Updated January 2017
Over the past few months, with increasing frequency, I have been posting articles on negative interest rates, the shiny new, untried and unproven policy that has become the tool of choice for many of the world's central bankers. While I don't want to sound like a tin foil hat-wearing conspiracy nut, in order to successfully implement a negative interest rate policy, central banks will have to prevent the sweaty masses from hoarding cash. The only way to do this is to entirely abolish cash in all forms, otherwise, consumers will merely withdraw their funds from the banking sector, which will leave banks in the unenviable position of not being able to charge their customer base for "storing" their cash in bank accounts and other forms of saving.
Over the past few months, with increasing frequency, I have been posting articles on negative interest rates, the shiny new, untried and unproven policy that has become the tool of choice for many of the world's central bankers. While I don't want to sound like a tin foil hat-wearing conspiracy nut, in order to successfully implement a negative interest rate policy, central banks will have to prevent the sweaty masses from hoarding cash. The only way to do this is to entirely abolish cash in all forms, otherwise, consumers will merely withdraw their funds from the banking sector, which will leave banks in the unenviable position of not being able to charge their customer base for "storing" their cash in bank accounts and other forms of saving.
With my theory
in mind, I want you to take a look at two recent polls by Gallup, America's
preeminent pollster regarding the use and future of cash in American society.
In the first poll, Gallup looked at what percentage
of Americans still used cash for purchasing retail items. They found that
the percentage of consumers using cash for all or most retail transactions has shrunk from
36 percent in 2011 to 24 percent now, a drop of 33.3 percent.
Here is a more detailed
breakdown:
The percentage of
Americans who now use cash for either none or some of their purchases has risen
from 43 percent in 2011 to 53 percent in 2016.
Let's look at how age
impacts the use of cash. Here is a detailed breakdown showing the
percentage of each of three age ranges that use cash for all or most of their
purchases of retail items, comparing the results from 2011 to those in 2016:
Over the five year span,
the percentage of Americans between the ages of 23 and 34 who use cash for most
or all of their purchases has dropped from 39 percent in 2011 to 21 percent in
2016. This is largely because younger Americans have embraced cashless
payment technology at a higher rate than their older counterparts.
Now, let's look at part
two of Gallup's research into cash. In the second poll, Gallup asked the following
question:
"How likely do you think it is that in your lifetime the
United States will be a cashless society, in which all purchases are made with
credit cards, debit cards and other forms of electronic payment?"
Here are the results:
Very likely - 30 percent
Likely - 32 percent
Unlikely - 25 percent
Very Unlikely - 11
percent
Interestingly, strong
majorities in all age groups stated that they could see a time when America was
a cashless society; 58 percent of those 65 years of age and older and 63
percent of those aged 18 to 29 years of age believed that American society
would become cashless.
Here is a table showing
how people in each age range deal with having cash on hand and how comfortable
they are without having any cash on hand:
The oldest Americans, 65
years of age and older, are much more likely to have cash on hand at all times
than their younger counterparts and are far less comfortable with the prospect
of not having cash than their younger counterparts.
Here is a table showing
how much cash each age group generally carries:
Those Americans in their
peak earning years of between 30 and 49 are more likely to have more cash on
their person than their younger or older counterparts.
This research is a
negative interest-rate central banker's dream come true. Americans are
less and less enamoured with cash as the years pass and it will be a far
simpler process to wean consumers off of cash now than it would have been a
decade or decades ago. The generation that used cash for most of their
daily retail needs is quickly departing this earthly orb and with a young
generation who has grown up using plastic, e-money and other forms of payment rapidly
becoming the new consuming generation, policy makers may find that there is far
less resistance to abolishing the use of paper and worthless metal currency than one might hope.
An American cashless will not happen. It can't happen for the following reasons: Undocumented workers, Drugs, Prostitution, gambling, and tax avoidance. You must realize that while against the law large percentage of Americans engage in at least one or more of these things. Unless there becomes a way for money to be transferred anonymously between people even those in power engage in these activities that require cash.
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