Retailers Rejecting Customers’ Cash As More Ban Paper Money

“Your cash is not wanted here”, a growing number of retailers and restaurants throughout the US and UK are telling customers. But are reasons being given by companies for the new “cashless” approach — speed, efficiency, and the safety of store employees — valid enough to require something as utterly and downright unAmerican as rejecting cash? 

We think not, and unfortunately the trend of “cash not welcome here” establishments is growing, to the point that lawmakers are beginning to take note and could introduce legislation barring the practice, as Massachusetts has done already, and as the New Jersey State House could be set to do next. According to a Federal Reserve survey conducted in 2017 cited in The Wall Street Journal, cash represented 30% of all transactions in America, with 55% of those being under $10.

via the NY Times

Regardless of Americans’ longtime preference for plastic in most transactions, many of which take place online, research by the Federal Reserve found that cash is still king in terms of Americans’ daily lives and usage, and as the study concluded further, this remains true across all income levels:

Not only is cash used frequently for small value and in-person purchases, it is also used by a wide array of consumers. The data on cash use by household income provides two main insights. First, consumers make—on average—14 cash transactions per month, regardless of household income. It is also noteworthy that cash was the most, or second most, used payment instrument regardless of household income, indicating that its value to consumers as a payment instrument was not limited to lower income households that may be less likely to have access to an account at a financial institution.

But this reality is now pushing up against the new trend of the cashless restaurant, bar and retailer, and creating awkward and frustrating situations for consumers, as a new Wall Street Journal piece chronicles. In one scenario, a customer had to intervene on another’s behalf and play personal bank for a “card only” salon, even though there was plenty of cash on hand offered by the woman who couldn’t pay. Ironically, as the WSJ story notes, this created an “emergency”:

Sam Schreiber was mid-shampoo at a Drybar blow-dry salon in Los Angeles when someone from the front desk approached her stylist with an emergency: a woman was trying to pay for her blow-out with cash.

“There was this beat of silence,” says Ms. Schreiber, 33 years old. “She literally brought $40.”

More and more businesses like Drybar don’t want your money—the paper kind at least. It’s making things awkward for those who come ill prepared. After all, you can’t give back a hairdo, an already dressed salad or the two beers you already drank.

And in another situation where someone simply wanted to order a salad, but was refused upon presenting $20 cash, the rejected customer slammed the policy that created the whole awkward situation as elitist. The customer recounted for the WSJ:

Jaclyn Benton, 30, visited a Sweetgreen near her office in Reston, Va., last summer with $20 cash, but no credit or debit card because she had forgotten her wallet at home. When her order was ready and she went to pay, the cashier explained that the restaurant doesn’t take bills.

“It’s almost like when your credit card gets declined for silly reasons,” says Ms. Benton, who works as an event planner. “It makes you feel like you can’t afford it even though I had the money right there.”

Ms. Benton has no plans to go back: “It feels very elitist,” she says.

A Sweetgreen spokeswoman said its decision makes its team members safer amid the risk of robbery and improves the cleanliness and efficiency of the restaurants.

Another anecdote involved a 51-year old women left feeling humiliated at a Manhattan restaurant. Though the eatery proudly advertises that its food comes from “from farmers and partners as close to home as possible,” it apparently rejects your local cash.

Again, another customer had to intervene as essentially an impromptu bank after a deeply “awkward” situation, per the WSJ:

“We went into one of those stores where they sell Lotto tickets and I got change and I gave her the money,” says Ms. Linbourne, who lives in Hasbrouck Heights, N.J., and works for a construction-management company. “I was so embarrassed.”

A Dig Inn spokeswoman responded by saying the credit/debit card only policy “makes for a faster experience for customers and for employees, who don’t have to count cash or make runs to the bank.” Though we should note this only puts the burden on the customers themselves, as their “options” are then extremely limited. 

And as the WSJ report points out, consider that on every US bill the following words appear: “This note is legal tender for all debts, public and private.” However, currently there’s no federal law stipulating that business have to accept cash when offered, though likely no body of lawmakers prior to the modern advent of payment by plastic could have ever envisioned such a dilemma as cash being banned by stores. 

But this is getting noticed by local and state governments: “New York City Councilman Ritchie Torres of the Bronx recently proposed legislation that would prohibit retailers and restaurants from refusing cash, and city council members in Washington, D.C., and Philadelphia have proposed similar legislation,” according to the WSJ. Councilman Torres said “I refuse to patronize businesses that reject cash payments, even though I primarily use debit or credit.” He explained the practice is “discriminatory against the undocumented, people without bank accounts and credit cards, and those who wish to have their transactions be more private” all of which can create an unnecessary and “humiliating situation.”

Increasingly, it creates situations where a patron simply can’t complete the transaction or make a purchase. This could most impact the young and lower income homes which are limited in terms of local bank and checking/debit card account access:

Another demographic that often only has cash? Minors. Connie Young, who lives in Walnut Creek, Calif., says that in February, her 17-year-old son got excited when he learned a book he wanted was in stock at the local Amazon Books.

