Excerpts from an essay in the Conversation by
Economist and Research Scientist, The Ohio State University
A cashless society that solely uses credit cards, debit cards and electronic transfers is dependent on a complex network to replace physical money. This network requires three things to work all the time.
First, there always has to be electricity to power the computers and network storage. Second, communication between all parts of the network needs to be available. Finally, the network has to be secure, so only authorized money transactions occur.
Hurricanes Irma and Maria devastated Puerto Rico in September. Many weeks later, less than 20 percent of the electricity has been restored, and no one really knows when the rest of the island will regain power. Because the electricity has been cut off to almost all cities and towns, the entire island has reverted to a economy based on cash, which is in very short supply. Credit and debit cards can’t be used because there is no way to process transactions and no power to run credit card terminals and readers.
Wildfires are currently ravaging Northern California. One of the problems caused by the fires is that the flames have destroyed numerous cell towers. When the phone network goes down, it is impossible both to reach loved ones and for credit and debit card readers to connect to the network. Without a connection, those without cash can’t buy fuel to flee, pay hotels for temporary shelter or purchase food.
Finally, we’ve recently learned how unsecure the network that processes transactions and protects our financial data has become. As most people do not possess piles of coins or bills anymore, our money consists of entries in bank and brokerage databases. If those entries change or disappear, people’s wealth vanishes, too.
A cashless society means a country’s economy is vulnerable to anything that causes a long-term disruption in power, communications or security. And those threats are rising. The number of natural disasters striking the U.S. is increasing, and wars are no longer being fought using just conventional weapons. Today the computers that control a countryare playing a much bigger role.
Cash can ensure the economy won’t collapse in an emergency, since people with cash are still able to buy and sell.