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ISIS and the End of Cash

If you listen to administration officials, the key to winning the war on ISIS is to cut off the group’s funding, some of which the government claims is tied up in stacks of U.S. dollars. At the same time, banking interests and policymakers claim possession of a $100 bill is practically evidence of criminality in and of itself. As these two efforts to stigmatize cash intersect, America faces a dramatic push to eliminate, or at the very least drastically curb, the existence of physical money.

Throughout the first 15 years of the global war on terror, there have been a lot of changes to our society in the name of war. But warnings about the effort to eliminate physical money within the United States still sounds like hyperbole. Not even the worst dictatorships in history eliminated money outright. Yet the intermittent talk of some future cash-less society is growing more intense, and high-profile officials like former Treasury Secretary Lawrence Summers are ever more comfortable in making public their disdain for paper money.

On February 4, the Financial Times ran an op-ed touting “The Benefits of Scrapping Cash [1],” arguing that the outright elimination of physical money would be a great way for America to hinder “drug-dealers and terrorists.” Such articles aren’t totally foreign to the FT, which ran another article back in August condemning paper money as a “barbarous relic [2].” Yet this wasn’t a simple case of the Financial Times running some policy flack’s vision of a perfect banker’s paradise.

Just two weeks later, Summers was penning a piece for the Washington Post [3] calling for a global agreement to withdraw from circulation all paper money worth $50 or more. That same day, articles began circulating claiming that ISIS had switched [4] to an exclusively U.S. dollar-denominated economy, based on the claim on a single “activist” in the Syrian city of Raqqa, who was quoted in the Associated Press under a pseudonym.

Summers’ article was in great measure a chance to advertise a Harvard Kennedy School working paper called “Making It Harder for the Bad Guys [5],”by Peter Sands, a member of the board of directors for the Institute of International Finance.

The Sands paper starts with the usual argument that high-denomination paper money is only really used for illegal activities, padding the usual laments about tax evaders with talk of international terror, that one tried and true excuse which can sell almost anything. Ultimately, he concludes that physical money is anachronistic, and that there are limited downsides to phasing out high-value paper money, along with potential benefits to the banking community.

If starting with the premise that cash “offers anonymity, leaves no transaction record and is universally accepted” and ending with the conclusion that it must be stopped is scary, the benefits to bankers are even more so, with the argument that physical money puts cap on interest rates at zero percent.

A rate of zero, or literally no interest, aims to discourage saving by offering no premium for putting off spending to a future date. Yet if everyone’s savings exist solely as electronic credits in the formal banking system, the option exists to have a negative interest rate, to charge people money for not spending. This, in a banker’s view, is the ultimate way to stimulate spending, but is impossible so long as people can (and undoubtedly would) withdraw all their money if the bank started charging them interest to keep it deposited.

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Though both Sands and Summers stop short of the call to outright eliminate cash in one swoop, Sands concedes that the effectiveness of removing higher denominations would be limited by whatever they stop with. Eliminating the $100 bill doesn’t mean much if everyone just uses $50’s, and eliminating the $50 bill just has everyone using $20’s. It’s hard to imagine, once this paring down of cash begins in earnest, however, that we will be left with much more than a nickel for the gumball machine.

And there is no evidence the ISIS claim is even true. For every claim of ISIS seeking to use U.S. dollars, there is an alternate claim, with the same lack of evidence, that ISIS uses Bitcoin [6] for all its important transactions, or demands jizya payments from Christians to be made in gold [7].

It seems clear that ISIS will continue to use a piecemeal currency system for the foreseeable future, using various nations’ cash where convenient, and indeed using the international banking system when it suits their interests.

In desperation for an “easy fix” for the ISIS war, the administration has turned to the cash elimination idea after things like bombing oil trucks didn’t work. In the past month the Pentagon has carried out multiple airstrikes in civilian areas of Mosul explicitly because they believed a large pile of physical currency was in the area and could be destroyed through sheer force of arms. While they hype blowing up “millions” in cash [8], there is little indication that it has done anything to stop ISIS.

At most, the elimination of U.S. currency shifts ISIS toward using some other nation’s cash as a substitute, at best creating a nuisance for them. At the same time, it dramatically curbs personal privacy within the United States and further empowers banks to fleece the American public.

