March 2023

MDC 2023, Canada, 15-18 October 2023

MINTING FOR THE FUTURE – Registrations are now open.

EDITORIAL: How to help control expenditure – A role for cash

In many countries during COVID and now post COVID we have seen an increase in the demand for cash – notes and coins – which is counter to the forecasts of some central banks and policy makers.

Against a backdrop of aggressive promotion of cashless technology and exaggerated misinformation about the transmissibility of COVID on coins and banknotes, many consumers have reverted to cash or at least partly returned to using cash for transacting purposes. Some central banks will suggest that demand for high denomination notes has been a risk mitigation reaction from consumers who use cash as a ‘store’ of value i.e. holding money for ‘saving’, particularly in times of fear and uncertainty such as during the COVID pandemic.

But in this challenging economic environment cash has been more than that. Many consumers have preferred to use cash because it helps them budget and control expenditure by preventing over spending. These are benefits that don’t accrue from the use of credit cards with high credit limits and high interest rates or the Buy Now Pay Later sector.

As governments around the world attempt to address burgeoning debt and deficits, particularly the aggregated value of consumer debt, it is well worth reflecting on why and how this situation has arisen.

Prior to the introduction of consumer spending technologies and debt creating vehicles, people could spend only what cash they had. While no-one is suggesting that we revert to cash as the primary means of transacting, it is important that policymakers and central banks accommodate those who so heavily rely on cash to limit their spending and avoid being in default.

We remind policymakers that cash on hand is the most effective vehicle for limiting spending – if you don’t have it you can’t spend it – and in times of economic hardship, when rising interest rates are contributing to increasing cost of living, the use of cash helps consumers to manage their finances.

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