Cash is legal tender! But for how much longer?
And what are the risks?
‘Keeping cash alive’ has been a bit of a catch cry of late, even more so due to the recent IT system crash, caused by a defect in a software update from cybersecurity firm CrowdStrike, which disrupted various industries in Australia, including airlines, banks, and media outlets. The outage, which occurred on July 20, 2024, resulted in widespread technical issues, including Flight information screens going blank at Sydney airport, Australian Broadcasting Corporation and Network Ten systems being affected, Cash registers displaying blue screens at a grocery store in Sydney, etc.
Many people my vintage would remember paying with various coins from 1c through to 50c and later to include $1 and $2 coins. Earlier generations would have been doing so with pennies. I grew up with cash, and I remember being paid cash directly to me by my employer to then spend how, when and on whatever I chose. But even before the advent of fiat currency, people relied on bartering and commodity-based currencies. Bartering involved directly exchanging goods or services without using a medium of exchange. For example, a farmer might exchange vegetables for bread with a baker.
We live in very different times now, the shift from commodity-based currencies to fiat currency occurred gradually, driven by factors such as:
Trade expansion: As trade increased, the limitations of commodity-based currencies became apparent, leading to the need for more flexible and widely accepted mediums of exchange.
Centralization: The rise of centralized governments and empires facilitated the introduction of fiat currency, as governments could issue currency without relying on physical commodities.
Inflation: The limited supply of commodities used as currency led to inflationary pressures, making fiat currency a more practical solution.
The rise of electronic payment: Western Union is credited with creating the first electronic payment system, dating back to the early 1990s. This early innovation paved the way for the development of modern electronic payment systems. These factors combined to create the perfect storm that drove the rise in electronic payments, making them the dominant form of payment globally.
A move towards Central Bank Digital Currencies: A Central Bank Digital Currency (CBDC) is a digital form of a government-issued currency, issued by a country’s central bank. It is not pegged to a physical commodity, unlike traditional fiat currencies. CBDCs are designed to be a digital representation of a country’s legal tender, providing a secure, efficient, and convenient means of conducting transactions.
Key characteristics of CBDCs:
Issued by a central bank: CBDCs are created and managed by a country’s central bank, ensuring their stability and trustworthiness.
Digital form: CBDCs exist only in digital format, eliminating the need for physical currency.
Not pegged to a commodity: Unlike traditional fiat currencies, CBDCs are not backed by a physical asset, such as gold or silver.
Government-issued: CBDCs are issued by the government, making them a trusted and secure means of transaction.
CBDCs aim to improve the efficiency, security, and accessibility of financial transactions, while also providing a new tool for monetary policy and financial stability. They have the potential to revolutionize the way people and businesses conduct transactions, particularly in the digital economy.
The push towards CBDC’s: The following entities and individuals are behind the push for central bank digital currencies (CBDCs):
International Monetary Fund (IMF): The IMF’s Managing Director, Kristalina Georgieva, has urged countries to make a more proactive push to develop CBDCs. The IMF has also published a paper, “Central Bank Digital Currency Behind the Scenes: Emerging Trends, Insights, and Policy Lessons,” which highlights the potential benefits and risks of CBDCs.
Federal Reserve: While the Federal Reserve has not made a decision on implementing a CBDC, it has been exploring the potential benefits and risks of CBDCs through technological research and experimentation.
Central banks globally: Many monetary authorities are seeking guidance on how to pursue digital forms of central bank money, indicating a widespread interest in CBDCs. The development of CBDCs will vary depending on the degree of digitalization of the economy, legal and regulatory frameworks, and the central bank’s capacity.
These entities and individuals are driving the push for CBDCs, with a focus on promoting financial inclusion, improving payment systems, and enhancing the stability and resilience of the financial system. They recognize the potential benefits of CBDCs, including lower costs, greater accessibility, and reduced volatility compared to private digital currencies.
References
https://www.atlanticcouncil.org/cbdctracker/
Assess potential drawbacks of CBDC adoption for Australia's financial system, economy, and citizens:
Disintermediation of Commercial Banks: If consumers move their money from bank accounts into a CBDC, commercial banks may lose their intermediation role, potentially reducing their profitability and stability.
Privacy Risks: CBDCs, being digital, may be vulnerable to cyberattacks, resulting in the loss of funds or sensitive information. This could compromise individuals’ financial privacy and security.
Taxation Complexity: With CBDCs, the central bank may implement a taxation system at the payment level, potentially creating complexity and additional administrative burdens for taxpayers.
Limited Anonymity: Unlike cash, CBDCs could be traceable, potentially limiting their use for anonymous transactions, such as those involving large sums of money.
Dependence on Technology: CBDCs rely heavily on digital infrastructure, which could be vulnerable to technical failures, outages, or cyberattacks, disrupting financial transactions and services.
Potential for Over-Reliance on Central Bank: A CBDC could lead to over-reliance on the central bank, potentially undermining the stability of the financial system if the bank were to experience difficulties or failures.
