Cash Remains Healthy as the Pandemic Rages

People like the convenience of digital transactions, but they rely on the anonymity and reliability of physical money.


Will the COVID-19 pandemic hasten the abolition of cash? That was certainly the hope of central bankers and politicians who don't like the uncontrollable nature of physical money. Banknotes and coins are virtually impossible to trace, allowing people to engage in anonymous transactions and to store value out of reach of grasping officials, which had officials hoping that the arrival of the pandemic would taint physical money as a nasty virus vector and so accelerate the move to a cashless world.

But that's not what's happening. Sure, contactless transactions have increased while people make purchases from home. But demand for cash is also up, as people hedge against uncertainty by holding on to a means of exchange that weathers emergencies and circulates beyond the reach of political whims.

It's not that officialdom hasn't put in the effort to kill cash.

"We know that money changes hands frequently and can pick up all sorts of bacteria and viruses and things like that," a World Health Organization (WHO) spokesman told The Telegraph in March. "When possible it's a good idea to use contactless payments."

Amidst massive uproar, WHO immediately backpedaled from the notion that it had ever warned against the use of banknotes. And well it didcash and coins are popular in most parts of the world. Cash enjoys public support largely for the same reason it is unpopular with officials: it makes it difficult to track and tax transactions, and to impose negative interest rates.

The popularity of cash was quite healthy even before the pandemic.

"It would seem that physical currency should be fading out as the world of payments is increasingly electronic, with new technologies emerging at a rapid pace, and as governments look to restrictions on large-denomination notes as a way to reduce crime and tax evasion," Ruth Judson, a Federal Reserve economist, wrote in 2017. "Nonetheless, demand for U.S. dollar banknotes continues to grow, and consistently increases at times of crisis both within and outside the United States because it remains a desirable store of value and medium of exchange in times and places where local currency or bank deposits are inferior."

Many U.S. dollars are held outside the United States by people who have limited faith in the political and economic stability of their own countries and see American currency as a reasonably stable store of value. But about a quarter of Americans make little or no use of banks, the Federal Deposit Insurance Corporation found in 2017. These "unbanked" and "underbanked" Americans primarily do business in cash, fueling demand for banknotes and coins.

That's not just an American phenomenon. "Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth," the Wall Street Journal reported at the end of 2019. "Central banks don't know where they have gone, or why, and are playing detective, trying to crack the same mystery."

The article went on to add that demand for banknotes is not that big a mystery, since central bankers are quite aware that "households feel distrustful of the banking system or people want to make transactions anonymously" out of sight of regulators and tax collectors.

Such distrust only increases when you add to the turmoil, such as with a pandemic and with tight economic controls imposed by panicked governments. That's caused a surge in demand for physical cash in the U.S., Europe, Australia, India, and elsewhere in the months since the virus began spreading.

This doesn't mean that people are spurning the convenience of digital payment systems; to the contrary, contactless transactions are surgingby 10 to 15 percent, according to some reports. Unsurprisingly, during a health crisis, people like the flexibility and perceived safety of paying for things from home and with a minimum of physical contact.

But people also like the reliability and anonymity of old-fashioned cash. Payment methods that were supposed to replace paper and coins are instead coexisting with them. That's because people's priorities are very different from those of the powers-that-be.

"The drive toward cashlessness is mostly driven by two factors: fiscal concerns over revenue collection and industry interest in capturing additional data about people's lives," notes Bill Maurer, dean of the University of California's School of Social Sciences. "If you're a state tax authority, eliminating physical currency means that transactions have to pass through a bank or other institution. Despite secrecy rules and privacy regulations, if they have due cause, officials can still peer into people's financial affairs."

Easily peering into people's financial affairs runs exactly contrary to what many members of the public actually want. Add to that the large number of Americans who live almost exclusively in the cash economy, and the fact that "when there's a natural or manmade disaster, paper money becomes absolutely essential to community resiliency," and you have Maurer's rationale for why banknotes and coins are "not going away anytime soon." But he does worry that continued efforts to marginalize cash will hit the poor hardest.

Perhaps counterintuitively, the European Central Bank (ECB) shares that concern. It came out against the Spanish government's plan to gradually eliminate physical money, warning that many poor Spaniards rely on the cash economy.

The ECB's own figures (ECB) show that, as of 2016, 79 percent of all point-of-sale purchases in the Eurozone87 percent in Spainwere made in cash.

Eliminating banknotes and coins would require massive changes to the way people conduct their lives. And, as the pandemic-era surge in demand for physical euros, dollars, and other currencies demonstrates, that would certainly be change imposed from above, against the wishes of the people earning, buying, and selling through their preferred means of exchange.

Those preferred means of exchange may well be through cards and apps when it's convenient and the stakes are low. But when privacy is a concern, or when a global crisis threatens the infrastructure required to keep digital payment systems up and running, people continue to rely on physical money they can hold in their hands.

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  1. No mention of the coin shortage sweeping the USA?

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    2. That seems like a glaring failure for an article about cash to miss

  2. >>Will the COVID-19 pandemic hasten the abolition of cash?

    stop encouraging their tyrannical ideas you know they want it bad.

