As someone who readily accepts any currency type at my farm stand, I see cash is definitely on the downward trend, but no where near non-use. We recently chose to offer any type of card payment options and also EMTs, but cash is still king be it a small or large order. My transaction summaries show at minimum, 64% up to 91% cash use compared to electronic or card transactions. Customers specifically say to me that they would rather pay me cash in order that we avoid electronic banking charges. (2.5% of a $30 tomato order does add up!)
Another consideration with cash use is to do with outages (as you touched on)...be them banking systems, specific card reader systems, hardware outages, internet and also hydroelectric power outages. These outages are more common in rural areas where business still has to go on, vendors and customers alike know this and are typically prepared, so cash still has a great utility value.
Maybe try comparing the level of cash held with the total amount of taxes paid on purchases? Or the amount of income tax paid, which incentivizes tradesmen to charge less for cash, saving both sides considerable money. I do it as often as I can.
If you keep robbing people with ridiculous taxes (and we DO pay ridiculous taxes in Canada), they will use cash or barter
That's an important point. But sales tax rates in Canada haven't really increased since 1991 - and federal income tax rates have similarly been more or less stable. So the possible existence of a tax rebellion won't explain why we're using cash more now than 35 years ago - especially given the transition to digital payments.
It’s possible that the cash economy is much bigger than in 1946 as a result of demographic changes. I taught international students for five years and was told by students from Morocco, India, Ghana and the Philippines that cash is the primary currency used within their communities in Canada. Another contributing factor could be crime, specifically crime linked to money laundering and drugs.
I am certainly with you that this increase in cash holdings by individuals is surprising. I myself hardly ever use cash any more. But then I have nothing to hide. The apparent fact that it is primarily larger denomination bills that people are either squirreling away (which costs them money) or are using in the shadow economy (which saves them maybe 15% in taxes) does provide some confirmation for my theory that tax-evasion is the main reason for people to use cash. In particular, my theory is that the construction and home renovation industries are particularly cash oriented. One of my relatives used to be an electrician, and openly admitted to me some years ago that a large part of his business was cash-only and tax free. I never use any denomination over $20 for the usually small purchases I make in cash; and by and large I am in favour of demonetizing larger notes. The government went some way in this direction by demonetizing $1000 bills in 2000, precisely, it said, to discourage money laundering and organized crime. Also I am wondering if immigrants from countries not so digitalized as ours might be more accustomed to hanging on to a cash reserve.
David, I understand what you say about going digital. Until ....
There are quite a few folks who distrust digital. Some of them are the usual conspiracy nuts. Well, nuts until you recognize the the Bank of Canada is working to develop it's own digital currency. Well, until you consider that the feds will freeze your bank accounts if they don't like your politics. Oh, they will call it an "Emergency" and declare the "Act" and they won't care if later they are found to be doing wrong. But, in the meantime you are without scratch.
There are also folks who just like having cash. And, there are folks who prefer being paid in cash. Some of your commenters have dealt with the latter group.
I almost always use my credit card for purchases - oh, paying it off each month hurts! - but I always have cash for when there is a time that is needed. And strangely enough there often is. Girl Guide cookies from a table at a grocery store; the Sally Ann kettle at Christmas; the panhandler at intersections; gifts to grandchildren; and so forth.
And, oh, yes, how many times does one here about the internet generally or payment systems going down for a period of time. So, the idea of having cash available does have merit. In fact, I suggest that having no backup supply of cash leaves one vulnerable.
Under the quantity theory of money, the stock of money related to the price level, not inflation (the rate of change in the price level). What does that comparision show?
As I understand it, higher or lower volumes of hard currency in an economy will make very little difference to outcomes in terms of quantity theory of money.
Your last paragraph spells it out. Seeing people being "debanked" during Covid certainly reinforces that thesis. another reason may stem from those wishing to exchange (your description) "hard currency" for the five thousand year old actual hard currencies (Gold, Silver, and Copper) while keeping the transactions away from the Jacobins and Bolsheviks who have been known to confiscate individual's reliable forms of stored value. This is particularly concerning now that the bankrupt welfare states are growing debt like never before to the increasingly likely point where sovereign default or runaway inflation are the only outcomes possible along with a replacement with "new" digital fiat currencies (rinse and repeat under big brother). Meanwhile those states uninterested in their continuing vulnerabilities under the US dominated reserve currency world are amassing gold.
Along with honest human action, there's the growth in the underground economy, arguably and increasingly the only remaining free market. Its the transactional privacy that is the major demand for cash rather than a nonexistent long term "store of value"
Paper money eventually returns to its intrinsic value – zero
~ Voltaire
If he were alive today, he would have no doubt clarified with: "all fiat currencies"
As someone who readily accepts any currency type at my farm stand, I see cash is definitely on the downward trend, but no where near non-use. We recently chose to offer any type of card payment options and also EMTs, but cash is still king be it a small or large order. My transaction summaries show at minimum, 64% up to 91% cash use compared to electronic or card transactions. Customers specifically say to me that they would rather pay me cash in order that we avoid electronic banking charges. (2.5% of a $30 tomato order does add up!)
