Cash has been around for millennia – but are its days numbered? Or have reports of its death been exaggerated?
How old is cash?
About 3,000 years ago, societies in China began using small metal replicas of tools, knives and spades as tokens of exchange and as a store of value. Then, as people got fed up with cutting their fingers when they came to settle up, metal currency grew rounder and flatter – and coins were born. The first mass minting of coinage in different denominations is usually dated to around 600BC, in Lydia (modern-day western Turkey). Paper money was first used in China, during the Tang dynasty of AD618-907; it took Europe close to 1,000 years to catch on. But today, cash is no longer the main form of money. In the UK, there are 3.4 billion notes in circulation, worth some £68bn. Yet as a proportion of the overall amount of money held by UK households and firms, cash makes up only 3% – fully 97% is in bank accounts.
So is cash gradually dwindling away?
No. Paradoxically, despite all the talk about the end of cash, the demand for it has soared in recent years, and the Bank of England has been printing more and more of it. The number of notes in circulation has surged by 80.5% since 2004; and it’s the same story in almost all other rich countries. That’s mainly due to the dramatic fall in interest rates after the 2008 financial crash: why bother to keep your money in the bank when rates are so low? Most people – with the notable exception of the Swedes (see box) – seem happier to keep their money in physical form.
Then why is cash said to be on its way out?
Denne historien er fra December 17 2016-utgaven av The Week UK.
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Denne historien er fra December 17 2016-utgaven av The Week UK.
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