Cash – the ‘Anchor of Stability’ Which Needs Safeguarding

A recent working paper entitled ‘Institutional Hostility to Cash and COVID-19’ by economists Doris Neuberger of Germany’s University of Rostock and Eduardo Beretta from the Swiss Institute of Economics examines how the pandemic has boosted commercial incentives and government policies to nudge consumers away from cash.

Money is a pure public good, say the authors. It creates trust between people who do not know each other. Governments establish and support cash, banknotes and coins, as money by making them legal tender and the official currency, since they do not exclude people and are not rivals to other payment options.

In the 1950s, in the post-war recovery in the advanced economies, banks needed to automate how they did their business as the number of customers rapidly increased, along with the number of transactions taking place. At the same time, the relative cost of staff was also increasing.