Funny Money

Few people in the USA use cash any more, and that is becoming more and more true in other industrialized countries, except Germany, where people love cash and opportunities to charge purchases on a credit card are fewer than in many other countries. But then, many Germans are so paranoid that they insist that pictures of the fronts of their houses be blurred out in Google Street View. Most of the rest of us are not quite that untrusting.

I admit that I seldom pay cash anymore. I would pay cash if I got a discount, but I don’t, so I swipe my credit card and get airline miles or a cash rebate deposited into my brokerage account. I even charge my senior coffee at McDonald’s in the morning, 55 cents plus 5 cents sales tax. I get double airline miles for that. The last time I remember paying for things in cash was when I walked the Camino de Santiago de Compostela last summer. Almost all of the small businesses in the villages through which I walked dealt strictly in cash, (Click on the book cover image in the left sidebar to know more).

I hope the days of people wanting the country to go back to the gold standard are over. All right, Ted Cruz wants us to go back to the gold standard, but he’s known for his complete lack of financial acumen. However, gold standard aside, there is some cause for concern about the disappearance of cash transactions. It’s not just the fact that most money today consists of ones and zeroes in computer systems and has no physical manifestation. More importantly, it’s the fact that the processing of most of those ones and zeroes is in the hands of a small number of large companies such as PayPal, Apple, Google, Amazon, Chase, Wells Fargo, etc.

The Federal Reserve prints very little money these days. When we refer to the Fed printing money, in most cases we mean that the Fed creates a cyber representation of money in its computer systems. I assume that someone does that by typing something into a terminal.

That cyber money can then be sent to the Treasury Department to buy US government bonds. The bonds do not have physical form, either. They are electronic documents that are sent back to the Fed. Nothing has changed hands that can be seen or touched in the real world. The two government entities have exchanged streams of ones and zeros in cyberspace.

My Social Security “check” from the Treasury Deptartment is also a stream of ones and zeroes. Once a month, it magically appears in my checking account, misnamed because I write no more than two or three checks a year these days. I charge most of what I buy to my credit cards or pay online through PayPal, which in turn charges the amount to one of my credit cards. At the end of the month, the credit card companies automatically deduct some of the ones and zeros from my checking account, and the debts are paid. During the whole process, no physical money existed. All of the money exists in cyberspace.

I never visit my bank anymore. In fact, I have no idea where it is located. I assume it’s somewhere in the USA, and I assume it’s not in Phoenix, but I don’t actually know if either of those statements is true. It could be located in Timbuktu, or perhaps it, too, exists solely in cyberspace.

Now, don’t get me wrong. I’m not about to rail against the Federal Reserve Bank. Unlike many people I know, I trust the Federal Reserve much more than I trust large corporate financial institutions. It does make me slightly uneasy that large corporations have so much control over my financial transactions. My trust in them is limited. After all, it the financial institutions caused the financial crash, and it was the Fed that rescued us from it.

Am I going back to using cash? No way! I may feel slightly uneasy about how much the credit bureaus and the large banks know about me, but I’m not paranoid enough about them to go back to using cash. The banks may know about every six-pack of beer I buy and every prescription I have filled, but I can live with that.