Cash and national security

Following our published response to a request for comment from UK Treasury Committee on preservation of cash usage, Victoria Friedman of The Epoch Times UK enquired as to more detail on our claimed links between national resilience and cash technology. This article quickly revisits that.

The perspective of computer scientists on money and national security might feel about as welcome as a fart in a spacesuit at this time of the rising "Nerd Reich". For what it's worth, this take is informed by signals, systems and security thinking, not what most would see as mainstream economics.

Efficiency has become a banner of tyrants. It's a word used euphemistically for great brutality and destruction. Yet even when used in good-faith it is problematic. Efficiency valued with maximal weight can and often does break systems. Many real systems are made worse by efficiency (unless optimising for their own metrics is their actual purpose).

Over-optimising in one dimension (like cost) can mean ignoring all the other dimensions we need to be mindful of. This is a common mistake for inexperienced system designers or "hands-off" idealists who hope markets can solve problems alone.

The value in some things is that they are difficult, slow, or noisy. They add some damping or friction to a process where it's needed. This is something efficiency ideologues overlook. Thus familiar blanket arguments like "cash is costly and inefficient" fail because here inefficiency is a desirable feature of stable, reliable and accurate systems.

Business tends toward least effort. Without mandates and standards this tends toward a loss of capability. This can be through loss of knowledge and skills (generations failing to pass on by education), or a loss of physical infrastructure (e.g.. loss of low-voltage copper telephone system that can function without a power grid and Internet).

Technology is abstraction, a way of making bits of the world that we no longer want to think about, disappear. As that atrophies neural circuits we replace "doing X" with "having X done for us" (agentic modality), which may be a net loss to productivity, comfort, quality, safety or any number of other dimensions.

Educational psychologists know there is "value in difficulty". The recent Microsoft report on "cognitive decline and AI" is unwelcome for neophytes but an expected finding. It basically says "AI makes us stupid".

Similarly, digital payment systems "make us poor", because they take away control and visibility of our money while purporting to do the opposite.

What we colloquially call "convenience" hides a plethora of problems, the most serious of which is a "disabling" effect or atrophy. Companies and organisations happily supply "disabling" technology since it transfers power to themselves.

This also applies to cybernetic circuits that include human minds and collections of minds, like systems of commerce and exchange. Maybe a better way to think about such systems of human-machine technology is the health of the overall assembly. Any technology that creates a highly efficient society but renders it so hostile, complex, out of control, unreliable and undignified for humans as to be "not worth living in" is a failed technology. Human standards remain the measure of all things.

A way of framing security is the difficulty with which something can be taken away. Efficiency and resultant weakness brings a deficit of security, exacerbated by reckless optimists and seekers of mere "convenience". We find that systems of value are hard won and maintained with effort - the upside is resilience - whereas ephemeral technologies, digital ones that can be erased with a power outage, war, magnetic storm, or political coup create an "easy come, easy go" world. If it takes no effort to obtain something it can be dismantled, lost or taken just as easily.

One reason for preserving cash money is entirely psychological. When it comes to money, physical coins and notes are more than tangible utilities, they are symbols. Heraldry, flags, postage stamps, notes and coins signify stability and confidence in the state or its figureheads (monarch etc). These underwrite the traditional benign presence of the state. Observe, the first thing a new or conquering ruler does is replace coins with his/her head. Money is visible power that is neither architectural nor military.

This can be explained by attachment patterns (Bowlby, Winnicott) between people and symbols, via familiarity, affiliation, association and projection. To talk of the value of money is therefore more than a statement about having money in some quantity, or its raw exchange utility. Money is cultural. The "bloke in the pub" says "All is well with the Queen in yer pocket". "Sound as a pound" is a confidence declaration.

This leads us to a key concept in economics and politics. Confidence.

Understanding the 1930s Great Crash, panics and bank-runs are feedback phenomena in systems. Meadows and Forrester describe intangible global variables like "confidence" as massively influential on systems.

As computer scientists and cybersecurity experts we must be clear there is little basis for strong confidence in digital technology, as is. If anything things are getting rapidly worse. That's not to say IT isn't amazing, or that we should not pursue better living. For structural, political and economic reasons our tech is in a terrible state. Therefore to put undue trust in digital, to "believe in it" - in an unexamined, quasi-religious, ideological fashion - is dangerous, especially given the evidence and the political climate of rising technofascism.

