By Guy Brandon, 21 September 2015
Although there isn’t a great deal of consensus about what money really is, at the most basic level, economists broadly agree that money is supposed to serve three main purposes:
- A store of value
- A unit of account
- A medium of exchange
Abolishing cash would make money a worse store of value, forcing people to use it more as a medium of exchange. This is not a side effect: it is the stated intention. Biblically and relationally, this poses serious problems.
The Bank of England has struggled with persistently low inflation for some time. This is the chief reason that interest rates have also been kept low, despite the apparent health of the British economy. If interest rates rose, consumers and businesses would be incentivised to save money, and the corresponding decrease in spending would push inflation even lower – into negative territory, raising the spectre of long-term deflation and the stagnating effect this would have on the economy.
Andy Haldane’s suggestion is that physical cash should be phased out, meaning that everyone would have to use an electronic equivalent (which would probably be based on the same kind of public ledger system that bitcoin uses). Not only would this allow a great degree of transparency – making every transaction an instrument of surveillance – but, moreover, ‘It would allow negative interest rates to be levied on currency easily and speedily.’
In other words, customers would be charged for holding money in bank accounts. (One way or another they already are, but abolishing cash means such a move is harder for customers to circumvent.) As things stand, keeping money as cash has no charge attached, save for the fact that inflation – such as it is at the moment – gradually reduces its value over time. Scrapping physical money would allow BoE to charge customers, which would further incentivise them to spend funds rather than keep them in a bank account. Running out of tools to treat low inflation (interest rates are already at a record-low of 0.5%), this is one option to levy effectively negative interest rates.
This introduces – or widens – a relational gap that already exists in the way we ‘do’ money. Inflation already means that money is not a reliable store of value, though it’s better than most or even all of the alternatives. Charging for money makes it a worse store of value, and pushes customers towards spending it. There isn’t alignment between the function of money for the end-user and for the BoE, the body tasked with creating and controlling money. In relational terms, this is a lack of Commonality.
It also further centralises money. In the Bible, money – mostly silver pieces and coins – was broadly overseen by the Levites (who kept accurate weights and measures) but was separate to any system of government or religious body. Money was too important to be used as an instrument of the state or Temple.
Of course, money as it exists in the 21st century is a far cry from money as we see it in the Bible, and these are not the only ways it falls short of the ideal. Over the coming weeks and months the Jubilee Centre will be taking a closer look at money, and how we might reform it to bring it more into line with God’s will.