Tag Archives: electronic systems

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.