Could Cash Become Extinct?

by Ron Haynes

The recent downturn in the economy has had an effect on more than just consumers. Governments are desperately seeking money for their spendthrift ways and one way to insure they get it is to regulate cash transactions. It appears that governments would like to do away with cash altogether, making hard currency something only seen in museums. Certainly, the death of cash as we know it would make tracking transactions a lot easier for governmental agencies.

Cash-going-the-way-of-the-dodo-bird In the United States, large cash transactions aren’t banned yet, but there are severe penalties (read: significant jail time) for failing to report a large cash transaction. For example, your bank is required to file a currency transaction report with the federal government for every deposit, withdrawal, or exchange over $10,000 in cash. Some banks voluntarily lower that amount – some are as low as $3,000, presumably to stay on the good side of the IRS. Basically, if you sell your car for $10,001 in cash and then try to deposit it, the bank has to turn you in to the government; sell it for only $3,001 and they voluntarily turn you in. “Have a nice day!”

Additionally, if a bank “knows, suspects, or has reason to suspect” that a cash transaction over $5,000 is “suspicious”, then a suspicious activity report must be filed with the government. I guess the bank has to act as FBI agents as well as snitches.

But the reporting requirement goes beyond just banks. Small businesses have to report  those same cash transactions as well, and thanks to the “health care bill” recently passed, those reporting requirements extend all the way down to $600. As Jeff Schnepper explained in an article for MSN Money, if you are in business and receive in excess of $10,000 cash in a single transaction, you must report it to the IRS or you will go to prison. According to Schnepper, cash used to be king but now it’s evidence.

If you’re in a business and receive more than $10,000 in cash from a single transaction, or from related transactions within a 12-month period, you have to file Form 8300 and report the buyer to the IRS. Don’t file, and you go to jail.

The IRS isn’t kidding. I had a client who was a dealer in Corvette sports cars. He told me he didn’t have time to file the forms. I told him several times to file. He thought he knew better. He went to jail. So did his children who were involved in the business.

US gold transactions must also be reported

ABC News has reported that ANY gold transaction in excess of a paltry $600 must now be reported to the IRS. That $600 figure doesn’t just apply to gold either. All businesses, large and small, are now responsible to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals. That tracking has an expense and it will be born, not by the business, but by the consumer, as all business expenses ultimately are.

Large cash transactions in some countries are banned

Yep, believe it or not, more and more countries are orchestrating how almost all business is transacted by making large cash transactions illegal.

Italy

As part of Italy’s new “austerity measures”, all cash transactions over 5,000 euros (approx $6,400 USD) will be banned.  Passed in the name of cracking down on tax evasion, this seems quite severe to me when you consider that it also applies to cashier’s checks.

Mexico

A bill before the Mexican legislature would completely ban the purchase of real estate in cash. In addition, the new law would ban anyone from spending more than MXN 100,000 (about $7,659) in cash on vehicles, boats, airplanes and luxury goods. $7,659 isn’t a whole lot of money when it comes to those types of items. Don’t think you can just ignore this law if it is enacted.  Violators will face up to 15 years in prison.

Currently, 75% of all transactions in Mexico are completed in cash.

Europe

In Europe, many of the “austerity packages” being introduced include severe restrictions on the use of cash. For example, in Greece, all cash transactions above 1,500 euros ($1,923 USD) are effectively banned starting in 2011.  According to Greek Finance Minister George Papaconstantinou as reported by Reuters:

“From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards.”

With Visa and MasterCard getting a cut of every card transaction, think of the money they will make in Greece alone.

Cash is ABNORMAL

Anyone using cash, especially large amounts of cash, is looked upon as abnormal and suspicious. We’ve been taught for three decades that anyone spending a large amount of cold hard cash is trying to hide something and is probably a criminal or tax cheat.

Certainly, a lot of criminals do use cash exclusively, but millions upon millions of normal, law-abiding citizens simply prefer to use cash as well.  Should we take the freedom to use cash away from the rest of us just because a small minority abuses it?

Unfortunately, the freedom to use cash is being slowly stripped away from citizens in an increasingly large number of countries, not just to clamp down on the criminal element, but to pad the coffers of inefficient and spendthrift governments.

Photo by net_efekt

About the author

Ron Haynes has written 988 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.