Why Germany's $5,500 Limit On Cash Transactions Is A Bad Idea


Say farewell to another slice of freedom taken away in the name of combating terrorism.

Germany could become the latest nation to turn its citizens into criminals if they use cash for large purchases. Its leaders are considering a new law that would ban cash transactions of more around $5,500, The Associated Press reported Feb. 3.


Because of "the risk of terror financing and ... the problem of how to clear up money-laundering offenses properly," German Deputy finance minister Michael Meister said, according to AP.

Translation: German authorities, who already have more surveillance and investigative tools than at any other point in human history, think it's still too difficult to track terrorists and organized crime. Never mind the fact that the vast majority of transactions -- millions upon millions of purchases -- are made legally by law-abiding citizens. It's like casting a net half the size of the Atlantic Ocean to catch a few fish.

Germany isn't alone. In September, France banned the use of cash for transactions worth more than about $1,100, Reuters reported. That mirrors an Italian law that also limits cash transactions to the same amount. In Spain, the limit is around $2,800. As AP notes, Germany wants the European Union to enact a cash limit for all its member states.

In the U.S., there is no limit on private cash payments, but bank transactions of more than $10,000 must be reported to the federal government. That means a person who pulls $10,000 from a bank account will get pinged by the feds, and could be closely watched.

French authorities used the same rationale as their German counterparts.

"It's a [type of] terrorism that is low cost to carry out but has major impact," Finance Minister Michel Sapin told Reuters. "This low-cost terrorism feeds on fraud, money laundering and petty trafficking."

Sadly, France's new law didn't help authorities there stop the November 2015 coordinated terrorist attacks in Paris that left 130 people dead, nor did it even give them an indication of what was coming.

Of course, there are other benefits to limiting cash transactions, benefits government leaders don't like to talk about publicly. The first, and most obvious, is tax collection. Digital transactions are easily and neatly recorded. Purchases made with credit and debit cards are easily taxed, and the government can keep tabs on how much money people spend, and what they spend it on.

Just ask smokers who thought they were avoiding state taxes on cigarettes by buying online: Around 30,000 people in Arizona were hit with seven years' worth of tax bills in 2014 for cigarettes they'd ordered through the Internet, according to the Arizona Republic. One Arizona woman received a $4,299 tax bill for smokes.

By imposing a limit on cash transactions, and enacting criminal penalties for people who surpass that limit, governments can also crack down on markets, informal retail and bartering. That could mean an end to things like flea markets, swap meets and the thriving underground economies that some people -- mostly those who are economically disadvantaged -- depend on.

Perhaps most frightening, limiting transactions and working to eliminate cash altogether adds more data points to the digital profiles governments assemble on their citizens. We don't need to imagine a dystopian future to envision a government that knows which websites we visit, the people we keep in touch with over social media, who we email and text, what we spend our money on, the things we like to eat and drink, and where we drive our cars.

In the privacy wars, the slow march to a cashless society is one of the most important fronts.

Americans can't do anything about Germany, but they can make sure the same thing doesn't happen in the U.S. It's up to American voters to remain informed, so authorities can't chip away at freedoms right under their noses.

Sources: AP, Reuters, Arizona Republic, Telegraph, Forex / Photo credit: Wikimedia Commons

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