At the start of the COVID-19 Pandemic it looked like cash was headed for the trash bin. Bills are dirty and who really wants to handle cash every time you make a purchase? Much cleaner and safer to use a debit or credit card.
Cash usage did drop slightly this winter and spring as a percent of transactions but if cash is on the way out it will be a slow death. For the elderly and the poor cash is still King, and for many others, stocking up on cash before the unknown effects of the COVID crisis just made good economic sense. As of June, currency held outside banks was up 13% versus a year ago.
Different countries have very different views of cash. Well over 50% of transactions in Germany are made with cash, even large purchases. Many Germans are conservative and concerned about financial confidentiality. In Sweden on the other hand, cash use is down to 15% of transactions and many banks no longer hold cash in their vaults. America is somewhere in between at about 30% of all transactions. We hold stubbornly to historic traditions of cash. The half-penny was eliminated in 1857 but the penny lives on even though it costs twice as much to produce as it is worth and many just sit forlornly in the ‘take one, leave one’ trays today.
Some bills can live into ripe old age (see chart below) but the average $1 and $5 bill lasts only one and a half years, and the average $20 just two years before shredding.
The most amazing fact about America’s cash is the amount outstanding – – $1.9 trillion today. This works out to nearly $5,000 for every man, woman and child in the country. Most of us can’t break a $20 much less imagine carrying five grand around. So where is all this cash? Approximately 70% is held outside our borders. The dollar is still very much King in many foreign wallets.