Another consideration with cash use is to do with outages (as you touched on)...be them banking systems, specific card reader systems, hardware outages, internet and also hydroelectric power outages. These outages are more common in rural areas where business still has to go on, vendors and customers alike know this and are typically prepared, so cash still has a great utility value.
Thanks for the morning read, David!
Victor Davis Hanson briefly mentions a black market in cash during a period in American history with high inflation and high taxation. https://www.youtube.com/watch?v=HkQ3CVfObc0&list=PLEASo__ijSI8
People worked for cash and paid cash when shopping.
Maybe try comparing the level of cash held with the total amount of taxes paid on purchases? Or the amount of income tax paid, which incentivizes tradesmen to charge less for cash, saving both sides considerable money. I do it as often as I can.
If you keep robbing people with ridiculous taxes (and we DO pay ridiculous taxes in Canada), they will use cash or barter
That's an important point. But sales tax rates in Canada haven't really increased since 1991 - and federal income tax rates have similarly been more or less stable. So the possible existence of a tax rebellion won't explain why we're using cash more now than 35 years ago - especially given the transition to digital payments.
It’s possible that the cash economy is much bigger than in 1946 as a result of demographic changes. I taught international students for five years and was told by students from Morocco, India, Ghana and the Philippines that cash is the primary currency used within their communities in Canada. Another contributing factor could be crime, specifically crime linked to money laundering and drugs.
That's a very interesting idea. I didn't control for that in my own analysis but I suspect it might account for at least some of the difference.
I am certainly with you that this increase in cash holdings by individuals is surprising. I myself hardly ever use cash any more. But then I have nothing to hide. The apparent fact that it is primarily larger denomination bills that people are either squirreling away (which costs them money) or are using in the shadow economy (which saves them maybe 15% in taxes) does provide some confirmation for my theory that tax-evasion is the main reason for people to use cash. In particular, my theory is that the construction and home renovation industries are particularly cash oriented. One of my relatives used to be an electrician, and openly admitted to me some years ago that a large part of his business was cash-only and tax free. I never use any denomination over $20 for the usually small purchases I make in cash; and by and large I am in favour of demonetizing larger notes. The government went some way in this direction by demonetizing $1000 bills in 2000, precisely, it said, to discourage money laundering and organized crime. Also I am wondering if immigrants from countries not so digitalized as ours might be more accustomed to hanging on to a cash reserve.
David, I understand what you say about going digital. Until ....
There are quite a few folks who distrust digital. Some of them are the usual conspiracy nuts. Well, nuts until you recognize the the Bank of Canada is working to develop it's own digital currency. Well, until you consider that the feds will freeze your bank accounts if they don't like your politics. Oh, they will call it an "Emergency" and declare the "Act" and they won't care if later they are found to be doing wrong. But, in the meantime you are without scratch.
There are also folks who just like having cash. And, there are folks who prefer being paid in cash. Some of your commenters have dealt with the latter group.
I almost always use my credit card for purchases - oh, paying it off each month hurts! - but I always have cash for when there is a time that is needed. And strangely enough there often is. Girl Guide cookies from a table at a grocery store; the Sally Ann kettle at Christmas; the panhandler at intersections; gifts to grandchildren; and so forth.
And, oh, yes, how many times does one here about the internet generally or payment systems going down for a period of time. So, the idea of having cash available does have merit. In fact, I suggest that having no backup supply of cash leaves one vulnerable.
Under the quantity theory of money, the stock of money related to the price level, not inflation (the rate of change in the price level). What does that comparision show?
As I understand it, higher or lower volumes of hard currency in an economy will make very little difference to outcomes in terms of quantity theory of money.
But it still makes more sense under the quantity theory to compare the stock of currency to the price level.
You're probably right, there. I'm going to have to see if I can get my head around the concepts enough to do that intelligently.
Your last paragraph spells it out. Seeing people being "debanked" during Covid certainly reinforces that thesis. another reason may stem from those wishing to exchange (your description) "hard currency" for the five thousand year old actual hard currencies (Gold, Silver, and Copper) while keeping the transactions away from the Jacobins and Bolsheviks who have been known to confiscate individual's reliable forms of stored value. This is particularly concerning now that the bankrupt welfare states are growing debt like never before to the increasingly likely point where sovereign default or runaway inflation are the only outcomes possible along with a replacement with "new" digital fiat currencies (rinse and repeat under big brother). Meanwhile those states uninterested in their continuing vulnerabilities under the US dominated reserve currency world are amassing gold.
Along with honest human action, there's the growth in the underground economy, arguably and increasingly the only remaining free market. Its the transactional privacy that is the major demand for cash rather than a nonexistent long term "store of value"
Paper money eventually returns to its intrinsic value – zero
~ Voltaire
If he were alive today, he would have no doubt clarified with: "all fiat currencies"