The days of “cash is king” may be numbered. Not only are credit and debit cards the general currency of modern American consumer transactions, but new virtual credit cards, operating through apps on your cell phone, are threatening to expand the power of cashless economics further. Even the old world of paper checks is not exactly cash. Currency crosses borders, not in suitcases (well…. there may be a cartel or two and a dude in North Korea) but via interbank wire transfers. When the Federal Reserve needs more money to buy unsold U.S. treasuries, it doesn’t print more paper currency to effect the transaction; it simply “increases the M-1 money supply” and buys the bonds with its virtual cash. The reality of paper currency, a huge change from the ancient and heavy coinage of old, which itself was a vast improvement over pure barter, is that human economic transactions are experiencing the next huge leap in the evolution of currency.
Which means that paper currency is also experiencing a transition: “The number of dollar bills rolling off the great government presses [in Washington, D.C.] and in Fort Worth fell to a modern low last year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills…The meaning seems clear. The future is here. Cash is in decline… You can’t use it for online purchases, nor on many airplanes to buy snacks or duty-free goods. Last year, 36 percent of taxi fares in New York were paid with plastic. At Commerce, a restaurant in the West Village in Manhattan, the bar menus read, ‘Credit cards only. No cash please. Thank you.’
“There is no definitive data on all of this. Cash transactions are notoriously hard to track, in part because people use cash when they do not want to be tracked. But a simple ratio is illuminating. 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…Production of paper currency is declining much more quickly than actual currency use because the bills are lasting longer. Thanks to technological advances, the average dollar bill now circulates for 40 months, up from 18 months two decades ago, according to Federal Reserve estimates.
“Banks regularly send stacks of old notes to the Fed, which replaces the damaged ones. Until recently, notes were simply stacked face down and destroyed, as were dog-eared notes, because the Fed’s scanning equipment could not distinguish between creases and tears. Now it can. In 1989, the Fed replaced 46 percent of returned dollar bills. Last year it replaced 21 percent. The rest of the notes were returned to circulation where they may lead longer lives because they are being used less often.” New York Times, July 6th. See those new parking meters in your home town? The ones that take credit cards and charge more?
OK, some folks, generally evil versions of Scrooge McDuck, still love the stacks and stacks of U.S. currency – notwithstanding its seemingly endless fall against other notable currencies – whether piled into the back of an armored van or delivered in a dark and dingy Latin American cartel headquarters via a couriered suitcase. As I have noted before, Dear (and soon-to-be-replaced) Leader, North Korea’s Kim Jong-il, demands a truckload of U.S. currency ($70 million a year) to pay for the cheap labor (he keeps most of it, sharing a minority with the workers) from special factories just above the DMZ serving South Korean corporations. Maybe he too has a currency swimming pool.
Posts
No comments:
Post a Comment