabling instant fund transfers between sender and receiver accounts at any time of the day, any day of the year.
The introduction of FedNow has led to discussions about whether the U.S. banking system is finally catching up with the technological advancements of the 21st century. However, as with any service developed by federal institutions, there is likely more to the story than meets the eye. Before exploring further, it is important to understand the current trends and changes in the way money moves through the economy.
Australia serves as an interesting example of a country at the forefront of the move away from physical cash. One of the biggest banks in Australia recently stopped dispensing cash at some of its branches, citing the fading relevance of physical payments in a society increasingly accustomed to digital and contactless transactions. However, it is important to consider whether this shift is driven by consumer preference or by the convenience of retailers and banks.
While the use of physical cash may be declining, it does not necessarily mean that it is becoming obsolete. Some argue that cash remains convenient for certain retailers and individuals, despite the push for digital payments. This raises an important question: who really benefits from a shift towards a cashless society?
Jim Rickards points out that the Australian government could potentially introduce a digital currency to replace physical cash, offering benefits such as cost savings on postage and enhanced tracking and surveillance capabilities. Similarly, the U.S. has been discussing the implementation of a digital currency for quite some time. It is argued that a cashless society would give the government unprecedented control over financial transactions, eroding financial privacy and exposing individuals to constant surveillance, taxation, and potential wealth seizure.
While the move towards a cashless society may be driven by a desire for control, it is important to consider the implications of such a change. Governments seldom reduce their own authority, and a digital dollar would exist at the whim of the Federal Reserve and the federal government. The potential loss of economic freedom and the risks associated with a centralized digital currency are concerning.
One lesson that can be learned from the failed experiment with demonetization in India is that abruptly eliminating cash without adequate infrastructure and support systems can have severe consequences. The chaos and economic damage caused by demonetization serve as a warning to other nations considering similar moves.
Amidst these developments, diversifying savings with physical assets like gold and silver may be a wise investment strategy. Precious metals have been recognized as valuable and have intrinsic worth, making them a reliable form of currency even in a cashless society. While the future of cash remains uncertain, having some physical assets on hand can provide a sense of security and protection.