The future of cash

Commerce exists through the exchange of good and services for other goods and services. There was a time when merchants would exchange animals for flour, such was a lack of any form of currency. That changed in the Iron Age when coinage was introduced in Greece, India and China. The Romans standardized their currency and it was accepted all throughout the Roman Empire. The Chinese were the first to introduce paper money around 900 AD when carrying large amounts of copper coins became too cumbersome and too much of an easy target for thieves. These notes were even backed by gold.

Currency has evolved over time certainly thanks to technological innovations like the printing press and various counterfeiting measures. What we in the United States know as currency, or the greenback, were introduced during the Civil War. Before then each state, as well as some prominent banks, issued their own currencies. Other states charged exorbitant exchange rates to convert another state’s money into their own and with a war raging not only did a large sum of money need to be paid out to soldiers and contractors but it needed to be printed cheaply (which made it an easy target for counterfeiters). What we got became known as the “greenback” since the back of the note was green and we have been using it ever since.

Cash is important in today’s world. When we hold a dollar bill in our hands we know we have one dollar’s worth of purchasing power. We can feel the coins in our pocket and know that we are not broke. Those days will come to an end at some point but when?

With an electronic financial system where money can be transferred electronically with the click of a mouse hard currency is useless. The amount of time and effort that goes into not only printing but securing the currency with ever more efficient printers and scanners could eventually make printing cash cost more than a bill is worth. Think about it, there has been a call for the removal of the penny from circulation as it costs 1.5 cents to create one. The copper itself is more valuable than the penny, so much so that many scrap metal yards specifically prohibit people putting pennies in with scrap copper to increase their payout.

There has also been a movement here in the United States to do away with the dollar bill. Several times in fact. From the Eisenhower Silver Dollar to the Susan B. Anthony dollar to more recent times with the Sacagawea dollar and the president dollar coins we are trying to get paper money out of circulation.

Electronic forms of payment will do that eventually. An impressive array of technology, ranging from credit cards to more modern forms like contactless payment devices will eventually allow Earthlings to keep their money in a digital wallet and never have to hold it in their hands. There are some financial experts who believe that a decade from now cash will cease to exist. With all money stored digitally counterfeiters will be out of business. There will be no more losing money out of your pocket (of course that also means the thrill of finding money on the ground will also go away). Having everything digital will also theoretically allow the authorities to monitor transactions and potentially take a huge bite out of crime (not to mention tax evasion). Keep in mind of course that experts have been predicting the end of cash for over 50 years and it is still here.

Removing a physical currency could have major problems though, many of which cannot be easily prepared for. What if there is a computer glitch that wipes out information? Every merchant accepts cash and while nearly every merchant accepts credit cards as well we are not psychologically prepared for the end of the dollar bill. Cash is a safety net for some, to be stored in a jar or under a mattress for an emergency, something that cannot be done digitally. There is also so much of it out there and no one really knows how much is circulated daily. While we’re at it what of groups like the Amish or in poorer countries that are not connected to the Internet? Will there be an international currency (some have proposed the Bitcoin) or will the American dollar still differ from its counterparts in Australia or Canada? After all we are still paying exorbitant rates to change out cash into other country’s cash even today.

Some European countries like Denmark and Sweden are trying to move to a digital economy but cash has not gone away. It is perhaps better that something like this be tried in a smaller country like one of those first. The day will come when cash will only be found in a museum but that day will probably not come in anytime soon. A global currency will probably come first and that is nowhere near close to happening.