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Cashless Society Will Enable Left To Unbank Political Enemies

By Peter RoffTownhall Finance

The trend towards a cashless society took a big leap during the worst of the COVID-19 crisis. The ability to purchase vital goods online using credit or debit cards and third-party payment sites made it possible for families to function as the brick and mortar outlets were forced to temporarily close.

It’s a convenience, but one that comes with a price. Americans should be concerned about the potential for the government, for banks, and for payments companies to infringe on their freedoms by preventing them from making legal purchases, barring them from platforms, or using their transaction history against them.

This may be one of the reasons cash continues to be the most frequent payment instrument. It’s used in 30 percent of all transactions and more than half of transactions under $10. Those numbers are likely to drop as more and more vendors are adopting cashless transaction policies. Some retailers, sports stadiums, restaurants, and other businesses now refuse to accept cash – and the number of them who do not is growing at an alarming rate.

This all impacts consumer freedom of choice. Even absent the pressure from the government, payment providers like PayPal have unilaterally closed the accounts of organizations because of complaints about their political leanings. Payment processing and financing firms are putting restrictions on the legal firearm industry like the 2018 Citibank prohibition on its business partners selling firearms to customers under the age of 21 and Bank of America’s announcement it would stop lending to certain firearms manufacturers.

And, along with PayPal, Square, Stripe, and Apple Pay do not allow their services to be used to purchase firearms. “We do not believe permitting the sale of firearms on our platform is consistent with our values or in the best interests of our customers,” said a spokesman for Square.Other banks and card companies have explored methods of identifying gun purchases – such as unique purchase codes for gun retailers and requiring specifics on the type of gun purchased – possibly as a prelude to restricting those transactions.

To dictatorial regimes, the advent of the cashless society is a boon. China is planning to eliminate cash as a means of payment as it seeks to further control its citizens and monitor their behavior. Leaders in Beijing understand cash is a ‘censorship-resistant’ currency whose use cannot be controlled, approved, or denied by a third party or government.

The Chinese can do this because whenever a customer uses a digital payment instrument, card product, or mobile app, they are giving merchants, financial institutions, and technology companies the ability to track the time, location, amount, and category of every purchase made. That data allows them to assign Social Credit scores to individual citizens and determine which goods and services they can and cannot buy. In the United States, that same information is collected and sold to other commercial institutions, often without the consumer knowing it.

In a completely cashless society, the choice of whether to leave a “digital transaction trail” will be made for us. We won’t have the option while financial intermediaries are put in the awkward position of making decisions for us about what we can buy when deciding what products and providers they’ll work with and which ones they’ll freeze out because of government or political pressure. 

A handful of states and cities have enacted laws protecting the use of cash but that might not be enough. The move toward a “cashless society” still accelerates. Recent surveys show that 78 percent of all Americans would support a federal law requiring all businesses to accept cash. It may be time to head in that direction.

The potential problems are not far-fetched fringe notions coming from the tinfoil hat brigade. They’re real and have already been glimpsed in Operation Choke Point, an Obama Administration initiative to quietly pressure banks to withhold services from payday lenders, firearms dealers, and other legal businesses. Without due process, firms found themselves locked out of the financial marketplace as their banking relationships terminated abruptly. In a cashless society, actions like that could be undertaken with a line of code, with no one the wiser until it happens. Yet most Americans are still completely unaware.


Sanders and AOC want to cap interest rates on consumer loans at 15% – here’s why that’s a bad idea

By: Anne FlemingThe Conversation

Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez want to cap consumer interest ratesin an effort to curb “sky high” credit card charges and other forms of predatory lending.

While that sounds nice in principle, in practice their plan would hurt some of the people it’s intended to help by killing off an industry that’s vital to struggling households: short-term, small-dollar lending. 

The history of small-dollar loans and their regulation – which I explore in a recently published book – shows why Sanders and Ocasio-Cortez should rethink their proposal or risk emboldening the type of lending they hope to stamp out. In part this is because their plan relies on an oversimplified history of the rules that limit usury, or how much interest lenders can charge.

A brief history of usury

Laws against usury are an ancient idea. Religious texts such as the Bible and Quran prohibited all forms of usury, while the Romans barred charging compound interest. 

And when the early American colonists began settling up and down the Eastern Seaboard, they brought with them England’s usury law. By the 1970s all but three states still had general usury laws on the book. Annual rate caps ranged from as little as 4% in North Dakota to as high as 30% in Rhode Island.

These caps became less effective in 1978 when the U.S. Supreme Court ruled that state laws don’t apply to loans from out-of-state banks. This allowed credit card-issuing banks to avoid more stringent usury laws by locating in states with higher caps or none at all. Some states, such as South Dakota and Delaware, repealed their laws after the ruling to attract banks. 

So while usury laws still generally restricted rates on some types of loans, the sky became the limit for bank-issued credit cards, with some charging subprime rates as high as 79.9% per year.

Sanders and Ocasio-Cortez would like to return to the world as it existed before what they call that “disastrous” Supreme Court ruling. Their Loan Shark Prevention Act would impose a 15% annual interest rate cap on all consumer loans while allowing states to set even lower rates. 

But their understanding of history isn’t quite right. That’s because starting in the early 20th century, states began making exceptions to their usury laws to allow for small loans.

Small-sum lending laws

In the early 20th century, state usury laws applied to almost all types of loans. As a result, small-dollar lending was effectively outlawed nearly everywhere because lenders could not operate profitably at the legal rates of charge. 

Usury laws fixed maximum charges as a percentage of the amount borrowed on an annual basis, which yielded a tiny dollar fee for small, short-term loans. For example, in a state with a 6% cap, a lender offering a US$200 three-month loan would be able to charge only $3 in total interest – the monthly rate would be just 0.5%. At such low rates, small-sum lenders could not cover the costs of running their business.

But working-class households still needed access to credit so strict usury laws didn’t diminish the demand for these loans. Rate caps simply discouraged legitimate enterprises from entering the marketplace. That left borrowers to deal with loan sharks willing to break the law.

The philanthropic Russell Sage Foundation, which studied the problem in the 1910s, urged states to exempt licensed small-sum lenders from their general usury laws. The foundation drafted a model law, which became known as the Uniform Small Loan Law, that allowed these lenders to charge up to 3% per month, or 36% on an annualized basis, on cash loans of a few hundred dollars.

Today, all 50 states continue to allow small-sum lenders to charge more than 15% per year.


George Washington’s Farewell Address

“If I may even flatter myself, that [these counsels] may be productive of some partial benefit, some occasional good; that they may now and then recur to moderate the fury of party spirit, to warn against the mischiefs of foreign intrigue, to guard against the impostures of pretended patriotism.”

Washington_Farewell_BroadsideThe Address of Gen. Washington to the People of America on His Declining the Presidency of the United States

September 19, 1796

Friends and fellow-citizens: The period for a new election of a citizen, to administer the executive government of the United States, being not far distant, and the time actually arrived, when your thoughts must be employed designating the person, who is to be clothed with that important trust, it appears to me proper, especially as it may conduce to a more distinct expression of the public voice, that I should now apprize you of the resolution I have formed, to decline being considered among the number of those out of whom a choice is to be made. Continue reading


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