The “War on Cash”
(A Report from the Front)

War on Cash MEDIUM

DON’T THROW AWAY your cash just yet. If the International Currency Association (ICA) has its way, cash will never be found on the abandoned products pile next to the likes of eight-track tapes, dot matrix printers, and 16 ounces of coffee for under six bucks.

The ICA, which came into existence last year and sometimes refers to itself in the third person as “the cash lobby,” says its mission is to “support and promote currencies worldwide,” “provide a framework to foster innovation,” and “encourage the highest ethical standards.”

The ICA is not the sole pocket of resistance in “the War on Cash.” Last year Steve Forbes wrote,

The real reason for this war on cash … is an ugly power grab by Big Government. People will have less privacy: Electronic commerce makes it easier for Big Brother to see what we’re doing, thereby making it simpler to bar activities it doesn’t like, such as purchasing salt, sugar, big bottles of soda and Big Macs.

If you detect more than a hint of paranoia in Forbes’s remarks, I am with you. Still, his take is rather muted compared with that of people who see in digital banking no less than a prophecy-fulfilling harbinger of doom. One such warns:

Over the last several years, the banks, financial institutions, and governments have all colluded to remove the last traces of cash transactions … this war on cash is nearly complete. These developments show just how close we really are to the complete elimination of the paper money in your wallet and the rise of the Antichrist’s system!

Ideology and religion aside, there are a number of companies whose survival depends on keeping hard currency in circulation. These include marketers of paper, ink, holograms, sorting and counting devices, counterfeit detection training and products, intaglio printing presses, and, ironically, cash-shredding machines. Such account for a good deal of the ICA’s membership.

Yet the alleged war on cash hasn’t taken as many casualties as alarmists might have us believe. In its 2017 “State of Cash” report, the Federal Reserve Bank of San Francisco provides surprising information about the endurance of cold, hard, tangible currency:

Despite innovations in smartphone technology and mobile payment apps … The amount of currency in circulation has increased steadily over time, and demand for higher denominations has accelerated in the years since the 2008 financial crisis.

It also reports that:

In 2015, cash remained the most frequently used retail payment instrument, used in nearly one-third (32 percent) of all transactions, including bill payments … Consumers used debit cards for 27 percent of their transactions, followed by credit cards for 21 percent of transactions.

And that:

Despite its decline in share of reported transactions, cash was used for a variety of merchant categories, even when other payment options were available … Gifts and transfers to people, where cash was used for 75 percent of transactions, was the category with the highest share of cash transactions. Other cash-intensive categories included government and nonprofit purchases (40 percent), food and personal care supplies (39 percent), and auto- and vehicle-related purchases (39 percent).

So despite the histrionics of Steve Forbes and the ICA, it doesn’t look like cash will diminish to the point of being used only by contemporary Luddite holdouts anytime soon. It still has its uses. Legal ones, even.

Notwithstanding, consumers are discovering that digital transactions are more convenient than handling hard currency. P2P is obviating resorting to cash for gifts and personal reimbursements. And as digital wallets become more popular and easier to use, they are proving preferable even for smaller purchases, to date the cash transaction’s main stronghold.

It will be a long time before cash becomes obsolete, but I don’t think it’s irresponsible to suggest that it is in the early stages of obsolescence. The day may yet come when retail clerks need no longer be trained in the art of counting out change.

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