It is fair to say people do not have confidence in digital tech. Nor should they. This is a feature that helps us build better technology. In computing we call that "debugging". Pretending it's all just fine, naively asserting that progress will "iron out the problems later" or simply doubling down on bullying people into unwilling acceptance is an anti-intellectual and anti-scientific course. It is unfortunately a course we are on where governments are driven by vague neophyte ideologies and economic alliances to tech companies.

Yet this very trait seems common with US tech broligarchs. Altman, Zuckerberg, Musk, Gates, all dropped out of technical college but let money and fervour greatly outweigh their poor capability as actual scientists and engineers. A major complaint against Bigtech is therefore not its intrinsic monopolistic and fascist nature, but the dangers of reckless engineering led by blind and stubborn "visionaries"

In electronics, we add capacitors to supply rails. In mechanics we have flywheels. These add "momentum" and keep systems running in an established mode if the source of energy is removed. We variously call them reservoirs, preservation, or buffers in system theory.

A grain store is what stops millions starving when there's a bad harvest. It is the opposite of "lean" or just-in-time philosophy (JIT) - the dominant creed today. JIT stems from a short-sighted conceptual mistake of seeing goods in transit or capital locked-up in uncompleted contracts as wasteful. Blockchain supply optimisation and smart-contracts attempt to remedy this by propagating trust faster than goods and money can move. But the attempt to apply that to all of domestic economics is catastrophic because the result is a very volatile, skittish, unstable economy with no momentum in the system.

Looking back on the RFC questions we tackled a wide range of security subjects about education, community and the rights of women and vulnerable people impinged by a dearth of cash.

We've pointed out one-way transformations and tipping points with hysteresis than mean systems can be irreversibly broken even before they show signs. As seen with the US telecoms systems - due to the idiocy of installing back-doors in their own software - or with the US Treasury in the post-DOGE takeover - one is left with a "completely poisoned" situation in which the only realistic path back to security is gutting and rebuilding the entire system. This can take years or even decades! Resilient paper systems are a last line of defence.

The CrowdStrike incident made a compelling case study. From it cybersecurity professionals learned key lessons about the dangers of monopoly and dominant suppliers and to avoid single-track systems with single points of weakness, eg Amazon, Microsoft, Google and so on. We learned to beware of "pushy" systems that assume consent and act to update rules unilaterally and autonomously.

We emphasised that organisations with only digital infrastructure, without human-in-loop backup or flexible staff, are most at risk. For example, buildings that use only electrical (fail-closed) access control with face, biometrics, keycard access. Everyone gets locked out of the building as happened with Meta/Facebook in 2019.

In summary our advice the UK government and The Bank of England was that balancing digital innovation with financial resilience by seeing digital innovation as not requiring the destruction of extant, proven technology. The new must be overlaid on top. Robust technology is hybrid, plural, compatible and built on diverse interoperability. We must discourage iconoclastic "new broom" thinking and the celebration of disruption for its own sake.

We caution that "emergency regulations" are of little use due to the atrophy problem. In any event they will be too little, too late. Resilience must be built-in as a latent mindset and so a mandated acceptance of cash as a backup line seems wise.

Governments need to understand the value of anonymity and stop obsessing on petty legibility. Most tax loss is via large scale corruption not petit commerce. Cash should be understood as a flexible, green, low power technology that is just another part of the machine. It carries the "slack" necessary for complex systems to operate reliably.

If our processing capacity is damaged that's as bad as removing cash from circulation. Bank branch closures and disappearance of physical POS "tills" is a worry. A mandate to maintain basic level of cash processing capability is needed. Social factors are as important as machinery. We must ensure a basic level of habitual capability, recognition and social acceptance of cash as a common financial tool.

Cash is itself a technology not something to which "technology is an alternative". In future cash may be very advanced. At its root it is a concept, not a form. It is a set of constraints that meet a number of complex properties. New techniques include paper printed active electronics with RFID, holographic data storage, e-inks, and a range of traditional financial instruments from bearer bonds to bankers "drafts" to personal cheques that have yet to be brought into the 21st century. Looking ahead, cash is evolving as part of a broader financial security system. We suggest looking at and understanding the Taler concept for future cash, which preserves tax legibility for merchants while preserving privacy for consumers.