From being frisked by the TSA to accepting NSA surveillance of personal emails, Americans have had to give up an awful lot of freedom in wartime. The loss of the right to use physical currency, however, would put us in the rarefied air, among the worst dystopias conceived in fiction.

Jason Ditz is news editor at Antiwar.com [9], a nonprofit organization dedicated to the cause of non-interventionism. His work has appeared in Forbes, the Toronto Star, Minneapolis Star-Tribune, Providence Journal, Washington Times, and Detroit Free Press.

17 Comments (Open | Close)

17 Comments To "ISIS and the End of Cash"

#1 Comment By Gabriel Armas-Cardona On February 24, 2016 @ 1:51 am

USD is known around the world as both a global currency and the cheapest to convert; unilaterally ending the $100 bill would increase the cost to use USD and reduce the dollar’s global presence. I’ve lived abroad for a number of years, and from personal experience I find that currency exchanges around the world tend to trade in dollars at a better rate than any other global currency. When my Syrian friends angry at the West for bombing their homes converted their money to flee the country, there was no question but to convert it to USD.
Exchanges give even better deals for $100 bills, typically the best deal available. If they kill the $100, and somehow remove it from circulation in the other 194 countries, the USD won’t get as good a rate. Maybe exchanges would give a better rate for $50s but not as significant as $50s come with higher transaction costs than $100s. Increasing the fee on transacting in USD by a minimal amount has more than a minimal impact. Unless Summers gets his global agreement, which I doubt, any unilateral move to end the $100 would have the effect of discouraging the use of USD around the world.

#2 Comment By Fran Macadam On February 24, 2016 @ 4:26 am

When cash changes hands at the checkout counter, banksters don’t get their vigourish. When the transaction is handled by the electronic banking system, merchants are charged a few per cent on every transaction, raising the price to all consumers.

Money was designed as a public service by government to empower people’s financial freedom and to make commerce easy. Like everything else, it is transforming into another tool of elites to control people instead, for the elites’ own benefit.

#3 Comment By interguru On February 24, 2016 @ 4:52 am

The largest bill, $100, is equivalent to $10 in 1948 according to the CPI inflation indicator.

As time goes on, I doubt ( barring runaway inflation ), the US will print larger bills, so the $100 will become less and less.

During the Iraq war, the US airlifted $12 billion of $100 bills, which weighed in at 363 tons. This shows that cash is no longer useful for large transactions already.

As a side note: most of it was untracked, and melted away. I know of a distant relative who worded as contractor and returned home to Turkey with suitcases full of cash.

#4 Comment By Johann On February 24, 2016 @ 10:13 am

Very good article. Thank you. Its frustrating that this new initiative for a cashless society is getting little attention. I’m with Fran on this one. the credit card companies, all of which are backed by big wall st banks want a cut of every single economic transaction. They are incensed that there are still people by-passing their credit card cut by using that “barbaric relic” called cash.

And then there is the government, who wants to be able to monitor all of everyone’s economic transactions.

And then there are the so-called Ivy league economists who think the only reason their economic theories have failed is because central banks can’t double down on them by going from zero to negative interest rates without the threat of people withdrawing cash from their bank accounts en masse.

So there are some powerful forces that want to make this happen. It think they will eliminate the $100 bill and our clueless people will not even care, but if they try to eliminate cash, it will finally wake people up and there will be a yuuge backlash. There will be pitchforks and torches.

#5 Comment By Montana Marvin On February 24, 2016 @ 11:34 am

Sounds like another instance where the global finance cartel and their neocon friends want to use unfortunate events (and the “War on Terror”) to further subjugate us.

#6 Comment By Neal On February 24, 2016 @ 1:56 pm

Give up cash so Visa and Mastercard etc. can extract a fee from every transaction. Goodness, that would be quite lucrative.

Give up cash so some government can seize every last penny of savings you have (with negative interest rates for example or in a tax dispute). That would never happen.

I’m all for fighting crime and terrorism. Let’s just be sure that the banking system and the government aren’t the criminals. There are plenty of corrupt governments in the world today. There are plenty of hacker – apparently mostly in Russia – working day and night to steal from us too.

