McKee Financial

McKee's Weekly Newsletter 8-31-2020

Are We Really Headed for a Cashless Society?


Everywhere you turn right now, it seems like someone wants to chat you up about our world turning into a cashless society. Your neighbor’s talking about it, the frenzied news media is talking about it, your social media feed is talking about it . . . and there’s even a viral article on the internet about a cashless society that’s claiming Dave Ramsey wrote it (spoiler alert: he didn’t).

So, why all the hype about a cashless society all of sudden? And how does it look any different than the digital world we live in now? Let’s break down everything you need to know (and debunk some junk too).

What Is a Cashless Society?

Here’s the deal: In a cashless society, all physical money (cash, checks, coins) is completely, 100% replaced by digital money.

You might be thinking, Wait . . . don’t we already have a cashless society now? And you wouldn’t really be wrong. Unless you’re a hardcore stickler for the envelope system, when was the last time you used cash daily to pay for everything?

Pew Research shows that in a typical week, 29% of Americans make absolutely zero purchases using cash.1 A lot of us swipe our debit cards to pay for everything and have wallets stuffed to the brim with receipts, rewards cards and gum wrappers—anything but cash.

But a true cashless society is way different than that. It’s a world where cash doesn’t exist, no one is paid “under the table,” and every transaction you make is traceable (insert Twilight Zone theme song here).

Why Are People Talking About a Cashless Society Now?

Well, see . . . there’s this thing called COVID. Ever heard of it? Yeah. When it came on the scene, it impacted nearly every single aspect of life as we knew it—including our money.

People started not wanting to touch anything that someone else touched (without it being sanitized first). And what’s one of the grimiest, germ-infested things that passes easily from person to person? Hint: It’s got presidents’ faces on it. That’s right. Money. But not the digital kind—we’re talking cold, hard cash and coins.

It didn’t take long for businesses to decide they didn’t want cashiers handling cash from every random customer coming in off the street. So they started pushing that people pay for things with cards only. Signs like “not accepting cash” and “cards only” started popping up at stores across the country—because somehow that’s safer.

We hate to break it to you, but you still have to touch someone’s card (unless the card reader is on the customer’s side). Even then, the poor customer still has to touch the buttons on the PIN pad that someone else just touched before them. It never ends! By the way, money was always gross, even before COVID ever came along. But that didn’t seem to bother anyone then. Strange . . .

Does This Have Something to Do With the Coin Shortage?

You’ve probably heard all about the great American coin shortage going on right now. If you lump the phrases “cashless society” and “coin shortage” together, then yeah, you might find a conspiracy theory ready to jump out at you. But here’s the deal: When people stop using cash to buy things, a coin shortage isn’t super surprising.

Think about it. There’s a coin shortage right now because back when businesses were closed, there weren’t any coins changing hands. And even when people did make purchases, they weren’t using cash and coins to do it!

Plus, the U.S. Mint (they’re responsible for actually making the coins) had less staff on hand during the pandemic. And when businesses opened back up, the need for coins was greater than the amount of coins existing out there in the world. In other words, the real problem comes from coins not moving around out there in the wild of the economy and not from a true shortage of the coins themselves.2

Add all that up and it equals one big shortage of coins. That’s all, folks. So take a big breath, stop looking for the boogeyman around every corner, and just be prepared to have exact change with you if you’re paying in cash.

Will the COVID-19 Pandemic Lead to a Cashless Society?

Nope. We still have a long way to go for that to happen. Just because some stores don’t want to accept dollar bills right now doesn’t mean that a cashless society is our next surprise of 2020. 

Think about how much of your money is virtual already. Does your boss hand you a wad of cash on payday? We’re guessing not. You probably wake up on Friday morning to a nice little direct deposit from your employer in your bank account. You never saw the money physically. It never changed hands in person. And the only reason you even know you did get paid is because some ones and zeroes tell you that you did.

Having said that, this doesn’t mean we live in a cashless society. You can still pull out cash from the bank and stuff your grocery envelopes with it or slip it under your kid’s pillow for their lost tooth. Cash is still alive and well, and no pandemic can take it down. Like it or not, there are plenty of people who like and rely on using cash bills. And as long as those people are around, no, we won’t be moving to a cashless society anytime soon.

Cash Is Still King

Yeah, you read that right. Dave has always stood by using cash, and that will never change. When you buy something with cash, you really feel it. You have to give up something (like that $20 bill) to get the thing you want to buy (like that spanking new T-shirt). There’s internal friction there as you watch the money leave your hands and go into the cashier’s drawer.

Think about how much big businesses would love for us all to go cashless, though. People who buy things with cards (yep, even their debit cards) tend to spend more. And people who use things like mobile wallets just swipe away like they’re playing around with virtual Monopoly money. So, of course these big companies would jump at the chance to get us all to stop using cash for good! It’s more kickback in their pocket—a lot more if you use a credit card.

