The 2,500 year experiment with solid currency

By Razib Khan | July 6, 2011 9:30 am

This article in The New York Times focuses on cash in terms of paper currency, but the lessons are generalizable to coinage as well, which pre-dates paper currency by 1,500 years. Some fascinating numbers:

…In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation’s economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.

…Indeed, cash remains so pervasive, and the pace of change so slow, that Ron Shevlin, an analyst with the Boston research firm Aite Group, recently calculated that Americans would still be using paper currency in 200 years….

… Thanks to technological advances, the average dollar bill now circulates for 40 months, up from 18 months two decades ago, according to Federal Reserve estimates….

…. In 1989, the Fed replaced 46 percent of returned dollar bills. Last year it replaced 21 percent….


We don’t know if the United States of America will be around 200 years from now, so the question about the persistence of cash is rather moot in my opinion. But in any case, the marginalization of (relatively) untraceable cash for abstract monetary units of value is going to entail some changes. Not only are financial institutions going to track and analyze your purchasing habits in fine-grained detail, but governments will able to get their hands on that information if they have a will to do so. Additionally, that information and the meta-data will be stored somewhere, so there are going to be solutions which emerge to resolve the problem of information getting stolen by pirates. Finally, at some point within the next generation or two I suspect that utilization of paper currency might suggest that something is off in your circumstance or intent. That is, people may wonder why exactly you are using an antiquated currency medium whose primary benefit is that it renders your transactions invisible. It will be an order of magnitude worse than the cases we encounter now with people who write checks in retail lines. They are sources of hapless inconvenience, not targets of suspicion.

CATEGORIZED UNDER: Economics
  • http://www.tdaxp.com tdaxp

    A running theme of the “Dave Ramsey Show” (an evangelical-focused financial advise show) is times in which listeners are ‘looked at like drug dealers’ for paying for cars or appliances in cash…

  • AG

    Hoarding some gold is alway good idea when you need untracible transaction. Gold is true universal currency across time and space.

    Invention of paper currency is great idea for Govement or Ruler’s additional taxation on mass by inflation. On the other hand, inflation forces people to spend and invest which is good for economic growth. Paper money started as credit or IOU for gold.

    Now with invisible credit circulating through electronic network, Govement even have easier time to inflate by writing off credit or debt like recently handling bank credit crisis. Just electronic writing off all debt. Hyperinflation is our future.

  • Brian Too

    Traceability is OK if you have a situation where the citizens generally trust the government, and government generally trusts the citizens. In those cases then untrustworthy transactions are mostly coming from illegal activities which, by general understanding, are immoral as well as illegal.

    If trust breaks down, or never existed in the first place, then this implied social contract is absent and traceability can become a really bad thing.

  • Neuro-conservative

    Philip K. Dick anticipated this situation 35 years ago, at the dawn of the credit card era. In A Scanner Darkly, “straights” carry credit cards which are required for entry into electronically gated malls, whereas there is a parallel, downscale cash economy for drug addicts.

  • AG

    “Traceability is OK if you have a situation where the citizens generally trust the government”

    Obviously, your only worry is your own govement. For me, scam artist, other shady people including gold diggers, foreign govements, many more are all my concern. If you travel in foreign countries, you better stay off your credit card or check book.

    Jumping to conclusion about untraceble transaction is obviously simple minded.

  • http://thesolarkat.com Ezequiel Aprea

    Most people want to lower their bills but for the most part at least currently sometimes going lowering your bills is not as easy as it sounds.I have looked at eco-friendly and green technology alternatives and adapted where it makes financial sense. So far I have also installed solar panels on my home but while looking for a electric car I find the cost doesnt justify it for me and also doesnt lower my bills much. While I am passionate about making good financial choices and opting for green technology whenever possible it is up to people like you and I to spread ideas about how to lower your bills. Your website looks popular and I think you can help influence society with your insight and tips. By the way I found your site by searching ” The 2,500 year experiment with solid currency | Gene Expression | Discover Magazine ” and you were the first result. So I think your website is a perfect platform to discuss ideas that are thought provoking to help influence your readers to make wise choices with our budgets. – Good luck with your site, you deserve all the success! Please continue to talk about more tips on saving money, every idea helps us get closer day by day!

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Gene Expression

This blog is about evolution, genetics, genomics and their interstices. Please beware that comments are aggressively moderated. Uncivil or churlish comments will likely get you banned immediately, so make any contribution count!

About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at http://www.razib.com

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