econlife - Is it Okay to Go Cashless During a Pandemic? by Elaine Schwartz

In 1978, Massachusetts became the first and only state to ban cashless transactions in retail establishments. Then, 41 years later, New Jersey, Connecticut, and Rhode Island, followed its lead.

After that, the cashless bans multiplied. Including Philadelphia, San Francisco, Berkeley, and NYC (on Nov. 20), a growing list of U.S. cities are saying that plastic alone or just digitized payments are not okay. Cash has to be acceptable.

However, the pandemic is creating some questions.

The Cashless Debate

When the U.S. government got a delivery of Federal Reserve notes from Asia, it said circulation would be delayed for at least 7 to 10 days. They wanted to be sure no virus lurked on any surface. Similarly, referring to Covid-19, a Rhode Island college professor suggests that her state reverse its cashless ban. She cites the governor’s recommendation that all restaurants become cashless when they reopen. Perhaps knowing that a typical rectangle of “paper” money can be the home of 3,000 kinds of bacteria (though I’m not sure about the coronavirus), both believe no cash is a healthier alternative.

Also opposing the cashless bans, opponents say they stifle payment innovation. Others point out that cash adds to business minutiae. They have to count bills, deposit them, maintain safety precautions. Atlanta’s Mercedes Benz Stadium saved $350,000 after going cashless during March 2019. Meanwhile, Harvard economist Ken Rogoff adds that large bills contribute to global crime.

On the other side, the cashless bans diminish inequality. They support the fifth of all Americans who have no bank accounts. They help the people and small businesses with limited internet access. In addition, psychologists remind us that cash can be a restraint. When we are aware of the cash we remove from a wallet, we spend less.

Cashless Transactions

Moving beyond the U.S., we can travel to Canada to see a more cashless country. Sweden also is high on the list. (Several years ago I told the wonderful story of an aspiring bank robber who was told he had selected a cash-free location. Sadly leaving with nothing, he asked a teller, “Where else can I go?”)

In the U.K. the share of cashless sellers jumped to almost 60 percent during the pandemic:

Our Bottom Line: Pandemic Money

So yes, the pandemic has encouraged us to replace cash with digital payments. But we should note that our digital device is not necessarily money; the transaction could be followed by a money transfer.

To be money, a payment needs these characteristics:

1. A medium of exchange (It is widely accepted for payment.)

2. A measure of value (People know what a certain denomination will buy.)

3. A store of value (It will retain its value.)

Returning to where we began, is it okay to go cashless during (and after) a pandemic? I suggest yes, if only for the time and money savings that might support struggling retailers. However, as we inexorably move toward a cashless society, we need to knock down its exclusionary barriers.

My sources and more: This NY Times column on cashless transactions took me to countless possibilities.  I went to a National Law Review article, to Payments Source, Pew, and Politico. I also looked at this paper from Harvard economist Ken Rogoff, the Dirty Money project and fisglobal. In addition, the Providence Journal told of the governor’s reversal. But if you just read one article, do go to Bloomberg CityLab.

Please note a key factual correction since publication about the Rhode Island governor’s policy reversal, supporting cashless businesses.

Check out this program, A World of Money from izzit.org that talks about the history of money, in its many forms.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Cash We Love to Stash by Elaine Schwartz

Each year, the Federal Reserve decides how much cash to print. The new bills are primarily used to replace whatever is too tattered or worn out. Meanwhile, the old ones are withdrawn from circulation.

Below you can see the Fed’s 2018 print order. Only the $20s exceed the new $100s they are creating this year:

Why We Want $100 Bills

The $100 bill just became the most popular kind of cash. For years, the dollar was in the lead. No longer:

For many reasons, a $100 bill is a handy denomination. Because of the financial crisis and low interest rates, people have more cash. It makes sense that whatever cash we stash under the mattress is in large bills.

Similarly, $100 bills are the note of choice for the “informal,” underground economy. Explained in a Harvard Business School paper, they are universally acceptable, they retain their value, and they are easily transportable. Add anonymity to that list and you get the perfect currency for illegal transactions. Similarly, the $100 bill is ideal for people in countries with unstable currencies.

It is also easy to ship $100 bills. In 2012, The Atlantic said we send pallets, each with 640,000 $100 bills, to destinations outside the U.S. Because financial intermediaries pay for those bills–called seignorage–we make money when we “export” them.

Finally, you might be thinking that we live in a digital age. However, people do want to continue using cash–more so in some places than others:

Our Bottom Line: What is Money?


Small rectangles made of cotton and linen, sea shells, or massive stone disks are considered money if they have three characteristics:

• A medium of exchange: People accept it as payment.
• A unit of value: People know what it’s worth.
• A store of value: Its purchasing power is relatively stable over time.

Like the $100 bill, these huge limestone disks on the Micronesia island of Yap have also functioned as money.

My sources and more: Quartz reminded me it was to look again at the $100 bill and at who uses cash. From there, you might want to see the Fed’s money order and more about the Yap. But returning to the $100 bill, The Atlantic and this HBS paper had the detail.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why the Secret Service Monitors Fake Movie Money by Elaine Schwartz

When Rush Hour 2 needed many millions in 100 dollar bills, Independent Studio Services (ISS) sent them 14 pallet loads of 4′ x 4′ cubes of fake money. During the filming, the Secret Service showed up, issued a cease and desist order, and accused ISS of counterfeiting. It appears that movie extras had been spending the cash nearby.

Although no one wound up in jail, the raid cost ISS a lot of real money. Their digital files were confiscated and billions destined for a slew of movies, destroyed.

Below, the real $100 bill is the top image while the Rush Hour 2 fake is under it. Commenting on the bogus bill (that does look rather real), a Secret Service agent said,”…son of a gun, if it’s green and it says ’20’ on it, somebody will take it.”

In this Rush Hour 2 scene, the fake money flies after an explosion in a casino:

Occasionally a movie maker decides to use actual cash. When The Brinks Job (1978) needed close-ups of U.S. currency, they borrowed the money from a bank. Real guards hovered near huge piles of real cash that, after filming, was counted and returned ASAP.

So, where are we going today? To what makes money real.

But first…

Counterfeiting History

Abraham Lincoln signed the act that created the Secret Service on the day he was assassinated (April 14,1865). Because somewhere between one-half to one-third of U.S. currency was reputedly fake, the Secret Service’s sole purpose was to combat the counterfeiting.

Fast forwarding to 1992, we can look at current counterfeiting criteria. According to the Counterfeit Detection Act of 1992, the fake money has to be clearly bogus in several ways.

It should be…

• either 75% smaller or 150% larger than real cash.
• one-sided.

Also, after its final use, the equipment used to make the money has to be destroyed.

Our Bottom Line: What is Money?

The textbooks say that any commodity can be money if it has three basic characteristics:

1. a medium of exchange
2. a measure of value
3. a store of value

It makes sense that money needs to be real for us to believe it is a medium of exchange. Get enough of those fake movie dollars in circulation and we have a problem.

My sources and more: Thanks again to 99% Invisible for another quirky episode. Only the beginning, the fake money story took me to more detail about movie prop money at priceonomics and Mental Floss. From there, it made sense to look at some counterfeit money history.

Please note that sections of Our Bottom Line were in a previous econlife post.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.