An Open Letter to the Dollar Bill, the Penny, and All the Dead Presidents on U.S. Money

www.michaeladelberg.com

Dear Dead Presidents,

I am a fan, but your time is nearly up.

In an interesting experiment, a journalist recently attempted to go an entire year without using cash. With the exception of using dollars for the babysitter and a few mass transit tickets, he was able to pull it off. Admittedly, this might have been more difficult for him had he lived in a rural part of country or worked manual labor, but the point of his one year experiment should not be missed: cash is becoming unnecessary.

Op-ed pages periodically argue one point or another about U.S. money: Should we get rid of the penny? Should we convert the dollar bill to a coin? Proponents of doing these things make reasonable arguments. There is a significant "cost" to money--printing it, distributing it, enforcing its value, stopping counterfeiters, etc. Switching from paper money to coins saves money (i.e., a Wake Forest University study predicts the U.S. would save $150M annually if we replaced the dollar bill with a coin) and eliminating a coin saves even more money (i.e., economist Robert Whaples projects that the U.S. would save $300M annually by eliminating the penny). But these moves are small ball. Imagine the massive savings if we phased out currency altogether.

There are fears, some legit, some not, about moving to a swipe card based economy. Certainly, too many Americans borrow irresponsibly and accrue debts through credit cards. Credit card fraud is a booming criminal activity. Fortunately, these problems are largely correctible. Market forces and regulation can drive us to a point when card owners feel pain for irresponsible borrowing, and card issuers feel pain for offering credit irresponsibly.

As a past victim of credit card fraud, I know it's a big deal. But if we'd all be a little better about protecting our personal information and resetting our passwords, most of it is preventable. Our children will accept as a fact of life that passwords need to be complex and changed regularly. Algorhythm-based password scramblers will eventually make this all a lot easier.

The greatest fear about an e-based monetary system concerns privacy. Libertarians extoll the virtues of cash is because it doesn't let "big brother" track our every economic activity. But most of us already conduct most of our business via credit card, we are already voluntarily feeding big brother plenty of potential information. Fact is that there are pretty good protections against our financial information being shared without our consent and those protections will likely only become stronger in the future.

And we like "big brother" when he catches that our credit card has been compromised, shuts it down (with our consent), and tells us we're off the hook for the bogus charges. Big brother need not be a bad guy. Big brother has captured terrorists through financial monitoring and frozen the assets of thousands of other bad people. Meanwhile, big brotherless cash remains the medium of criminals--from sophisticated international types down to street thugs. Illegal activity is the largest remaining cash-dominated sector of economy.

Cell phones, pay pal, and credit cards are creating a new way to transact business. Already, most of the people who read this blog prefer to buy gas and groceries with a credit card. Cashless e-commerce now commands nearly one fourth of our holiday shopping. The end of cash is not science fiction or Gingrichy futurism--it's already happening. We just haven't had much of a public discussion about it yet.

Currency was a fantastic innovation a few thousand years ago. It facilitated trade by creating a commonly accepted measure of value, far more convenient than endlessly negotiating how many fish should be traded for clay pot or young goat. It is hard to imagine the onset of the industrial revolution or capitalism without currency. But like sailing ships or the film camera, great innovations can still become obsolescent.

I am just barely old enough to remember a black and white television. My children are barely old enough to remember phones with chords. My grandkids will be just barely be old enough to remember the cash register.

Sorry Dead Presidents. Don't take it personally, but we don't really need you anymore.