Seriously, No More Cash in 2012

It turns out that 2012 is a kind of magnet for apocalyptic thinking. Justin Wolfers has predicted that the name Cash, currently riding a wave of popularity, will largely disappear by that date. Will actual cash — currency, greenbacks, dineros — survive much longer? David Wolman is the latest in a long line of people hoping the answer is no. While we’ve argued for ditching the penny, Wolman writes in praise of abolishing physical money altogether, in favor of a streamlined, emoney future. The technological solutions, he says, are in place. The policy solutions are, we think, another matter. [%comments]

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COMMENTS: 53


  1. JCA says:

    No Way! I am using more cash these days…I can’t trust gas stations to have safe card readers.

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  2. Paul Franceus says:

    The ability to spend anonymously is very important. And not just for illegal purposes. Do we really want a record of everything we do with our financial lives?

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  3. Nicholai says:

    @Paul:

    You can have anonymous, electronic funds transfer. Back in 2001 when I lived in Belgium there was an electronic purse card called Proton. Many countries have something similar, where value is stored on the card, not in a banking system.

    You could also buy high-value prepaid debit or credit cards to make anonymous purchases.

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  4. noe says:

    the ability to spend anonymously will probably still find a way to exist, even with the disappearance of cash. it’s just a matter of finding another currency that has a value. for example, if you wanted to buy some illegal drugs from someone in a cashless society, what’s to stop you from just buying a $50 Amex Gift Card and trading it for the drugs?

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  5. bb says:

    Will the homeless start carrying eMoney readers?

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  6. Quill says:

    So, when the power goes out we don’t get to buy groceries?

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  7. Brian says:

    Not a fan. There would be an unintended consequence of creating a new class of “untouchables” – people who can’t get onto “the system” in order to use e-money.

    Also, cash has a quality that digital funds never can. It’s a “bearer instrument”, which is something that we actually need for the economy to function. If you can never hold money in your hand, you’re excluding a surprisingly large segment of the population from potential productivity. I’d estimate that if the US cut over to digital-only transactions, it would cut the US GDP right about in half, give or take. You’d be surprised.

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  8. Grant says:

    I try to use cash as much as possible and my cards as little as possible. Not only for tracking purposes, but for self-control. Let’s say I’m at a bar. I start the night with $60. Once that 60 is gone that’s a good sign it’s time to pack it in. I’ve spent enough money. If I’m running a tab on a credit or debit card I can just keep spending and spending.

    But also, anonymity. Plus, cash is still faster for small transactions. Rather than waiting for my card to be approved when buying coffee on the street I can just hand the guy exact change and move on. And that’s not even considering the high fees charged by card companies. I don’t want to pay extra money for small things just so we can get rid of cash.

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  9. Kijeren says:

    I can’t believe no one has mentioned the tooth fairy or the piggy bank!

    Nine months of loose change was the basis for each of my kids savings accounts.

    Sorting coins by denomination and year and tarnish level kept my OCD 4 year old occupied for HOURS.

    What about flipping a coin?

    Or convincing your kid brother that he should trade you his two small dimes for your two big nickles?

    A digital world would just NOT be the same.

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  10. Zoltan says:

    What would I do with for garage sales, parking meters, loaning friends a few bucks…and paying my contractor and mechanic in cash?

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  11. Holme says:

    I seriously doubt this would work, especially in a time where people are loosing trust in the current monetary system.
    If cash is abandoned gold might very well become a common mean of trade.

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  12. Mike says:

    in addition to having some sort of safe secure way to pay digitally we would also need a safe way to be paid. If you want to have a garage sale would you have to get a credit card reader? The football pool at work? chipping in for pizza? any system needs to be as fast and as easy as throwing in a pile of money on a resturant table and the guy quick at adding up makeing sure there is enough to cover the tip

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  13. Sean F. Kennedy says:

    The Freakonomics theme of unintended consequences:

    No matter how much you say that you can still have anonymous transactions, the end of cash would create a rebirth in barter.

    I see this coming from those low income consumers still not having access to as Wired put it “a ubiquitous and secure network of places where people can transact electronically.”

    Those who work in cash markets will likely find other ways to do business.

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  14. Ben says:

    Seems like one of the Credit Card reform proposals (don’t know if it made it into the final law) would allow merchants to charge credit card users the processing fees. Currently the merchant agreements with Visa & Mastercard technically don’t allow them to charge credit card customers any more than cash customers, although I know this is common practice in other countries I’ve been to. But my point is that use of cash will likely see a resurgence if credit card users are suddenly getting stuck with an additional 3% fee on each transaction.

