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5 - The Paradox of Cash

Published online by Cambridge University Press:  15 July 2025

Ignazio Angeloni
Affiliation:
Harvard University, Massachusetts
Daniel Gros
Affiliation:
Centre for European Policy Studies
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Summary

This chapter deals with cash (banknotes and coins), the oldest and most traditional form of money in existence. Cash involves a paradox: On the one hand, it is technologically less advanced that modern means of payments like cards and apps, so one could presume that it should decline in use and eventually disappear. On the other, however, evidence for almost the whole world shows that the demand for cash is increasing, although it is used less frequently for certain types of transactions like online commerce, retail stores, and restaurants. Criminal activities may explain part of the puzzle, but not much. One advantage of cash is that it can be seen and touched, therefore appealing to the senses and conveying a sense of security. Another is that it ensures absolute privacy of transactions. Other important characteristics explaining the popularity of cash are that it is simple (it requires no technology or complication whatsoever); definitive (it instantly settles any financial obligation); private and personal (it appeals to the desire of confidentiality); and self-sufficient (it does not depend on any other infrastructure functioning). We conclude therefore that physical cash is a useful complement of a robust and diversified monetary system, in which digital means of payments gradually prevail.

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Type
Chapter
Information
Money In Crisis
The Return of Instability and the Myth of Digital Cash
, pp. 105 - 132
Publisher: Cambridge University Press
Print publication year: 2025

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  • The Paradox of Cash
  • Ignazio Angeloni, Harvard University, Massachusetts, Daniel Gros, Centre for European Policy Studies
  • Book: Money In Crisis
  • Online publication: 15 July 2025
  • Chapter DOI: https://doi.org/10.1017/9781009390101.006
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  • The Paradox of Cash
  • Ignazio Angeloni, Harvard University, Massachusetts, Daniel Gros, Centre for European Policy Studies
  • Book: Money In Crisis
  • Online publication: 15 July 2025
  • Chapter DOI: https://doi.org/10.1017/9781009390101.006
Available formats
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Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • The Paradox of Cash
  • Ignazio Angeloni, Harvard University, Massachusetts, Daniel Gros, Centre for European Policy Studies
  • Book: Money In Crisis
  • Online publication: 15 July 2025
  • Chapter DOI: https://doi.org/10.1017/9781009390101.006
Available formats
×