Commentary Magazine

The End of Cash

The digital revolution has sent many technologies into the Smithsonian: typewriters, carbon paper, film, car keys, cathode ray tube TVs, solitaire with actual playing cards, mercury thermometers, pay phones, phonographs, Polaroid cameras, and so on.

Others are clearly on the endangered list, such as paper-and-ink newspapers and magazines. And, when you think about it, cutting down acres of Canadian forests, transporting the wood to paper mills, transporting the paper to printing plants, transporting the newspapers to newsstands around the country, and then throwing it all away the next day, is a very 19th-century technology. (Of course, the nice thing about paper-and-ink newspapers and magazines is that the ads just sit there. You can read them or ignore them as you please. In the digital versions, the ads, as often as not, jump out and bite you on the nose.)

And now the New York Times is reporting that one of the world’s oldest technologies, cash, is beginning to disappear from the marketplace. An increasing number of restaurants and fast food places are plastic only, no cash accepted. What about dollar bills being “legal tender” you ask? Well, the full phrase is, “Legal tender for all debts public and private.” Creditors and governments are obliged to accept cash in payment of debts and taxes, but merchants are under no such obligation in an exchange of goods, such as dollars for lunch.

Money in the form of coins has been around since the late 7th century BC, and paper money, first used in China in the 7th century AD, came into use in Europe beginning in the late 17th century (the Bank of England was founded in 1694).

Money was one of the great inventions in world history because it greatly facilitated transactions, the sum of which is called “the economy.” The more transactions, the more wealth is created. In a barter economy, if you have apples and want oranges, you need to find someone who has oranges and wants apples. Economists, with their usual talent for coining snappy phrases, call this a double coincidence of want. With money, you sell your apples to the apple dealer and then take the money to the orange dealer.

But cash has its downside, too. For once thing, it’s “negotiable.” That means it belongs to whoever has it. A stock certificate (also in the Smithsonian today) has to be signed over, a dollar bill does not. That makes cash very vulnerable to robbery and employee stealing. And it greatly facilitates illegal activities such as drug dealing. It also facilitates the underground economy, the part that escapes taxes. Needless to say, the IRS would love to see the end of cash. Waiters are less enthusiastic.

It won’t vanish overnight, of course, but cash is headed for the Smithsonian, too.

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