Sunday, November 27, 2022

Puerto Rico Suffers Physical Cash Shortage After Power Grid Destroyed

Puerto Rico Suffers Physical Cash Shortage After Power Grid Destroyed

Here’s a twist on the “War on Cash” that better reflects economic and natural reality: Puerto Rico is desperate for physical money to keep its economy going, after two hurricanes ruined the U.S. territory’s power grid.

Also read: Managers of ICO-Related Exchanges Must Remain in China

It raises the question: if physical cash is removed from the economy, what would people trade with if the grid goes down?

Puerto Rico’s Power, Communications Infrastructure Severely Damaged

Puerto Rico power grid damage
Image: AP

Credit and debit card transactions are now virtually non-existent in Puerto Rico, according to Bloomberg. The local power grid, already damaged by Hurricane Irma two weeks ago, was finished off “one hundred percent” by Hurricane Maria on 23rd September.

The hurricanes also knocked down wireless communications towers, meaning electronic payments aren’t possible even with generators. It’s all a sobering thought for those looking to make all cash digital — including Bitcoin fans.

Even physical cash isn’t widely available, since much of it is held in banks and ATMs aren’t working either. Puerto Ricans, like many, were becoming accustomed to using cards and digital dollars for everyday payments.

Digital, Cashless Utopias – Be Careful What You Wish For

This contrasts the stories we hear of “cashless utopias” like Sweden and Denmark, where businesses frequently refuse physical cash. The mainstream media breathlessly reports this as a modern, positive development. Physical cash is for criminals, they say, echoing government talking points.

But even some media reports about disappearing cash have tempered their enthusiasm in the past couple of years, wondering whether the cashless goal is indeed a noble one.

Puerto Rico streetWhat happens when you achieve digital cash nirvana, and suddenly there’s no way to access it? Even Bitcoin is probably not the answer here.

Sure, Puerto Rico’s infrastructure was fragile and more vulnerable than most other parts of the U.S. But any country could suffer localized power and communications outages that would leave people wishing they had a backup means of value storage and exchange.

“If there’s no power or internet you’ve got far bigger problems than money,” some say. However, for the moment, Puerto Rico has neither and yet daily life and shopping for necessities must go on. Society itself has not broken down, just digital commerce.

Bloomberg appeared more concerned at authorities’ inability “to trace revenue and enforce tax rules” than the wellbeing of the populace. However its reporter did go on to interview several consumers and business owners who suddenly needed a supply of government paper.

How Much Cash Is There, Actually?

The physical cash, or “M0” money supply constantly fluctuates. In July 2017 there was an estimated $3.79 trillion USD in physical cash — that’s bills and coins, but mostly $100 bills. It works out to roughly $11,678 for every American, however the Federal Reserve says from 50 to 70 percent of that cash is held outside the country.

The amount of physical cash on hand after a nationwide crisis would be quite low. And if some policymakers have their way, it will continue to get even lower.

Do countries need to retain physical cash? Tell us what you think.

Images via Pixabay, AP

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