[Dave Birch] I happened to be watching a mildly diverting TV drama called “Mad Dogs and Englishmen” on a plane the other day. It’s about some English guys in Spain. I won’t spoil it for you by telling you what it’s about, but at one point the chaps are in a bar and they try to pay with a €500 note. The waiter refuses saying that he doesn’t have enough change in the till and that, anyway, only drug dealers try to pay with €500 notes. It’s meant to be a humorous reference, because (for complicated plot reasons that are not relevant to this post) the note actually does come from drug dealers stash as, I imagine, most of them do. While I was watching it, the cabin crew came around asking if anyone wanted to buy any duty free shopping. I glanced at the in-flight catalogue and noticed that it said that British Airways will accept cash (which I was surprised about) but will not accept “high value notes”, specifically mentioning the $100 and €500 notes.

A MAN who brought a lawsuit against Continental Airlines for refusing to accept cash for an in-flight transaction has had his case dismissed by a state Superior Court judge.

[From Continental Airlines: Taken to court over a cashless cabin | The Economist]

I should think so too. What a pointless, expensive and time-consuming hassle it must be to deal with cash on the plane: not just taking it and making change, but counting up and reconciling at the end of the flight then depositing the proceeds, managing and distributing float and so on. But back to the €500 notes. What is the point of them? Am I exaggerating to say that the majority are used for drug dealing? Probably. The majority are undoubtedly used for tax evasion. Look at what’s happening in Southern Europe at the moment. Michael Lewis’ wonderful, astonishing and frightening report from Greece is a typical must-read. He mentions in passing that

The easiest way to cheat on one’s taxes was to insist on being paid in cash, and fail to provide a receipt for services. The easiest way to launder cash was to buy real estate. Conveniently for the black market—and alone among European countries—Greece has no working national land registry

[From Beware of Greeks Bearing Bonds | Business | Vanity Fair]

I’ve heard it said before that the predominant use of €500 notes is to evade Spanish property taxes. Tax evasion is endemic in large parts of Europe. Greek doctors apparently earn so little that they are entitled to draw welfare, yet many of them mysteriously live in villas and own yachts. I’m not being nationalistic here, incidentally. It looks as if some British doctors have been careless with their record keeping too.

The taxman’s amnesty, the Offshore Disclosure Facility and New Disclosure Opportunity, has resulted in over 50,000 voluntary disclosures. In addition, the Tax Health Plan, which was aimed at medical professionals, produced a further 1,500 voluntary disclosures.

[From HMRC opens 16 criminal cases over tax evasion – Telegraph]

As the Deputy Governor of the Bank of Sweden put it

We use more cash than is optimal for society, so what should we do about it?

Well, use less of it might be a good starting point. Why is it so hard to get going? I’m beginning to wonder if the extensive use of cash to avoid tax is one of reasons why it’s proving so hard to get rid of it. Too many people benefit (at the expense of the poor and honest, obviously) from the black economy.

With 76% of Capitec customers believed to use taxis as their primary mode of transport, the bank expected them to adopt a smart card technology in preference to carrying around cash [but] Capitec has had limited success with this initiative: taxi drivers are wary of implementing it owing to a lack of trust in “virtual currency”, but also because it would be better not to create a paper trail for the taxman to follow.

[From Fin24.com>>Money Clinic>>Can South Africans ditch cash?]

So there’s an obvious resistance to cashlessness coming from people who evade taxes. On the other hand, in the case of taxi drivers, the experiences in New York suggest that revenues go up when customers can use cards instead of cash. If people could see that having everyone else pay their fair share of taxes would make them better off, they’d maybe give it a go.

I suppose the other people who might be sad are artists, like the chap who made the room full of $1 bills at the Guggenheim. I went to see it earlier in the year.

German artist Hans-Peter Feldmann is breaking the museum’s Hugo Boss award into $1s to line it with $100,000 worth of currency.

[From Artist to Cover Guggenheim in 100,000 Dollar Bills — ANIMAL]

Bank notes might also have some ceremonial functions, but they are no longer needed to support commerce and industry. I was in a discussion with someone yesterday who mentioned the wedding tradition in some countries of pinning banknotes to the bride. In these cases, I’m sure that enterprising entrepreneurs will produce special “money” that is not actually legal tender, much like the Chinese “Bank of Heaven” notes that you see at New Year. But I have to say that there are some uses of cash that I simply cannot envisage an electronic replacement for.

The Feminist Initiative (Feministisk Initiativ – Fi) carried out its promise to burn 100,000 kronor ($13,000) on Tuesday morning, claiming that a half-page ad would never have had the same impact in the fight for equal pay between the sexes.

[From Schyman burns 100,000 kronor in wage protest – The Local]

This shows an outstanding appreciation of the art of PR. People have such an emotional connection to cash. People other than me, I mean.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers


  1. Dave – I was speaking to a flight attendant about their shift to only accepting cards the other day. She said one of the main reasons that the airline had done it was because of fraud…but not the fraud I expected.

    Apparently the flight attendants were caught taking the little booze bottles home, refilling them from their own stash, and selling the refilled bottles on the next flight (but pocketing the cash as no sales of airline inventory were taking place).

    Shifting to card payment only has the benefits of removing float, etc., but it may have also boosted the official on-board sales of alcohol significantly!

  2. Aran: that’s what the receipt and the cashtill was invented for: to engage the consumer in the protocol to document the transaction. If the consumer suspected the sales person of pocketing the money or misdocumenting the transaction, the consumer would alert the store owner. This works because the consumer has an interest in lower prices and honest trading.

  3. Dave: There is another use for the supernote: facilitating the run on the banks. Recent numbers put substantial upticks in supernote withdrawals when Lehman Brothers crashed.

    It seems inevitable that we’re going to see some more of this real soon now… It might not be a good time for banks to try and shift more transactions to themselves, given their tendency to wobble as soon as the markets say boo.


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