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  15. Tim James says:

    @Quill

    If the power goes out now you won’t be able to buy groceries — the computer-based cash registers don’t work too well when the lights go out.

    Prediction: its not going to happen, at least not by 2012.

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  16. Emmett says:

    Clearly we will have an “embodied” cash system for a very long time (for all the reasons already stated — and more).

    BUT no one has brought up the fact that there are ideas about making all cash instantly traceable and DE-certifiable via RFID tags. Any piece of cash could be essentially “turned off” while in your pocket. “Turned off” cash could live in the world of the have-nots for a while until it traveled to a big enough retail outlet where it would be checked by the RFID equipped cash register and be declared worthless.

    I worry about this semi-cash scenario.

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  17. Andy says:

    In New Zealand cash is used increasingly less. Debit cards have been in high levels of use since I arrived here 11 years ago, and that has continued unabated. Many traders are glad to give you cash back with your purchase as it saves them the risk of holding it and the cost of depositing it at the bank.

    Most bank accounts don’t charge per transaction, so there is no disincentive to using electronic payment (other than the ability for someone somewhere to know where you’ve been). The system is fast at approval and adds minimal delay.

    I seldom have more than NZD50 in cash in my wallet (approx USD30)

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  18. Dave C. says:

    Ha, not for questionable transactions. Last time I used a credit card at Taco Bell, they surreptitiously added $1 to the charge without telling me. I only use cash there from now on. I’ve worked in retail before and most people who pay cash count their change and most people who pay with cards don’t pay attention, especially now that you don’t have to sign.

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  19. CBBB says:

    And of course the switch to eMoney cards would probably be accompanied by bank transaction fees being charged for every single purchase. It would be like an additional sales tax that goes to the banks.

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  20. scott says:

    On behalf of gigging musicians everywhere, let me just say that a ‘cashless’ economy will be very sad for those of us who prop up a tip jar at our place of business.
    =(

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  21. Ray says:

    Just think, the government could now tax EVERY “penny” spent.

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  22. Don says:

    A system where you could pay via cell phone text message doesn’t seem like it would take too much to implement.

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  23. laurence says:

    hong kong has this touchless payment card in place that’s extremely efficient. the card is called the “octopus” and it started off as a payment for the underground Metro (MTR) now it has basically taken over spare change for 90% of the case: Metro, bus, 7-11s, mcdonalds, tons of parking garages, shops all take the octopus card for money!

    its an extremely good system its not hard imagine it to take over cash completely! or at least substantially!

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  24. Kevin says:

    Well then, what would be the (functional) difference between a $50 American Express gift card and a $50 dollar bill?

    Aside from the fact that American Express isn’t accepted everywhere, they both serve mostly the same function. Cash is just more flexible. So I don’t see any advantage of eliminating it.

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  25. Shun-CMS says:

    I certainly believe that in the near future, all cash (and coins) will disappear. That trend can be well observed in Japan. I was impressed when most of the people using public transportations slide a card, which they replenish it regularly – like a credit card. Since it is made of a magnet, one does not need to take it out of the wallet. Also, mobile phones serve similar functions, as the card presented above, and also watch TV etc. Both the card and the phones are accepted in most stores in Tokyo, and other major cities. These are very time efficient and better security wise, since they are password protected.

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  26. ja says:

    How about graft and corruption? Black market? Buying politicians? Fun to think about?

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  27. brian t says:

    To all the folks talking about credit cards: no, that’s not what this is about. Neither is this about debit cards – they are linked to a bank account, which is checked every time the card is used (which costs money). This is about cash replacement, a card of some sort charged up occasionally, which does not incur any kind of per-transaction charge. Preferably no charges at all, which is possible by piggy-backing on an existing system, such as mobile phones, or transit cards, as one commenter said about Hong Kong.

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  28. jimmy new says:

    Very good points kijeran. And what about the neighborhood paper boy and doing lawn work for elderly neighbors. I sure bought a lot of baseball cards with the cash I made from those things. It just wouldn’t feel right to get a $5.00 prepaid Visa for cutting the neighbor lady’s lawn.

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  29. Justin says:

    I never thought I’d say this but: Think of the children!

    I thought the new credit card law restricted cards for those under 18. Metering funds out is harder then handing someone a $10 or $20.

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  30. rick says:

    Let’s get back to reality. Until recently I worked for a large supermaket firm in south Texas. We have stores that do over half their transactions in cash and I’m talking about million dollar a week sales stores. There is a very large unbanked population here. Paycheck cashing is a big business with standalone stores all over. It is a common practice to buy money orders each week for a quarter of the rent in order to be able to pay it when due.