But her son returned home empty handed. When he told her the store didn’t take cash, she assumed there must have been a power outage and that the register was down, before he explained it was the policy. “I laughed. I was, like, you’re kidding,” says Ms. Young, 57. “I was just stunned.”

Though we are unlikely to ever reach a totally cashless society, the disturbing trend does bring up interesting questions of privacy and transacting “off the grid”… likely those advocating for a “no cash” future will be the same ones pushing for greater surveillance power of the state, as is quickly happening right now in places like China, where its Orwellian ‘Social Credit System’ seeks to abolish any and all private transactions altogether. 

The Depression Of 2019-2021?

Submitted by Brendan Brown, the Head of Economic Research at Mitsubishi UFJ Securities International via

The profound question which transcends all this day-to-day market drama over the holidays is the nature of the economic slowdown now occurring globally. This slowdown can be seen both inside and outside the US. In reviewing the laboratory of history — especially those experiments featuring severe asset inflation, unaccompanied by high official estimates of consumer price inflation — three possible “echoes” deserve attention in coming weeks and months. (History echoes rather than repeats!)

Will We Learn from History — And What Will Soon Be History?

The behavioral finance theorists tell us that which echo sounds and which outcome occurs is more obvious in hindsight than to anyone in real time. As Daniel Kahneman writes (in Thinking Fast and Slow):

The core of hindsight bias is that we believe we understand the past, which implies the future should also be knowable; but in fact we understand the past less than we believe we do – compelling narratives foster an illusion of inevitability; but no such story can include the myriad of events that would have caused a different outcome .

Whichever historical echo turns out to be loudest as the Great Monetary Inflation of 2011-18 enters its late dangerous phase.  Whether we’re looking at 1927-9, 1930-3, or 1937-8, the story will seem obvious in retrospect, at least according to skilled narrators. There may be competing narratives about these events — even decades into the future, just as there still are today about each of the above mentioned episodes. Even today, the Austrian School, the Keynesians, and the monetarists, all tell very different historical narratives and the weight of evidence has not knocked out any of these competitors in the popular imagination.

The Stories We Tell Ourselves Are Important

And while on the subject of behavioral finance’s perspectives on potential historical echoes and actual market outcomes, we should consider Robert Shiller’s insights into story-telling (in “Irrational Exuberance”):

Speculative feedback loops that are in effect naturally occurring Ponzi schemes do arise from time to time without the contrivance of a fraudulent manager. Even if there is no manipulator fabricating false stories and deliberately deceiving investors in the aggregate stock market, tales about the market are everywhere….. The path of a naturally occurring Ponzi scheme – if we may call speculative bubbles that – will be more irregular and less dramatic since there is no direct manipulation but the path may sometimes resemble that of a Ponzi scheme when it is supported by naturally occurring stories.

Bottom line: great asset inflations (although the term “inflation” remains foreign to Shiller!) are populated by “naturally occurring Ponzi schemes,” with the most extreme and blatant including Dutch tulips, Tokyo golf clubs, Iceland credits, and Bitcoins; the less extreme but much more economically important episodes in recent history include financial equities in 2003-6 or the FANMGs in 2015-18; and perhaps the biggest in this cycle could yet be private equity.

Echoes of Past Crises

First, could 2019-21 feature a loud echo of 1926-8 (which in turn had echoes in 1987-9, 1998-9, and 2015-17)?

The characteristic of 1926-8 was a “Fed put” in the midst of an incipient cool-down of asset inflation (along with a growth cycle slowdown or even onset of mild recession) which succeeds apparently in igniting a fresh economic rebound and extension/intensification of asset inflation for a while longer (two years or more). In mid-1927 New York Fed Governor Benjamin Strong administered his coup de whiskey to the stock market (and to the German loan boom), notwithstanding the protest of Reichsbank President Schacht).

The conditions for such a Fed put to be successful include a still strong current of speculative story telling (the narratives have not yet become tired or even sick); the mal-investment and other forms of over-spending (including types of consumption) must not be on such a huge scale as already going into reverse; and the camouflage of leverage — so much a component of “natural Ponzi schemes” — must not yet be broken. The magicians, otherwise called “financial engineers” still hold power over market attention.

Most plausibly we have passed the stage in this cycle where such a further kiss of life could be given to asset inflation. And so we move on to the second possible echo: could this be 1937-8?

There are some similarities in background. Several years of massive QE under the Roosevelt Administration (1934-6) (not called such and due ostensibly to the monetization of massive gold inflows to the US) culminated in a stock market and commodity market bubble in 1936, to which the Fed responded by effecting a tiny rise in interest rates while clawing back QE. Under huge political pressure the Fed reversed these measures in early 1937; a weakening stock market seems to reverse. But then came the Crash of late Summer and early Autumn 1937 and the confirmed onset of the Roosevelt recession (roughly mid-1937 to mid-1938). This was even more severe than the 1929-30 downturn. But then there was a rapid re-bound.

