Cashless Society

Explainer

A penny for your thoughts: Should America become a cashless society?

By Mack Pittman, Gwen Baumgardner

Americans aren’t using cold hard cash like they used to: the Federal Reserve has reported declining cash use for more than a decade, a trend that accelerated during the pandemic. Sweden is working towards becoming the world’s first cashless society by 2023. South Korea started eliminating coins from circulation in 2017. Would either of these moves to become cashless or coinless work in the US?

Baumgardner: A MAJORITY OF THE WORLD IS TAPPING AND SWIPING THEIR WAY THROUGH THE 21ST CENTURY…AND DON’T EVEN GET ME STARTED ON CRYPTOCURRENCY.

AS MORE PEOPLE RELY ON MODERN PAYMENT METHODS, DO WE EVEN NEED  CASH AND COINS ANY MORE?? 

LET’S BREAK IT DOWN. 

FORMS OF MONEY HAVE BEEN AROUND FOR THOUSANDS OF YEARS. SO, PROVING ITS WORTH HASN’T REALLY BEEN AN ISSUE…IT’S TANGIBLE AND RELIABLE. 

Whaples:  “What you want is a monetary system that allows you to make all these transactions that you want to make as efficiently as possible.”

Baumgardner: YEARS AGO,  THAT MEANT CASH AND COINS.

ECONOMIST ROBERT WHAPLES SAYS NO MORE..

Whaples: ‘’And what we’ve evolved toward is a system that has multiple forms of payment. I personally think there is a value of that competition amongst the different sources.’’

Baumgardner: ACCORDING TO THE FEDERAL RESERVE, CASH USE HAS BEEN ON THE DECLINE FOR MORE THAN A DECADE. AND THE PANDEMIC ONLY ACCELERATED THE TREND. CONSUMERS RELIED HEAVILY ON TECHNOLOGY FOR PURCHASES – SOME BY CHOICE, OTHERS BY FORCE.

IT DIDN’T TAKE A PANDEMIC FOR SOME COUNTRIES TO TAP IN TO THE CASHLESS TREND.

SWEDEN PLANS TO BECOME THE WORLD’S FIRST CASHLESS SOCIETY BY 2023.

IT’S ESTIMATED ONLY ONE PERCENT OF THE COUNTRY’S ECONOMY INVOLVES PHYSICAL MONEY…EVEN CHILDREN ARE TAUGHT TO USE DEBIT CARDS.  

SOUTH KOREA IS ALSO WORKING TO WITHDRAW CASH FROM THEIR ECONOMY…FIRST TAKING STEPS IN 2017 TO ELIMINATE COINS FROM CIRCULATION.

 WOULD EITHER TREND BE FEASIBLE IN THE US? 

Whaples: ‘’I think that the US could easily go cashless. But I’m not sure that the users of cash want us to go cashless at this point.’’

Baumgardner: ECONOMIST DR. JAY ZAGORSKY HAS A MORE CYNICAL VIEW.

 Zagorsky: “There’s a lot of dangers of going to an all cashless society.”

Baumgardner: FIRST WE LOOKED AT SWEDEN’S APPROACH.

 HE POINTS TO FOUR MAJOR REASONS WE MAY NOT WANT TO COMPLETELY RID-OURSELVES OF CASH.

FIRST: YOUR SAFETY: IT’S EASIER FOR A HACKER TO STEAL YOUR DATA THAN SWIPE YOUR WALLET.

SECOND: YOUR PRIVACY . EVERY  ELECTRONIC PAYMENT LEAVES A DIGITAL PAPER TRAIL…MEANING EVERY PURCHASE CAN BE TRACKED. 

THIRD:  FINANCIAL INEQUALITY. CASHLESS-NESS WOULD COME AT THE EXPENSE OF LOW INCOME AMERICANS  AND OTHER UNBANKED’ CITIZENS. THOSE IN POVERTY ARE LESS LIKELY TO HAVE ACCESS TO THE INTERNET TO PAY BILLS ONLINE.

FOURTH: IN TIMES OF EMERGENCY…CASH IS KING.

REMEMBER THE WINTER POWER OUTAGE IN TEXAS?

YOU CAN’T MAKE A CREDIT CARD TRANSACTION IF THERE’S NO ELECTRICITY.   AND YOU CAN’T USE A CASH APP IF YOUR PHONE IS DEAD. 

SO MAYBE GOING 100% CASHLESS ISN’T A PERFECT IDEA,

SO WHAT ABOUT COINS?.

 ZAGORSKY DOES CONCEDE THERE’S A STRONG CASE FOR ELIMINATING COINS…OR AT LEAST SOME OF THEM.

 Zagrosky: “The low value coins, they’re just not worth it. The government loses money every time you miss a penny.” 

Baumgardner: THANKS TO THE RISING PRICE OF METALS, THE U.S. MINT ACTUALLY SPENDS ABOUT 2 CENTS TO MAKE EVERY PENNY. AND SPENDS ABOUT 7 AND A HALF CENTS TO MAKE A NICKEL.

ZAGORSKY SAYS THE ELIMINATION OF THOSE COINS WOULD SAVE THE GOVERNMENT MONEY.

BUT HERE’S THE CATCH – WE – YOU AND I WOULD END UP PAYING FOR IT IN THE LONG-RUN… AS PRICES WOULD BE ROUNDED UP ON EVERY ITEM.

OK, THEN, WHAT IF WE JUST GOT RID OF THOSE PESKY PENNIES.

PRESIDENT OBAMA SPOKE TO THIS ISSUE BACK IN 2013. 

Obama: “It’s very hard to get rid of things that don’t work, so that we can then invest in the things that do. And the penny ends up being a good metaphor for some of the larger problems that we’ve got.” 

Baumgardner: AMERICA GOT RID OF THE HALF-CENT COIN IN 1857, BUT CAPITOL HILL’S MULTIPLE ATTEMPTS TO ELIMINATE THE PENNY HAVE BEEN SHORT CHANGED.

MANY PENNY-PINCHING  LAWMAKERS VOTED NO, DUE TO PRICE FLUCTUATION. 

ONE EXAMPLE:

RIGHT NOW GAS PRICES RISE AND FALL A FEW CENTS EVERY FEW DAYS

WITHOUT PENNIES, THOSE GAS PRICES WOULD JUMP BY  NICKELS AND DIMES.

AND… THERE’S ANOTHER REASON WE WON’T SEE A PENNY PURGE ANYTIME SOON…   

Whaples:  ‘’Congress is busy. They got like a million other issues. And the penny is at the very bottom of their list of things that they care about. ‘’

Baumgardner: SO, COULD THE U.S. GO CASHLESS OR COINLESS? DON’T COUNT ON IT.

WHAT ABOUT YOU- PAPER OR PLASTIC? 

LET ME KNOW YOUR THOUGHTS IN THE COMMENTS BELOW.

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Americans aren’t using cold hard cash like they used to: the Federal Reserve has reported declining cash use for more than a decade, a trend that accelerated during the pandemic. Sweden is working towards becoming the world’s first cashless society by 2023. South Korea started eliminating coins from circulation in 2017. Would either of these moves to become cashless or coinless work in the US?

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