SPOTLIGHT, TOP TREND 2023: From Dirty Cash To Digital Trash
In India, Cash Gives Way to Digital Payments
NOTE TO READERS: The following is one of the dozens of economic articles found in last week’s issue of The Trends Journal. Consider subscribing here for in-depth, independent geopolitical and socioeconomic trends and trend forecasts that you won’t find anywhere else.
In India, QR codes have become as common as curry. Street peddlers and performers display them just like barber shops and clothing stores do. Even beggars have their own QR codes if passers-by have no spare change.
The codes connect the country’s 1.4 billion people to a national digital “scan and pay” system that handled eight billion transactions in January and has largely sidelined the rupee and paise coins as the chosen way to buy.
About 99 percent of Indian adults now have unique ID numbers that give them entrée into the digital payment system, which is actively used by more than 300 million people and more than 50 million merchants, The New York Times reported.
The ubiquitous codes have become the means by which India’s informal cash economy has been absorbed into the mainstream, as having a digital ID and digital cash makes it easier to open a bank account.
More than half the digital transactions are for what the government calls “micro-purchases:” a few cents for a cup of chai or the equivalent of a dollar or two for some vegetables.
In addition to speeding economic development, the system also allows local, state, and national governments to monitor transactions and record who owes how much in taxes.
“Our digital payments ecosystem has been developed as a free public good,” prime minister Narendra Modi told the G20 conference on 24 February.
“This has radically transformed governance, financial inclusion, and ease of living in India,” he said.
His government has likened the payment system to a railroad track on which business and financial innovation can travel at high speed and low cost.
Thanks to the size of India’s population, its digital economy now dwarfs that of any single Western nation.
“Combine Britain, France, Germany, and the U.S. and multiply by four—it is bigger than that,” is how one Indian cabinet minister compared the scope of India’s “Unified Payment Interface” (UPI) at the World Economic Forum in January.
The personal ID numbers that make the system work spread widely during the COVID War as the government used the numbers to track and manage vaccinations and deliver support payments.
“I used to prefer cash,” one rickshaw driver told The Times, “but I learned the benefits of this during the lockdown.”
In urban centers, as many as half the transactions now are made digitally; in smaller communities, the proportion may be as small as 10 percent on any given day, the Times said.
Even in remote areas that still use cash, the UPI has given each individual an ID number, bank account, and mobile phone app so the system is still ready to use.
Although India’s supreme court has limited the use of the personal data the UPI collects, fears remain—especially as Modi has shown dictatorial tendencies.
With India now promoting its system to other developing countries, those concerned about abuses of privacy will travel with it; often, emerging nations have loose safeguards, if any, governing privacy and have autocratic leaders.
TREND FORECAST: In the 28 July 2020 Trends Journal, we had forecast that “the world monetary system will devolve from dirty cash to digital trash.” Since then, the devolution has progressed at a fast clip, leading us to renew our prediction as a Top Trend 2023.
“The reality is that physical currency is on its way out in practically every economy. The use of cash is already plunging and the day will come even in the U.S. when currency is not used anymore,” Eswar Prasad, a professor of trade policy at Cornell University, told PBS.
Digital currencies should make transferring money easier and cheaper for those who do not use traditional banks, but there are obvious privacy concerns.
In making our Top Trend 2023 forecast, we reminded readers that The Trends Journal has long noted Washington will crack down on cryptos when they become a possible threat, and it seems as though politicians and agencies are using the collapse of FTX and TerraUSD as examples of how more oversight is needed over the industry.
Wall Street Silver, a popular Twitter account, posted that the SEC will likely try to control cryptocurrencies by authorizing the Fed and treasury department to bring a Central Bank Digital Currency to the public.
In that case, the government would be able to monitor all purchases and freeze all accounts, just as Canada froze bank accounts during the trucker protests early last year.
Mises.org reported that the International Monetary Fund (IMF) published a document in 2017 that offered suggestions to governments—“even in the face of strong public opposition”—on how to move toward a cashless society.
Governments and central bankers claim that the shift to a cashless society will help prevent crime and increase convenience for ordinary people. But as we had forecast, the real motivation behind the war on cash is more government control over the individual… so they know every penny spent, where it was spent, and what it was spent on. And the bottom line is, the political system will be guaranteed of getting every tax dollar that they “deserve.”