    I don’t think cash will go away soon. It is too convenient, untraceable, and it doesn’t carry fees.

    btw, it is not the most efficient transaction at the checkstand in terms of labor and expense at the store. The PIN based debit card is the most preferable from the retailer’s perspective.

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  31. Robb says:

    @ Nicholai

    So you use your trackable debit or credit card to buy a “private” card which also has a serial number which will be tracked as part of the transaction – where again is the anonymity?

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  32. Robb says:

    Another thing to consider: THE BANKS KNOW YOU WILL SPEND MORE IF YOU USE ELECTRONIC FUNDS! They are not trying to save the environment, reduce nusance, mine less metals, ease transactions, they merely want you to spend more. Im not about to trust that the banks have my best interest at heart.

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  33. Richard says:

    I wonder what kids would do in a money-free world – as a child I would be given 20p on a friday to spend at the sweet shop after school. Would my mum have to give me a card with 20p on it? Or send 20p credit electronically to my own card?

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  34. Richard says:

    Cash accounts for less than 5% of my purchases, but I can’t see how a good deal of that can be done electronically. The girl scouts come to my door selling cookies, or the fruit vendor that sells at his orchard, or the garage sale are cash transactions. I’m not going to swipe a card to a machine attached to the Salvation Army kettle come holiday season.

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  35. iratecat says:

    Funny that the article mentions apocalyptic thinking. What happens when the system breaks? There’s no central server crash (or fire, or natural disaster, or…) that can render my cloth-paper $20 bill worthless.

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  36. Joshua says:

    If this came in to existence, I would be most concerned about the behavioral effects on the market. I hate those commercials that look down on cash purchases. People think they are better and keeping value and numbers in their head than they really are and an electronic system would be too far removed from value.

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  37. Liz says:

    How does a card store value without identifying the card itself? How does one purchase a stored value card in a cashless society without identifying oneself as the purchaser? If the society is truly cashless, all transactions can ultimately be traced.

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  38. Eric M. Jones says:

    Scrooge McDuck used to do backstrokes in his strong-room full of silver coins…but many of the posters here make somewhat specious arguments for the need for cash. Your money has been in cyberspace for 40 years…maybe we should follow it! But there is one huge issue: The “Missing Cash Problem”:

    On average every US taxpayer should have $3600 folding money on his person. Unless you have a lot different bling from me, if you check your wallet it probably won’t be there. Even making allowances for all the cash registers, bank drawers, UFOs, money under matresses, lost to fires, etc., the Benjamins are simply nowhere to be found. So where is it? Well…the US cash runs most of the markets on the planet. Most foreign business has suitcases, strongboxes and safes full of folding US currency.
    See: http://www.ncpa.org/pub/ba280

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  39. Mojo Bone says:

    I believe cash will be with us always; can’t think of a more useful invention since the wheel and the fulcrum/lever. At a very basic level, a busker or panhandler barely requires thought; they receive the potluck of the pocket, no calculations are required. If the giver has to think about how much, the recipient might just be out of business altogether.

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  40. Griff says:

    It appears they unsuccessfully tried electonic cash cards in Swindon, UK and possibly in San Francisco in 1994 – see :

    http://www.independent.co.uk/news/cashless-society-stops-at-swindon-1327804.html

    Cheques have nearly gone out of use in the UK (wages are near universally paid into bank accounts) and I find that I write no more than 2 or 3 a year, mostly to pay subscriptions to clubs or to charities which aren’t set up for electronic money – I guess cash would limp on in a world of e-money cards in similar niches.

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  41. hmt says:

    If physical dollars disappeared in the US I could imagine the Canadian dollar taking it’s place up north. Even the Euro could be used. All removing the physical dollar would do is push down the demand for it.

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  42. --E says:

    In addition to the above reasons, cash is a great means of budgeting. I allot myself a certain amount per week, and put that in my purse. I can see when it’s running low, in a much more concrete fashion than a “balance available” for a debit card.

    And the fact is, large chunks of our economy still function on undocumented cash transactions. Otherwise law-abiding people still pay their fourteen-year-old baby sitter in cash.

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  43. Another David says:

    you can’t get rid of cash. if my friend owes me $20, i don’t carry around a card reader so he can pay me, and he doesn’t want to carry around blank checks. cash may be used much less frequently, but it’s not going to disappear all together.

    as for the penny, as long as out money is denominated is cents, the penny stays. get over it, guys.

