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Poor coins and notes, no one loves them anymore. Except criminals, that is.
REMEMBER when cash was king? Now cash is more like a minor duke whose stately home is badly in need of repairs.
Cheques are nearly forgotten and now Aussies are giving up on the lobster ($20 note), the pineapple ($50 note), and all the rest of them as well
This chart shows we are abandoning cash even for small payments. The decline of cash is accelerating.
Source: RBA surveys, conducted by Colmar Brunton and Roy Morgan Research.
The number of ATM withdrawals has also been falling fast since 2010, according to banks. Cash lasts a lot longer when you can PayPass your way through each day. Sometimes these days, I find a $20 note in my wallet and I can’t remember when I got it. Probably weeks ago.
While we don’t have as much actual use for cash any more, we still really like it.
On Wednesday, the RBA started talking about issuing digital cash, which would have some similarities with Bitcoin.
“The digital currency would presumably circulate in parallel (and at par) with banknotes and other existing forms of the national currency,†said the RBA’s head of payments policy. He emphasised the RBA “has not reached a stage where it is actively considering this.â€
The central banks of England, Canada and China are also looking into digital currencies. They would let you transact using an electronic system, more anonymous and quite separate to your bank account.
But still, the rise of a digital currency instead of cold hard cash frightens a lot of people.
But it could make sense for governments to dump cash.
Cash gives government problems. They have to make it, watch out for counterfeits, recycle the old notes and coins and make sure nobody is stealing them.
Cash also undermines monetary policy, used to boost the economy. If the RBA need to cut interest rates to give the economy a boost, but if interest rates are already at zero, the government has a problem. If they cut interest rates to negative interest rates, we could just withdraw our money and keep it as cash. But without cash, you can’t withdraw your cash and negative interest rates become possible, giving monetary policy makers more options.
And there are more everyday problems — cash lets many dodgy things happen without the government knowing.
When is the only time we see this much physical cash? When police seize it from criminals. Picture: Justin BriertySource:News Corp Australia
Just this week, a woman was arrested on the Hume Highway with $920,000 in the boot of her car. Sure, maybe she was just heading to Sydney to buy the median price house. But those amounts of cash are mainly the preserve of criminals.
In fact, criminal activity probably explains the mystery of the missing hundreds. The RBA keeps printing hundred dollar bills, but nobody seems to spend them, and we’re not sure where they end up.
The reason criminals love cash is however also the reason to be nervous about losing it. Cash is anonymous. If there is no cash, the government can see every little thing you do.
Whether privacy becomes the big issue of the next century is not yet clear. Maybe governments and businesses will know our every move and leave us alone. If they don’t, privacy could become our biggest headache. Until that is clear, there is a very strong argument for keeping cash.
Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine.
Follow Jason on Twitter @Jasemurphy