Our coverage of this growing trend can be found in past articles, including:
“JPMorgan to Create Digital Bank” (2 Feb 2021)
“Global Banksters Going Digital” (29 Jun 2021)
“China Goes Full Digital Yuan in Beijing” ( 29 Jun 2021)
“Mexico’s Central Bank Going Digital” (11 Jan 2022)
“Fed Releases Digital Dollar Report: Going Crypto?” (25 Jan 2022)
“U.S. Treasury Pushing for a Digital Dollar” (20 Sep 2022)
JAPAN TO EXPAND TEST OF DIGITAL YEN NEXT MONTH
After a successful “proof of concept” trial in 2021, in April the Bank of Japan will launch the next phase of its pilot test of its digital yen, the bank announced.
The earlier test tried out systems of issuing, paying, accepting, and transferring the digital currency. That was followed by tests of its digital infrastructure in more technical operations.
That phase will end this month.
The expanded program beginning in April will “test the technical feasibility not fully covered by” aspects tested earlier and “utilize the skill and insights of private businesses in terms of technology and operation for designing a central bank digital currency ecosystem in the possible event of social implementation,” Uchida Shinichi, the bank’s executive director, said in a speech earlier this month.
“Under the pilot program, we plan to develop a system for experiments, where a central system, intermediary network systems, intermediary systems, and endpoint devices would be configured in an integrated manner,” Uchida added.
The new phase will only simulate transactions between consumers and retailers. Several banks will be part of the experiment, which will see how well the digital currency can work during natural disasters and in areas with limited Internet access.
It also will open a forum in which retail businesses can offer comments.
The central bank will decide whether to issue a digital yen in 2026.
At the end of last year, 114 countries were considering launching a digital currency, the Atlantic Council reported.
China, Hong Kong, and Thailand have already introduced digital currencies to the public. Australia, Brazil, Ghana, India, Japan, Malaysia, Singapore, South Korea, and South Africa have announced they will begin or continue pilot tests this year.
Last October, the Bank of International Settlements partnered with the central banks of China, Hong Kong, Thailand, and the United Arab Emirates to test digital foreign exchange transactions that cross national borders.
TREND FORECAST: While the U.S. Fed lags Japan and many other nations in creating and testing a digital currency and payment infrastructure, they are in the process of designing a digital payments infrastructure to be tested at an unspecified future date.
As we have forecast, with the reality of soaring U.S. national debt, up from $5.7 trillion in 2021 to $31.6 trillion today—and that the higher interest rates rise the more it cost to service the debt—deep in debt countries like America will use a new currency as a sham to erase much of their debt load. Indeed, according to US Debt Clock.org the debt per citizen is nearly $95,000 … and rising.
ATM’S DISAPPEARING IN U.S. AS CONSUMERS FORSAKE CASH FOR CARDS
The number of ATMs in the U.S. has declined from about 470,000 in 2019 to 451,000 at the end of 2022, a study by research service Euromonitor International found.
Many people who increased their use of plastic cards instead of “dirty cash” during the COVID War have not gone back to bills and coins, the service said.
“There was that scare that the virus was transmitted by paper, plus the trend of buying everything online,” Euromonitor research manager Kendrick Sands told The Wall Street Journal.
Cash and checks will make up just 14 percent of face-to-face transactions this year, compared to 42 percent in 2010, the WSJ said. The steepest drop in the use of cash began with the onset of the COVID era, Euromonitor noted.
The trend will continue, data from the U.S. Federal Reserve indicates.
The central bank found that the number of digital transactions between people climbed 12.4 percent in the second quarter of 2020 from the first, while the number of people making those transactions jumped 18 percent.
Those data points indicate less of a need for ATMs.
Two of four machines outside a Wells Fargo branch in San Francisco were seen to be covered over recently due to disuse, according to the bank; in New York, JP Morgan closed several 24-hour ATM vestibules recently due to “crime and vagrancy,” the bank said.
“Our customers are increasingly using digital channels and transacting less often at ATMs and in branches,” Julia Bernard, Wells Fargo’s vice president of communications, said in comments quoted by the FT.
“At the same time, cash withdrawal amounts have increased over the last several years, indicating cash remains popular among customers,” she added.
Banks also are adding features to ATMs, such as the ability to teleconference with a human teller. Banks hope such features will prevent the need to open additional branches, the FT noted.
“The ATM is definitely not dying,” Brian Riley at Javelin Strategy & Research told the WSJ, in part because “they do allow financial institutions to displace some employees.”
TREND FORECAST: As the world goes towards central bank digital currency (CBDC), ATMs will join telephone booths and juke boxes as things of the past. Again, the primary reason for CBDCs is so every government will know what, where, when and how every penny was spent so they can get full tax payments and full control of society. (See: “IN INDIA, CASH GIVES WAY TO DIGITAL PAYMENTS” in this issue.)
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