One of the bogus arguments deployed to argue in favour of cash is that it is somehow good for poor people. It really isn’t. The people trapped in a cash economy, who are generally the poorest, are the people who face the highest transactions costs. And when things go really wrong, it’s the people who are stuck with cash who have no back-up.
A trader has lost N300million cash in the inferno that destroyed Kano’s Sabon Gari market, overnight on Saturday… Over 3,800 shops were burnt in the inferno, described as the worst market fire disaster in Nigeria, with chairman of Sabon Gari Market traders’ association, Alhaji Nafi’u Nuhu Indabo saying over 75 per cent of the market was burnt down.
Remember when the Japanese tsunami hit? The bank and ATM networks went down (for a while) but the mobile phone networks stayed up.All of those people who had prepared for disaster by tucking away cash at home? Their money was washed away and forgotten, whereas people using cards and mobile phones went about their business with minimal interruption. I wrote about this a few years back.
After the earthquake and tsunami, the offline electronic money systems (such as Edy and nanoco) carried on working so long as there was power and the backup battery systems or generators were working, so you could still pop round to 7-Eleven and buy your staples. In fact, it was people who kept their money in cash who suffered greatly.
But I doubt that cash is the solution, which I suspect will be more to do with distributed identity / reputation management. Why? Because if there are floods, fires, meteor strikes or a zombie apocalypse, there simply isn’t enough cash in circulation to support the economy