Paper Money

Cash is not on the way out, several recent studies show

Traditional currency such as Federal Reserve notes still play a major role in commerce, according to several recent reports.

Coin World file image.

A pair of recent stories call into question the nearly daily pronouncements by experts that the end of cash is near. 

Bloomberg columnists Leonid Bershidsky and Mark Whitehouse write that despite the facts that almost a third of the U.S. population goes through a week with using any paper money and some businesses are trying to go cashless, people in most developed countries are holding on to more of it than ever. U.S. currency in circulation today, for instance, accounts for 8.2 percent of gross domestic product, near its highest level in at least 36 years. The reason, they opine, is one of confidence. People look upon currency as a store of value. The $100 bill now comprises 80 percent of the value of currency in circulation, a 7 percent increase from 10 years ago. It is not just that interest rates being paid by banks are so low. One study they cite concludes that aging populations have more of an affinity for cash and do not trust electronic transactions. The most concerning possibility, they say, is “that people are losing faith in financial institutions more broadly.”

An opposite trend is found in less-developed countries. Currency in circulation has been declining as a percent of GDP in China, Russia, and India.

More cash-supporting evidence was provided by Anna Hrushka in Banking Dive, discussing a recent J.D. Power survey. It found that 82 percent of Americans said they still carry cash for certain transactions. Regarding making payments in a given week, 67 percent of those surveyed said they used cash to make a purchase, 61 percent used a debit card, 54 percent, a credit card, and 20 percent a mobile phone or smartwatch. Seventy-eight percent said that businesses should be required to accept cash, including 85 percent of those over 60, and 72 percent of the 18- to 29-year-olds. 

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