The “Cashless Economy” Is A Myth

Jon Alternative Media, Banking, Blogosphere, Crypto Currency, Economy, Fiscal Policies, Government

Via ConvergEx’s Nick Colas,
The ‘Cashless economy’ is myth. Forget what you think you know about credit and debit cards, PayPal, bitcoin, Apple Pay and any other modern conveniences meant to displace physical currency. The truth is that transactional currency ($1 through $20 bills) in circulation per capita today in America is essentially where it was, inflation adjusted, in 1994: $661 then and $649 today. Moreover, the Federal Reserve’s orders from the U. S. Treasury for small bills have grown faster in the last five years than the 20 year average: 4.5% annually versus a 3.5% long run growth rate. This year should be no different, with the Fed ordering $49.9 billion of ‘small bill’ currency, the largest amount since 2010. One bit of good economic news in terms of transactions: $1 bills wear out fastest, and the Fed’s 2015 order of 2.5 billion bills is higher than 2014 (2.3 billion) and 2013 (1.8 billion). That’s growth and relevance any startup online payment company would be happy to see.
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As a New York City resident, the ‘Fast Cash’ button at ATMs in other U. S. cities always amuses me. The most typical offering is $20. That doesn’t even buy you a 7 day unlimited MetroCard in Gotham ($30) or a sandwich at the Carnegie Deli (the Reuben is $29.99). If you want to see ‘Fifty Shades of Grey’ at the Ziegfeld you’ll get a Lincoln back for your Jackson, but you’ll have to choose between a drink or popcorn. You won’t be able to afford both.
And yet there is actually some good data behind that $20 Fast Cash option. According to the Diary of Consumer Payment Choice, a 2012 survey done by three regional Federal Reserve branches, the average adult American carries $56 and the median observation is $22. Only 5.2% of Americans carry a $100 bill, and a Boston Fed paper from November 2014 estimated that 65% of those notes actually circulate overseas. So a $20 bill from the ATM in Des Moines or Charlotte is actually enough to replenish the average American’s wallet. Just don’t try that in NYC.

This post was published at Zero Hedge on 02/27/2015.