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  44. Daniel says:

    Why can’t we at least get rid of one significant digit? Eliminate the penny and nickel, so your coffee costs $1.5 rather than $1.50. And stop printing dollar bills so people will use dollar coins. Then cash becomes less annoying. And we don’t have to spend billions coming up with a government-run electronic payment system that will need to be rewritten every 18 months when it’s hacked.

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  45. Brendan says:

    @ Kijeren

    “What about flipping a coin?”

    I have a dice-roll simulator on my phone for that very purpose.

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  46. Alan says:

    I think cash will eventually disappear, although I don’t think it will be by 2012. I think we could come up with technologies for the instances where we pay small amounts of cash (paper boy, pizza, etc.) Transferring e-money via a mobile phone seems like the most likely scenario.

    The only thing I’m worried about is if the plot to Die Hard 4 becomes true.

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  47. Duane says:

    There are too many “outside” transactions for something like this to ever serve the function of a stand alone currency.
    I for one hope to never see anything like this occur.

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  48. Celeste says:

    Daniel in comment #44 makes a great suggestion on reducing change. I would love to see that go into effect. But as far as electronic only, I’m not into it. Replacing checks is one thing, but garage sales, farmer’s markets, chipping in on pizza all need cash.

    The text-money suggestion annoys me, because I don’t want phone numbers or to give my phone number to all the people I would pay and get paid by. And there are many people who don’t use cell phones or text messaging.

    There’s also the problem with how to include the large population who exists on a cash only basis, no bank accounts. I lived in a building where most people paid rent by cash or money order.

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  49. JB says:

    Tim James,

    As an employee of a large retailer, I can tell you that during a recent power outage, our cash registers did not work, and we were still open for business. We took cash and check. We added up each transaction on a calculator and then added tax. We couldn’t take a lot of customers at a time, but then again, not a lot of people were wanting to shop. The only ones there were looking for essentials, like food, generators, batteries, flashlights, etc.

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  50. Travis says:

    I still haven’t heard any good ideas for e-transactions between normal individuals. Using gift cards is always mentioned, but how many of us would take a $50 gift card as payment and just trust that it has full value (or any value at all)? And what if you have a $50 gift card, but want to pay someone $5 – would you start carrying around dozens of cards in different denominations? (and if so, wouldn’t dollar bills be more convenient)?

    So far PayPal seems like the only existing method that’s even close to being usable, but I’m sure the black market will come up with a cash substitute almost immediately once it becomes necessary (maybe we’ll go back to “private banks” printing their own money).

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  51. Dave Birch says:

    “Well then, what would be the (functional) difference between a $50 American Express gift card and a $50 dollar bill?”

    If you lose the $50 bill, you can’t call up the Feds and cancel itand get them to send you another one. I picked up a pre-paid euros MasterCard with a chip on it at the airport last week: if you steal if from me, it’s no good to you without a PIN.

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  52. Dave Birch says:

    “Paycheck cashing is a big business with standalone stores all over…I don’t think cash will go away soon. It is too convenient, untraceable, and it doesn’t carry fees.”

    Does not compute Captain… unless check cashing has become a free public service.

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  53. Steve says:

    Before everyone dumps the idea of a totally electronic monetary system factor in the staggering costs by having cash. What does the vast majority off all criminal activity pursue? Answer cash. Crime would shrink to almost nothing if there was no cash to be had. Drug smugglers, street dealers, gangs, prostitutes, illegal gambling, tax evaders, illegal aliens, those that hire illegal aliens, terrorists funded by opium trade, black market activity, counterfeiting etc. etc. All seek cash. No one is going to sell a pound of coke and run the transaction through a debit card. The drastic and immediate reduction in crime would result in billions of dollars saved in the fight against it not to mention the lives saved in the process both law enforcement and victims. Billions would be save in the manufacture of currency even though a lot of those costs would fall to the administration of the electronic system. Sure we have to develop a secure system and a method of being able to pay the baby sitter, boy mowing your lawn or your neighborhood poker buddies. But surely their are ways to do that. We used to write checks when we did not have cash on hand. My point is the up side is so tremendous that to not be pursuing a way to make it work would be foolish. I’m not one to give up my liberties lightly but I’m tired of hearing about the convenience store clerk, father of 3, working a 2nd job getting shot and killed for $50.00 or one of our kids being killed because they accidentally got in the way of a drug dispute. Getting rid of cash would greatly increase the security of every individual and our country as a whole. Tax rolls would swell since cash can’t be hidden. Illegal immigration would decline. The expense to the community and country to fight crime would drastically drop. I could go on. You get the picture. It is worth seriously looking at making it happen.

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