On further consideration, there are grounds for skepticism about whether the 1937-8 episode will echo loudly in the near future.

In 1937 there had been barely three years of economic expansion. Credit bubbles and investment spending bubbles (mal-investment) were hardly to be seen. And the monetary inflation in the US was independent and very different from monetary conditions in Europe, where in fact the parallel economic downturn was very mild if even present. And of course the re-bound had much to do with military re-armament.

It is troubling that the third possible echo — that of the Great Depression of 1930-2 — could be the most likely to occur.

The Great Depression from a US perspective was two back-to-back recessions; first the severe recession of autumn 1929 to mid-1931; and then the immediate onset of an even more devastating downturn from summer 1931 to summer 1932 (then extended by the huge uncertainty related to the incoming Roosevelt Administration and its gold policy). It was the global credit meltdown — the unwinding of the credit bubble of the 1920s most importantly as regards the giant lending boom into Germany — which triggered that second recession and snuffed out a putative recovery in mid-1931.

It is possible to imagine such a two-stage process in the present instance.

Equity market tumble accompanies a pull-back of consumer and investment spending in coming quarters. The financial sector and credit quakes come later as collateral values plummet and exposures come into view. In the early 1930s the epicentre of the credit collapse was middle Europe (most of all Germany); today Europe would also be central, but we should also factor in Asia (and of course China in particular).

And there is much scenario-building around the topics of ugly political and geo-political developments that could add to the woes of the global downturn. Indeed profound shock developments are well within the normal range of probabilistic vision in the UK, France and Germany — a subject for another day. And such vision should also encompass China.

Brendan Brown is the Head of Economic Research at Mitsubishi UFJ Securities International.

Training Jihad (Again): Pentagon Peace Deal Proposes “Job Opportunities” For Taliban

How much worse can America’s eighteen year long “forever war” in Afghanistan get? This is not The Onion, but Pakistan’s major English language daily, The Dawn citing Pentagon reports: “Eager to persuade Taliban to join the Afghan peace process, the United States is offering them a safety network that includes creating job opportunities for the insurgents.” 

Taliban in the Shindand district of Herat province, Afghanistan, via AP.

This is part of a new Pentagon peace process plan to “rehabilitate the rebels” and directly engage the notorious jihadist group. In a statement which exposes the utter futility and hypocrisy of the whole “war on terror” post-9/11 narrative, the Pentagon proposal submitted to Congress this week attempts to defend the offer by noting the Taliban will only lay down its weapons “if they have an opportunity to earn enough money to provide for their families.”

According to the Pentagon draft plan cited in The Dawn:

Although some members of the Taliban may be weary of fighting and ready to lay down their weapons, they will only rejoin society if they believe their safety and the safety of their families are guaranteed, and if they have an opportunity to earn enough money to provide for their families.

This comes after over 2,372 American troops have died in the war in Afghanistan, with more than 20,000 wounded, and at a cost to the American taxpayer of $1.07 trillion, according to one recent study

Since the summer the US State Department has been engaged in direct and indirect talks with Taliban officials. Last month the U.S. special envoy to Afghanistan indicated he hopes to strike a final peace deal with the Taliban by April of 2019, according to Reuters citing local media reports. Khalilzad told reporters at the time that he hopes “a peace deal is reached before April 20 next year,” when Afghanistan is planning to hold a presidential election. While six months is ambitious and a tad optimistic, it appears more about creating the conditions for the now ongoing face-saving American exit from the approaching two decade long quagmire

President Trump recently announced a draw down of 7,000 US troops leading to an eventual full pullout. 

However, conservative media is thrashing the latest Pentagon proposal to give Taliban members “job opportunities” in what sounds like some kind of prison-release halfway house work program. For example, Breitbart comments:

The U.S. is offering Taliban narco-jihadists — the killers behind most American military fatalities during the ongoing Afghan war — safety and job opportunities as part of a peace deal

For its part, reports suggest the Taliban could agree to a residual U.S. military presence in an advisory capacity as a bulwark against the Islamic State and other terror groups, which could actually involve training and advising former Taliban jihadists(!).

But regarding Trump’s latest shock announcement of a massive draw down of forces, chairman of the Joint Cheifs Gen. Joseph Dunford dismissed any current “orders” of withdrawal as “rumors”. 

“There’s all kinds of rumors swirling around,” Dunford told U.S. forces, according to Stars and Stripes. “The mission you have today is the same as the mission you had yesterday.” Pentagon officials have elsewhere repeated they’ve received “no orders” to withdraw American forces from Afghanistan yet.

However, with the latest Pentagon proposal for what we could essentially call taxpayer sponsored “jihadi rehab,” US trainers in Afghanistan could find themselves in an interesting situation indeed… perhaps even a full-circle return to when the CIA funded and trained Afghan mujahideen and Talib insurgents during the Afghan-Soviet war of the 1980’s in the first place.