Why we still need cash

A few years ago economist Willem Buiter proposed to abolish cash money. He argues that with modern technology, such as debit cards, we do not need cash any longer and that only criminals have an interest in maintaining cash. Although he might be right, Buiter overlooks one key aspect.

The problem with electronic systems is that they vulnerable for Solar flares, a sudden outburst of charged particles from the Sun. The nasty thing with Solar flares is their capacity to destroy electronic equipment. So if your computer is hit by such flare, all your data will be lost for ever.

From RationalWiki we have the following quote regarding bitcoins:

There is also the matter of built-in deflation. As more and more bitcoins get mined, it requires more and more processing power to mine new ones. Also, if your wallet file is deleted, your bitcoins are gone for good.

So if a Solar flare hits the earth or a Space habitat, and all computers are robbed of their data, a cashless economy will lose all its money. However, electromagnetic storms cannot destroy cash, therefore it would be wise to keep at least a part of our money in the form of cash.

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8 thoughts on “Why we still need cash”

  1. I don’t know what the probability of a massive solar flare which will destroy electrical data is but I would guess it is one in a zillion. You can keep your cash reserves in gold or platinum which is not subject to massive electrical disturbances. Not many of us have huge cash reserves so most of us have nothing to worry about if our cash or digital financial accounts are stolen or destroyed.

    1. Solar flares poses together with meteorite impacts one of the most important danger to orbital space settlements. Whether a solar flare will be able to destroy data, depends on the strength of that solar flare. Fortunately the greater solar flares are much less frequent than the smaller ones. However, the consequences of a major solar flare are far reaching, and it might take years to restore the resulting damage. The effects should be taken into account, along their probability.

  2. Even without solar flares , there are times of natural disasters beit hurricanes , earthquakes or other events that disturb power grids for extended periods of time. Then there are wars and civil unrest… ATMs do not work. Networks don’t work…. Cash/currency is more convenient or easier to work with than barter.
    Does the majority of the world’s population walk around with a debit card handy?… Really?
    Just thinking outloud. 🙂

    1. Though hurricanes and earthquakes are not the primary concerns of orbital space settlers, (but civil unrest and war do) you make several important observations.

      1. Thank you. You are very kind.
        I am afraid that I forgot the leap into the future that your republic offers…
        Perhaps there, in a free exchange of skills and knowledge…?

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