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#7 Comment By Rostale On February 24, 2016 @ 4:29 pm

The thing of it is, getting rid of cash won’t do anything to get rid of crime or terrorism- banks caught aiding drug cartels get off with a slap on the wrist.
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#8 Comment By Christopher On February 24, 2016 @ 5:49 pm

Pitchforks and torches.

#9 Comment By Erik On February 24, 2016 @ 10:18 pm

There are a lot of small businesses and freelancers throughout this country who thrive on physical currency in large denominations. Eliminating cash sounds like an effort to make it impossible for anyone who generates value to escape becoming a serf of the banking system with all of the attendant fees and restrictions. I work at a small, legal business where the owners file all proper tax documents and make payment by credit card available to their customers, but they are so very grateful when high-spending customers come in with envelopes of $100 bills because accepting cash saves a ton of money in transaction fees. For a small business, those narrow margins are everything.

#10 Comment By Trev On February 25, 2016 @ 2:16 am

Jason (and others): If you haven’t already viewed it, “belangp” did, in his typical virtuoso fashion, an outstanding analysis of the above war on cash. See it:

#11 Comment By musings On February 25, 2016 @ 8:17 am

I really hate the slim suppositions that form the just-so stories of our rulers. It’s as bad as saying that patent leather shoes can allow boys to see up your dress.

In reality the latest threat (with which I am sure they will follow through) to remove the $100 bill needs some traction from the public. Once it is cowed into believing the protection angle to the story, anyone who opposes this situation (which will lead to negative interest rates on savings), then no matter what the well-supported “enemy” is up to, the policy will be unveiled and irreversible. Those who will impose it will do so in the name of patriotism. In reality, it will be the very opposite. Being an American will just be another burden, not a source of pride in what our founders, innovators and own selves have achieved.

#12 Comment By grumpy realist On February 25, 2016 @ 12:28 pm

JP Morgan Chase has already gotten rid of their change-sorting machines. They now only take coins if you count them out and wrap them up in the wrappers.

#13 Comment By Biff On February 25, 2016 @ 12:36 pm

Got stopped in a west coast airport heading to Asia by the federal goons. We had a couple dollars over our ten thousand limit, and they treated us like we had twenty pounds of heroin. Down to gulag we went for a thorough search of our bodies and everything we had. Missed our international flight, and it was quite expensive(airlines don’t care about your problems) to continue our journey, not to mention the $1200.00 fine they slapped us with. They’ve got it in for “our” money.

#14 Comment By KA On February 25, 2016 @ 7:42 pm

Next time how America would finace a drug or terror business? How a future ISor Al Qiada would be financed by US? Big banks will not be able to launder drug money . Is America getting out of this business ?

#15 Comment By Fascist Nation On February 27, 2016 @ 12:25 am

I’m sure ISIS is paid by the pallet full of $100 bill flown in on C-130s by the US Government.

I’m sure drug dealers love to receive $100 bills.

I’m sure child pornographers pay for their young conquests with $100 bills.

Did I forget any other scum of the earth? Oh yes, I’m sure elected officials, judges and cops enjoy $100 bills too.

#16 Comment By /mark240 On March 3, 2016 @ 4:16 am

If the US forces a cashless society, they will impose international cooperation. Otherwise we would all demand to be paid in Euros, or Gold, Silver, anything we could keep on hand. So they would force a roll-up of all other currency. They will increase house raids- all cash or gold must be drug money!

Interesting, you never hear- gosh, terrorists and pedophiles use cars and roads- we can’t have that! No more private car ownership- only buses! No more cash, use your visa/mc and state issued id to ride.

#17 Comment By Gary M On March 21, 2016 @ 3:18 pm

Are you aware that the serial number on every bill is tracked by the banks? They know which bills are dispensed by the ATMs to which person. Then the bills from the merchants are scanned by serial number as they come back to the vaults. This data is accessible to the government at any time. While the bills might wander some between the ins and outs, the data that is recoverable to track your life is getting more complete every day. Lets go back to non track able metal currency. I am not talking about the gold standard here. I am talking $1, $5, $10, and $20 coins.