  3. Cash doesn’t even need to be outlawed for someone to freeze everyone’s liquid assets, if that was even possible. What percentage of anyone’s “cash” is held in actual physical cash? Most people have a small amount in their wallet and that’s it. No one cashes their paycheck and stashes FRNs and gold coins in a safe. If “they” wanted to take all of your digital money right now “they” could and you’d be left with pocket change. Like the tracking chip in the vaccine thing. Huh? “They” are tracking you right now. No vaccine chip necessary.

    1. Very true. I had a recent mishap where I moved and my bank didn’t send my updated address to the card department. They sent the new card to the wrong address. For a few days everything was frozen. It was a weird feeling. Not being able to access your own money. Luckily I have cash stashed here and there, but if not I would have been paralyzed.

      1. I hate to say it but Tulpa’s posts are more interesting.

        1. Did you know that Donald Trump is a unique threat to our democracy?

    2. You are correct. But, they can only do it to a few people. If they started doing it regularly, people would start hording cash and taking precautions against it happening. So, the existence of a cash economy and the ability to get by in it, is what ensures that they don’t do that on a widespread scale. Get rid of the cash economy and go to a cashless society, and there is no way the public can take any precautions and the government will be free to use freezing assets to whatever degree it wants to impose.

      1. That’s why people hoard gold, am I wrong?

        1. Yes. But hoarding gold likely is no good in a cashless society. If you can’t make any electronic transactions, how do you sell it?

          1. by weight?

            1. Its hard to pay your electric bill with gold and try giving the cashier at the supermarket a tenth of an ounce of gold in exchange for your weekly food ration. people will roll over so fast.

          2. Now I get your point. Do you mean that without electronic cash we would be without currency? There will always be currency. Could be gold, cigarettes, bullets, whatever.

      2. “They” could freeze all banking at once right now and no one would have the chance to remove anything.

    3. FDR’s devaluation, leaving the gold standard, and making gold illegal was facilitated by new non-gold bills being a different size, and, sez vague memory, making the old larger bills as irredeemable as politicians after some period (six months? a year?).

      1. Gold certificates are still legal tender, and count at face value.

        1. But can’t be redeemed for gold, right?

          Are these the larger pre-FDR bills? I had remembered the size change as part of their scheme for getting the old bills out of circulation.


            I have some old gold certificates and would like to trade them in for gold. What should I do?
            Gold certificates were withdrawn from circulation along with all gold coins and gold bullion as required by the Gold Reserve Act of 1934. Gold certificates circulated until December 28, 1933. That is when the President ordered private owners of gold certificates to deliver their notes to the Treasurer of the United States by midnight on January 17, 1934. It was then illegal to hold gold certificates. C. Douglas Dillon, the 57th Secretary of the Treasury, removed the restrictions on the acquisition or holding of these notes on April 24, 1964.

            Under 31 U.S.C. 5118(b) as amended, “The United States Government may not pay out any gold coin. A person lawfully holding United States coins and currency may present the coins for currency . . . for exchange (dollar for dollar) for other United States coins and currency (other than gold and silver coins) that . . .” citizens may lawfully own. Although gold certificates are no longer produced and are not redeemable in gold, they still maintain their legal tender status. You may redeem the notes you have through the Treasury Department or any financial institution. The redemption, however, will be at the face value on the note. These notes may, however, have a “premium” value to coin and currency collectors or dealers

          2. The size change occurred in 1928, five years before FDR. It was initiated to make money more convenient to handle, and to make the appearance of different kinds of paper money more uniform. Paper money in circulation at the time included Federal Reserve Notes, United States Notes, Silver Certificates, Gold Certificates, and National Currency.

            Small size Gold Certificates looked like this:

  4. Couple days ago I went to buy gas with my credit card but their machine was down. So I whipped out my emergency Benjamin and she didn’t have change. I had to drive to the next spot for gas.

    Lesson learned: Keep a Jackson with the Benjamin.

    1. Had an issue where the machine would not take my card, went to the attendant and tried to give her my card and said I would fill it up…she could not do that could only approve for an amount. Even tried to give her a 20 and would then get change but could not do that either could only take exact amount pre-paid.

  5. Cash has gotten more attractive vs. banking for 40 years, since interest rates topped out at 20 — TWENTY — percent.

    It won’t get less attractive until the Fed inflates the s*** out of the dollar. Not looking forward to that.

    1. It’s happening before our very eyes. The Fed’s printers are smoking and shooting flames right now and there is less stuff being manufactured.

      1. Money printer go brrrr.

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  7. Cash good.
    Socialism bad.

  8. The “pandemic” isn’t “raging.” Jesus fucking christ, the CDC’s own numbers make it less deadly than seasonal flu for those under 50: .05% KungFlu to 1.8% flu mortality. That’s using numbers from people with a vested political interest in propping up the Andromeda Strain narrative, so when you factor reality in to the equation you’re looking at something even more benign. What the fuck is “raging” about it?

    1. But everybody’s got it! Like disco fever, it could destroy society as we know it.

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  10. Cash is good but pandemic rages not good

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