Martha Myron

Is the end of physical money near?

  • In the money: does cash have a future in this digital world?

The thing about money — we all need it.

“Money bewitches people. They fret for it, and they sweat for it. They devise most ingenious ways to get it, and most ingenuous ways to get rid of it. Money is the only commodity that is good for nothing but to be gotten rid of. It will not feed you, clothe you, shelter you, or amuse you unless you spend it or invest it. It imparts value only in parting. People will do almost anything for money, and money will do almost anything for people. Money is a captivating, circulating, masquerading puzzle.” — Federal Reserve Bank of Philadelphia, “Creeping Inflation”, Business Review, August 1957.

The prediction from various financial pundits (and some advanced countries) is that the use of physical cash — paper money and coins — as we know it may decline dramatically in the not too distant future. Of course, calculation of a future depends upon what age you are now: a 70-year-old views the future in an entirely different context than a young careerist.

But what is cash money anyway?

Individuals view cash money from various viewpoints as:

• A tangible, visible medium of exchange, you can touch it, you can count it. In the very distant old days, whale’s teeth, shells, precious metal, cattle, etc, were exchanged for food, clothing, equipment and shelter. These mediums of exchange were not easily portable, inconvenient for domestic and overseas transfers and often, environmentally and politically damaging.

• A standard of value — we measure our relative worth in financial terms, however, much we may sincerely believe that, the things of the spirit are more important.

• Means of accumulating wealth;

• A bargaining chip: you have something I want, I have something you want.

• A cushion against tough times, particularly hard (or black market) currency, the only currency that has value in strife-torn jurisdictions — think US dollars.

• An immediately liquid method to achieve gratification.

• An extremely comforting, readily available asset, a control hedge — you have your money not someone else.

• A non-investable asset — when held physically, as in cash under a mattress that is subject to purchasing power declines.

• You, the consumer have the cash, you aren’t paying your bank fees to hold your money.

The perspective of financial institutions is quite different.

Cash represents, first and foremost, a physical management challenge.

• Coins are heavy, consume storage, and expensive to produce. In 2014, a US dollar’s worth of each of the following cost this to produce: $1.62 for nickels, $1.66 for pennies, 40 cents for dimes, and 36 cents for quarters. *

• Paper dollar bills may be more cost-effective, but also consume space.

• Security protection is expensive.

• Physical cash is anonymous. Tracking is almost impossible.

• Interchange requires personnel and machinery; receiving, transferring, distributing, handling, accumulating and inventory control.

• Capital reserve valuations must be agreed upon with monetary authorities along with concurrent maintenance of liquidity thresholds.

• Banks have a role in regulating the amount of cash in circulation. Anyone ever notice that physical cash limits are increased during very busy holiday times, like Cup Match and Christmas?

• Physical cash access by account holders may need to be controlled during times of stress and volatility. We’ve all seen media pictures of residents (in long lines) waiting to access bank accounts in various countries traumatised by natural catastrophes, most recently Puerto Rico.

Bermuda is a small island, relatively isolated, yet cash money circulates freely: Bermuda dollars, US dollars, other foreign currency that can be changed with a five-minute visit to our local banks. How many of us ever stop to think why this is so, or what would happen if it did not?

Do we even think about it? Probably not. Why? Because it seems the money is always there, in every cash register, in every bank, in every consumer pocket, and government coffer.

What happens if cash money in circulation diminishes? Money then becomes completely digital, opaque, anonymous, more personal with transactions just between the buyer and seller (no third party in the middle), and possibly more, or less, visible in the hands of those inclined to nefarious activities?

Is this something that communities want?

The Swedes are almost all accepting of digital interchange, although, there is a countermovement. Swedish physical cash in circulation is down to less than 1 per cent. See BBC news, “Why Sweden is close to becoming a cashless economy,” By Maddy Savage, Business reporter, Stockholm, 12 September 2017. ( )

Yet, Bloomberg, in a recent article, “Reports of cash’s death are greatly exaggerated,” by Nicholas Colas, August 28, 2017, states that:

“Individuals see paper currency as a store of value and hedge against another financial crisis. Cash continues to thrive because it solves real-world problems in a way that non-cash solutions do not.” ( )

Most important observation. There are four more crucially significant questions that very few address when chatting euphorically about digital, bitcoin, other cryptocurrencies, and variations of the same — taking over our financial world. 1. What if you cannot afford all the electronic stuff, and the cost of use?

2. How can you control your accounts against identity theft, hacking, and virtual impersonations.

3. What happens if the power grid goes down?

4. What happens if satellites become inactive (or are deliberately sabotaged)?

How do you access any medium of exchange then: cash (ATM), digital, crypto, oil, gold, you name it? Everything, virtually everything in our sophisticated lives depends upon electricity, cellular communications, internet access, and related technology.

Looks like we shouldn’t forget how to barter — as well as checking those mattresses!

Be aware. Learn about your finances. The more you know, the more you have control.

Next we explore the digital, and the new, new thing — the crypto world.


* The Washington Post, Wonkblog, by Christopher Ingraham, December 15, 2014

Martha Harris Myron CPA JSM: Masters of Law — International Tax and Financial Services, Pondstraddler Life™, financial perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact: