Friday, September 12, 2014

Cash is still King - Bloomberg

There are all kinds of new technologies around the world for people to use to pay expenses. Credit cards, debit cards, electonic wallets, and more. But for now, as this Bloomberg article notes, good ole cash is still king.  Why is that?

A couple of quotes from the article:

"The average American still uses cash for dozens of transaction each month, despite the wealth of alternatives, from good old plastic to virtual currencies to “point and pay” apps like the upcoming Apple Pay service."

"Cash has advantages these high-tech replacements can't match. It won't run out of battery power, for one thing. It's anonymous -- invisible to the IRS, law enforcement and hackers, as well as to irritating marketers and data brokers. As Cass Sunstein notes, paying only in cash can also be a great way to monitor spending and stick to a budget."

"Using cash can help people carefully track their own spending, as Sunstein says. But one of its most convenient features is that it keeps everyone else in the dark."
My added comment:

I suspect that another reason for the popularity of cash is that many people still do not trust the economy and want to keep some cash reserves on hand. Recall the recent CNBC article where the Fed said people are "hoarding cash".

The decline in the velocity of money also suggests money in all forms is not turning over in the economy very quickly. We also note that gold is going to close below the key $1240 level, oil is dropping, and jobless claims jumped up again. All this suggests a weaker economy and further evidence that officials may fear a deflation type event. They want 2% inflation in hopes of getting 3% GDP growth, but can't seem to get there.

3rd quarter GDP will be an interesting number to look for.

No comments:

Post a Comment