References
https://www.forbes.com/advisor/au/investing/cryptocurrency/digital-currency/
https://www.rba.gov.au/speeches/2022/sp-ag-2022-12-08.html
There are predictions that there will be other threats and more serious IT system crashes, and Cyber-attacks, as explained by the powerful global thinktank, the World Economic Forum.
The recent unprecedented CrowdStrike disruption has highlighted the importance of cash as a backup payment method in Australia. Despite advancements towards a cashless society, the incident demonstrates that:
Digital payment systems are not yet foolproof
Cash remains a reliable alternative during technical failures
Australia is not yet ready to abandon paper notes and coins entirely
The CrowdStrike outage has reinforced the need for a balanced approach to payment systems, ensuring that both digital and cash-based options are available to mitigate the risks of technical failures.
The above are strong reasons why people in Australia want to keep cash alive, some others are:
Security and Control: For some Australians, particularly those from older generations, cash represents a sense of security and control. As Economist Professor Pasquale Sgro notes, “For his generation, cash was a security blanket. He was raised in the Depression when cash was king, so it was important for him to still feel he was in control.” This sentiment is echoed by the Reserve Bank of Australia’s governor, Philip Lowe, who emphasizes the importance of ensuring banknotes remain widely available for those who want to use them.
Anonymity and Vulnerable Populations: Cash provides anonymity, which is crucial for vulnerable individuals, such as family violence survivors who may seek to make payments without being tracked or monitored. Without access to phones, debit cards, or the internet, cash remains a vital payment method for these individuals.
Regional Areas: Older Australians, particularly those living in regional areas, are more likely to use cash for in-person transactions. According to the Reserve Bank of Australia’s Consumer Payment Survey, over 65s are five times more likely to use cash in regional areas compared to those under 30.
Income Level: Lower household income is associated with more intensive cash usage. Seventeen percent of people in the first household income quartile were high cash users, compared to only 2% in the fourth household income quartile. This suggests that cash remains an important payment method for those with lower incomes.
Campaigns and Petitions: The “Cash Welcome” campaign and a related change.org petition have garnered thousands of subscribers and signatures, demonstrating a desire to protect the right to use cash among some Australians. This grassroots movement highlights the importance of cash as a payment method for those who value its autonomy and flexibility.
References
https://www.seniors.com.au/home-contents-insurance/discover/cashless-society
https://www.rba.gov.au/publications/bulletin/2023/jun/cash-use-and-attitudes-in-australia.html
Cash is legal tender in Australia…..but; it’s important to note that the Reserve Bank of Australia (RBA) does not obligate businesses to accept cash payments. As stated in various sources, businesses are within their rights to set the terms of payment, as long as these terms are not discriminatory or in breach of consumer laws.
Key Points:
Australian banknotes and coins are legal tender.
Businesses are not obligated to accept cash payments, however they are required to provide verbal or written notice prior to entering the contract with their customer.
Refusal to accept payment in legal tender banknotes and coins is not unlawful.
Businesses can set their own payment terms, provided they are not discriminatory or in breach of consumer laws.
References
https://www.canstar.com.au/credit-cards/payment-options/
https://lawpath.com.au/blog/is-it-legal-for-a-business-to-refuse-payment-by-cash
https://banknotes.rba.gov.au/legal/legal-tender/
https://www.finder.com.au/news/cash-legal-tender
Politicians taking notice: One Nations Sarah Game MLC in South Australia is currently tabling the “Public Finance and Audit (Cash Payments) Amendment Bill 2024” to push back against the drive to a cashless society, as she believes no government service should ever refuse cash; cash is legal tender.
Regional bank closures in Australia! Will those wanting to access and use cash still have a choice going forward?
Between 2017 and 2023, almost 800 branch services have closed in regional areas, accounting for more than one-third of all regional bank branches in Australia. This significant decline has had a profound impact on rural and remote communities, making it increasingly difficult for people to access face-to-face banking services.
Key Statistics:
30% drop in the number of bank branches in Australia over the past five years
Faster closure rate in remote and very remote areas
Over 800 branch services closed in regional areas between June 2017 and June 2023
Recent Developments:
In February 2023, a parliamentary inquiry was referred to the Rural and Regional Affairs and Transport References Committee to examine the impact of bank closures on regional communities
The inquiry’s final report called for guaranteed cash access and the establishment of a public bank
Major banks, such as Westpac and Commonwealth Bank, have continued to close branches, despite the inquiry’s recommendations
Examples of Regional Bank Closures:
Bankwest closed its remaining 60 branches in Western Australia in March 2024
Westpac postponed the planned closures of eight branches across regional Australia, but some branches have still closed, including one in Coober Pedy, South Australia
ANZ has postponed announcing further closures but will proceed with 14 closures that were announced last year and are almost complete
Challenges Facing Regional Communities:
Reduced access to face-to-face banking services
Increased reliance on online banking and ATMs, which can be unreliable in remote areas
Disruption to local economies and businesses that rely on banking services
Calls for Action:
Guaranteed cash access in regional areas
Establishment of a public bank to provide alternative banking services
Greater transparency and accountability from major banks regarding branch closures
References
https://alga.com.au/regional-bank-branch-closures/
Massive profits for Australian banks amid ongoing bank closures.
