Will cash be a thing of the past?
Its use is down -- dramatically -- over the past 40 years, but will it really disappear?
This post comes from Lynn Mucken at MSN Money.
In a wonderful piece in The New York Times, Binyamin Appelbaum points out the many places that cash has become passé: the growing giant of online shopping, buying drinks on airplanes, pretty much every restaurant, even New York cabs. He then buttresses these observations with a stunning fact:
In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation's economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.
So, is cash, to steal the words of that pair of philosophers, Mel Allen and Bob Dylan, "going, going, gone?" Its demise probably was predicted after the first form of a check was written in 300 B.C. in India, declared inevitable with the appearance of preprinted checks in England in 1717 and pronounced as terminal when Diners Club issued the first widely used credit card in 1950. Everything since then apparently has just been shoveling dirt on the grave.
The truth is, cash isn't going anywhere, except from your pocket to somebody else's purse. Here's why:
- The baby sitter. The only thing more foolhardy than trusting the lives of your precious children to a 12-year-old from down the street is giving her a check. She doesn't even know what it is, and she will be unavailable the next time you call.
- Tips for nonmonetary services. The best example here is the club cleaner. While you're putting on the 18th green, he or she is industriously -- and without invitation -- shining up your 8-iron. Such initiative must be rewarded with a couple of ones.
- Paying off small wagers. If you bet your brother-in-law $5 that Alabama would beat Auburn last fall, it is de rigueur to hand over the money in person and in cash, just so he can gloat. On the other hand, why not just stiff him and save yourself the agony of going through it again next November.
- Prostitutes. This is insight gleaned only from movies, TV and books, of course, but cash seems to be valued highly when this profession is practiced illegally. Especially by the guy waiting up the street.
- Small purchases. With five people behind you in line, you can just feel the hate as you slide your debit card, cover up and enter the PIN, reject the offer of cash back and then hit the "accept" key. Wouldn't it be easier just to whip out a five to pay for that $1.99 candy bar that you just had to have at 3 in the afternoon.
- Impressing small children. Your kids or your grandkids, nothing solidifies a relationship like cash. First it's nickels and dimes dropped into a piggy bank, which must be vigorously shaken. Then, there is the cash in the birthday cards, accelerating from $5 to $20 over the years. Those gift cards can wait a decade; enjoy this form of giving while it is fully appreciated by the recipient.
- Philosophical. Face it, cash has a nice feel. Coins "jingle" in your pocket. Those twenties coming out of an ATM seem so thick in your wallet. Paying for anything with $100 bills is a real power trip. Credit and debit cards, on the other hand, have no soul.
Of course, these are just personal opinions. Post continues after video.
Not surprisingly, pretty much everybody agrees with me, even the NYT's Appelbaum:
It is easy to look down the slope of this trend and predict the end of paper currency. Easy, but probably wrong. Most Americans prefer to use cash at least some of the time, and even those who do not, grudgingly concede they cannot live without it.
Currency remains the best available technology for paying baby sitters and tipping bellhops. Many small businesses -- estimates range from one-third to half -- won't accept plastic. And criminals prefer cash. Whitey Bulger, the Boston gangster who lived in Santa Monica for 15 years, paid his rent in cash and stashed thousands of dollars in his apartment walls.
Indeed, cash remains so pervasive, and the pace of change so slow, that Ron Shevlin, an analyst with the Boston research firm Aite Group, recently calculated that Americans would still be using paper currency in 200 years.
Dollars are great in case of an emergency. I live in San Francisco, where the Big One is essentially a certainty. Can you guess what's in my earthquake kit? It's not a BitCoin or a Visa card. In a disaster situation, I want something in my hand. I want something that's easy to convert into goods and services if all the lights are out and there's no network connection to be found.
Look, I'm eager to use all kinds of next-generation payment technologies. Smart companies like Square and Google and PayPal are all working on ways to let me pay for something without handing over cash, or whipping out my credit card. That's great! Especially since I'm often running late.
But the dollar is my old steady. And I'm glad to see it's not going anywhere anytime soon.
Cash also provides a degree of anonymity and privacy that paying by credit card, debit card, or check never will. If I buy something with cash, the government won't know who bought it, where they bought it, or what it was that was purchased.
Yes, cash makes criminal transactions easier, which is one of the reasons that laws have been written to regulate and monitor large cash transactions. However, there are also perfectly legitimate reasons why someone would want their buying history to be secret, which is why any move toward a government-mandated "cashless" society should be viewed with suspicion.
More on MSN Money:
1. Dollars are legal tender in this country. They CANNOT be refused as payment.
2. If your purchase is less than 5 dollars - PAY CASH - especially in convenience stores and fast food joints. I'm so tired of waiting for someone to charge a pack of gum. Keep a twenty in your pocket, for christ's sake!!
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