Only 8% of the World’s Currency is Physical Cash

Dollars. Pounds. Euros. Pesos. Rupees. Krones. The list goes on.

All in all, there are 180 different types of currencies in the world today. And incredibly, only 8% of it is actual, physical, hold-it-in-your-hand cash.

On reflection, this might not seem so surprising. Internet banking has never been more popular, and the huge selection of digital payment methods has helped phase out the need for bills and coins. But still, when we think of money, we picture paper and metal — not numbers on a screen.

Today, many of us are now earning and spending money without ever actually touching it. So how does that impact its value — and its future?

You Gotta Have Faith

Pre-1971, the value of most paper currencies was tied to the value of gold. This was known as “the gold standard.” However, when the US left the gold standard behind, every major international currency soon followed suit.

Without gold, the value of money has no guarantee — except that we believe it has value. We all have faith that a dollar has value because there’s a system in place that allows us to exchange that dollar for something valuable.

Milton Friedman, the Nobel Prize-winning economist, said it best: “The pieces of green paper have value because everybody thinks they have value.

What Does the Future Hold?

With contactless payment, digital wallets, and the rise of cryptocurrency, will cash be obsolete in the not-too-distant future?

According to an article in the New York Times, cash is unlikely to disappear anytime soon. However, the movement away from using cash is happening at different speeds around the world. In more technologically advanced countries, cashless societies are edging ever closer, while poorer countries lack the infrastructure to fully embrace electronic payments.

At the end of the day, just as we assign value to money, the existence of physical cash will come down to how we perceive it. If the vast majority believe it’s quicker, easier, and safer to transfer numbers from one hard drive to another, that could spell the end of paper money. And our descendents will never know the joy of finding a crumpled bill in a long-unworn coat pocket.

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Build confidence, and invest with knowledge. Play, learn, & invest on the Invstr app today! Available on iOS and Android. https://invstr.com/

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