Australian banks have consistently reported massive profits in recent years. According to various sources, including the Australia Institute and KPMG Australia, here are some key highlights:
Record-breaking profits: In 2023, Australia’s major banks reported a combined cash profit before tax of $32.5 billion, surpassing the previous record set in 2017 ($31.2 billion).
High profit share of GDP: In 2016, Australian banks’ profits equated to a staggering 2.9% of GDP, making them the most profitable in the world.
Strong capital positions: The major banks have further improved their capital positions, enabling them to reinvest in the business and provide returns to shareholders through share buy-backs and dividends.
Net interest margin (NIM) uplift: The combination of healthy balance sheet growth and NIM uplift contributed to the record-breaking profits, with net interest income rising by a never-before-seen $9 billion.
Consistent profitability: The big four banks – Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Australia and New Zealand Banking Group – have consistently reported profits above $10 billion annually.
Key Entities and Their Profits
Commonwealth Bank of Australia: $14,343 million (as of September 30, 2023)
Westpac Banking Corporation: $10,305 million (as of September 30, 2023)
National Australia Bank: $10,450 million (as of September 30, 2023)
Australia and New Zealand Banking Group: $10,075 million (as of September 30, 2023)
These figures demonstrate the massive profits generated by Australian banks, driven by factors such as surging net interest margins and healthy balance sheet growth.
References
https://www.vice.com/en/article/y3wnz5/why-are-australian-banks-making-record-profits
https://www.statista.com/statistics/1062074/australia-profit-before-tax-of-major-banks/
https://www.pwc.com.au/media/2023/major-banks-deliver-record-profits.html
Restricting access to your money! Is the best place to store your money under your pillow?
Restrictions to accessing your money: Banks in Australia ask what you will use your money for when withdrawing cash for several reasons:
Anti-Money Laundering (AML) and Anti-Fraud measures: Banks are required to report cash transactions exceeding $10,000 to AUSTRAC, a federal government agency, to combat money laundering and terrorist financing. By asking about the purpose of the withdrawal, tellers can identify potentially suspicious transactions and report them accordingly.
Customer protection: Banks have a duty of care to protect their customers from fraud and scams. By inquiring about the withdrawal purpose, tellers can detect and prevent customers from falling victim to schemes, such as withdrawing large sums for fraudulent activities.
Risk assessment: Banks assess the risk associated with each transaction. Unusual or large withdrawals may trigger additional scrutiny, and the purpose of the withdrawal helps banks evaluate the risk and take appropriate measures.
Compliance with regulations: Australian banks are subject to regulatory requirements, including the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. By asking about the withdrawal purpose, banks demonstrate their compliance with these regulations.
In some cases, customers may be asked to provide additional information or documentation to support the purpose of the withdrawal, especially for large or unusual transactions. This helps banks maintain transparency and accountability while protecting their customers and the financial system.
What happens if I don’t provide the information requested?
If you do not have, or do not wish to provide the information requested, the bank may declinethe transaction. Banks understand that this may be frustrating for customers; however, the need to collect certain information is required by law.
Regardless of your views on the Canadian Trucker Protests during harsh COVID lockdowns and mandates, giving government emergency powers to lock hundreds of bank accounts should raise the eyebrows of even the hardest communist sympathiser.
The Canadian government has the authority to freeze bank accounts linked to individuals or groups deemed to be involved in illegal activities, such as the “Freedom Convoy” protests in Ottawa. This power is exercised under the Emergencies Act, which allows the government to restrict access to cash and cryptocurrency for individuals or groups associated with the protests.
Examples of Account Freezing
During the “Freedom Convoy” protests in 2022, the Canadian government instructed banks to freeze up to 210 bank accounts with total holdings of C$7.8 million linked to the protesters. These accounts were frozen under the Emergencies Act to disrupt illegal activity and starve the protest organizers of funds.
Ultimately it will come down to how many people in the community believe that the removal of cash is not an issue, and that digital money is just another societal progression because of technological advancements.
Personally, I believe Australia’s government as well as powerful unelected global conglomerates such as the UN, WHO, WEF, Alphabet, META, Blackrock, Vanguard, etc, have exercised way too much control over our lives during the past 4 years, possibly even longer, so I for one am not comfortable giving them more power over the way I access and spend my money.
I understand that I’m currently in the minority and may not have any control over the transition away from cash and other tradable commodities into digital currencies.
However, if you are also concerned about the transition away from cash or any other means of potential overreach and influence on our government from unelected global corporatists, consider joining other likeminded individuals in your community with the same concerns.
Find out more about what your government is not telling you - Empowering communities
Join a likeminded community via Myplace Australia
Good luck out there.
Mark
PS, here is an earlier piece.
Global Financial Manipulation
Have you heard people talking about Central Bank Digital Currencies (CBDC’s), zero cash, Universal Basic Income (UBI’S), ATM and Bank closures, limits to the funds you can withdraw, etc.?