Is Cash Dying? Will the U.S. Stop Minting Coins? Don’t Worry, Dollars and Cents Aren’t Going Anywhere

Last Updated on August 12, 2021

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Cash — the physical tokens of money, both paper and metallic — is an institution with a long history. But in the 21st century there are those who doubt that it has much of a future.  When you say, “I have more money today than I did last week” you likely mean something fairly abstract. You may mean, for example, that the numbers associated with your banking and savings accounts are higher now than they were last week. More generally, you mean that your liquid wealth — the wealth at your ready command for the purchase of goods and services — has increased. The concept of cash is more concrete. It is the physical manifestation of that liquidity.  Sometimes cash is used for purposes of display. The big shot flashing a wad of bills in a crowd is a stock figure of ridicule. Other times, though, cash is used as a medium of exchange. It is the stuff that, traditionally, changed hands when one bought goods and services.  Let us discuss why it may be fading. And why some want to push it along the way to extinction. The rise of electronic payment services has proven very convenient, even though with most of these services money never leaves its abstract condition as a set of numbers describing liquid wealth.

How Much Do Americans Use Cash?

Plastic cards, credit or debit, have been around for a long time. They are still a physical token of a sort even though they offer no impressive wad for display. Direct bank transfers, automatic deposits, and apps such as Zelle are more thoroughly post-cash. They abolish the role of bills or coins altogether on a transaction-by-transaction basis. According to data from the Federal Reserve, customers still use cash for only about one quarter of all payments. If you are going to commit an armed robbery, you probably won’t want to buy the gun from a reputable retailer using Venmo. You may buy your gun from ‘a guy’ on a street corner. And of course your ‘guy’ will want cash.  Logically, then, people trying to punish and deter the illicit gun trade and other law enforcement goals may soon be pressing overtly, may already be pressing covertly, for the abolition of cash.  

The Unbanked and the Offline 

So what are the disadvantages to getting rid of cash?  First: the immediate victims of any abolition, or for that matter the victims of incremental moves to limit the use of cash, will be those who are already marginal and disenfranchised. The poor are generally unbanked. They have to ready accounts into, or from which, transfers can be made.  Also, many Americans, especially the elderly and people in rural areas, don’t use the Internet. They can either be stuck-in-their ways or without access or some combination. Without the Internet, most of the alternatives to cash are at best cumbersome, even if one has a bank account.  During the spring of 2020, Democratic members of Congress discussed the idea of a “digital dollar” plan as a way of getting pandemic relief money quickly to Americans who may be neither banked nor internet savvy. The idea was that the federal government would step in to provide Americans with simple online accounts If the country should ever move to a system of universal basic income, it will likely create this kind of arrangement. But perhaps we can eliminate the people who don’t have bank accounts and bring the Internet to everyone, and then get rid of cash. 

Cash Allows for Gray Markets

Also on the pro-cash side of the ledger, there is the matter of privacy. There is much that you likely don’t want in databases maintained by central authorities, whether the authorities at issue are governments or large bureaucratic corporations, insurance companies, or social media giants.  Related to this, there is a strong sentiment in many quarters that certain actions formally considered criminal are in fact “victimless” and ought to go unpunished — even unnoticed where possible — by authorities.  Cash serves as the enabler of gray markets, allowing activities that many are willing to allow. Any serious push for getting rid of cash would encounter severe kickback.