If you don’t feel comfortable using cash these days because of COVID, that’s okay. Just use your debit card (like you probably were already doing). And don’t feel like you’re contributing to the “downfall of America” by not using cash. Seriously. As long as you have money in the bank, using your debit card is okay.

At the end of the day, whatever kind of payment you want to use (debit, mobile wallet, cash), just make sure you’ve budgeted for it first. You need to plan for every expense whether you’re laying down a few George Washingtons at the gas station or paying back your friend for covering lunch.



Interesting Economic Facts


WAR CHEST FOR THE FUTURE? - Investment grade companies in the United States borrowed $1.15 trillion in bond offerings during calendar year 2019, below the all-time record of $1.37 trillion set in 2017. That 2017 record will likely fall in 2020 as investment grade companies are projected to borrow $1.6 trillion during the current calendar year (source: Refinitiv, JPMorgan Chase).


SHIFT THE RISK - If a bank loans out money to a business through the “Main Street Lending Program,” the Fed will purchase from the bank 95% of the loan amount in order to reduce the lender’s risk (source: Federal Reserve).


RECORD SPENDING - The 4 months that have produced the greatest government “outlays” in US history have been the last 4 months – April 2020 through July 2020. “Outlays” in June 2020 were $1.1 trillion, more than double the pre-pandemic record of $440 billion set in May 2019 (source: Treasury Department).


MONEY TO HELP - The “Economic Impact Payments” of $1,200 per adult and $500 per child (under the age of 17) that were part of the 3/27/20 CARES Act were the 3rd time the government has issued direct stimulus payments in the last 20 years. The previous payments were made in 2001 and 2008 (source: CARES Act).


ALL THIS DURING A PANDEMIC - The median sales price of existing homes sold in the United States was $304,100 in July 2020, the first time in US history that the median sales price has exceeded $300,000. The $304,100 median price is also a record on an inflation-adjusted basis, besting the $230,200 median sales price from July 2006 (14 years ago), equal to $293,096 in 2020 dollars (source: Nat’l Association of Realtors).


NEED MORE, NOT LESS - The suppliers of lumber cut their production in the 1st quarter 2020 as the pandemic was developing in anticipation of a slowing housing market. Instead, an increased demand for home building and renovation projects has pushed the price of lumber to an all-time record price of $858 per thousand board feet, up +111% from a price of $406 per thousand board feet at the end of 2019 (source: CME Group).


RUNNING OUT OF TIME - Renters were protected from eviction by the 3/27/20 CARES Act through last Monday 8/24/20. An estimated 23 million Americans, i.e., 21% of the 110 million people who live in renter households, are financially strapped and are at risk of eviction by 9/30/20 (source: COVID-19 Eviction Defense Project).


LOVE THE WATER VIEW - Just 8% of the counties in the United States (255 out of 3,142 counties nationwide) touch a coastline, i.e., they touch the Atlantic Ocean, the Gulf of Mexico, the Pacific Ocean, the Bering Sea or the Arctic Ocean. These coastline counties however are home to 29% of the US population or 96 million people out of our 330 million population (source: Census Bureau).


TWO STATES, VERY DIFFERENT IMPACT - The jobless rate in California in February 2020 (pre-pandemic) was 3.9%, before soaring to 13.3% by July 2020. The jobless rate in Wyoming in February 2020 (pre-pandemic) was 3.7%, before rising to 7.1% by July 2020 (source: Bureau of Labor Statistics).


SO THEY SAY - As of 8/28/20, the top 3 countries in the world for reported deaths from the COVID-19 pandemic are the USA, Brazil and Mexico. China claims to have suffered just 4,718 deaths, or less than 3% of the death total recorded by the United States (source: Center for Systems Science and Engineering at Johns Hopkins).


WHAT A MESS - American consumers’ demand for paper towels is +25% higher today than it was before the COVID19 pandemic hit the United States in February 2020 or 6 months ago (source: Procter & Gamble Co.).


DEFEATED BY COVID - The AP college football preseason top 25 rankings include 9 teams that will likely not play a fall 2020 schedule, including # 2 ranked Ohio State and # 7 ranked Penn State (source: Associated Press).

...and for the History Lovers... This Week in History


August 31, 1997

New York Yankees retire Don Mattingly's #23 (first baseman, coach, manager).


September 1, 1957

""In God We Trust" appears on US paper currency as an act to distinguish the US from the officially atheist USSR; the motto had appeared on coins at various times since 1864.


September 2, 1964

Scientists announce findings that smoking can cause cancer.


September 3, 1955

Two children's television programs and a family sitcom all destined to become classics debut: Captain KangarooMickey Mouse Club, and The Dick Van Dyke Show.


September 4, 1963

Hurricane Flora storms through the Caribbean, killing 6,000 in Cuba and Haiti.


September 5, 1921

The World Series is broadcast on radio for the first time.


September 6, 1866

The Reno brothers--Frank, John, Simeon and William--commit the country's first train robbery near Seymore, Indiana netting $10,000.


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