Björn Wahlroos, 2017
Money, of course, is a fascinating subject for a banker. More surprisingly, money has recently attracted the loving attention of great artists, and not only because of the financial rewards that may be associated with their work. Money is just so many things. As any textbook in economics will tell you, it is both a medium of exchange, a unit of account, and a store of value. If you have seen Pablo Escobar bury truckloads of the stuff on Netflix’s Narcos you will have grasped the core concept of money. It pays for things, it measures their value and, once tucked away, it is a great way to store a fortune, at least when interest rates are low and it is packed in watertight bags.
Money has been around for quite a while. You can still find Roman coins in the ground around the Middle East, and paper money was invented in China more than a thousand years ago. The sad thing is that it is now dying, at least in its traditional, physical form. My grandchildren will probably be the last generation to use any significant amounts of cash as we have known it. Ten or twenty years from now, electronic payments, anything from credit cards and mobile banking to instant cash and even cryptocurrencies, will have taken its place.
Money is, literally, what makes the world go around, and not just for Joel Grey and Liza Minelli in Cabaret. If you don’t believe that, or if you think it is too tacky to mention, just look at how the expansionary monetary policies of the Fed and the ECB, feeding trillions of dollars and euros into the markets, have improved the economy. But too much of a good thing may not be so great. Running the proverbial printing presses red hot will not produce anything of value, only a drop in what money is worth, inflation. Today, of course, money is no longer created by issuing more notes, but by central banks buying assets, and paying for them with electronic cash, thereby increasing the amount of money in circulation; or by commercial banks extending credit to their customers.
The fact that money is about to go all electronic doesn’t really change things all that much, at least not in a financial sense. Money will still be money, even if it is invisible to the human eye. In fact, notes and coins have for a long time already constituted only a small fraction of what economists call money. Still, there have been enough 100 dollar bills left in circulation to support a number of illegal activities, from the drug trade to international terrorism. That is why most professionals welcome the end of physical money. In sharp contrast to the whereabouts of a dollar note, electronic money in bank accounts can be traced and tracked, to the detriment of those who don’t want it to be.
Crime will therefore, hopefully, pay even less in the future. Unless bitcoin or one of the other cryptocurrencies will make it big, that is. Only impersonal, untraceable money can provide the rather extreme form of privacy, previously supplied by paper money, required by those who want to fly under the monetary radar. This is why most bankers don’t really think bitcoin will be a hit. Once we have gotten rid of cash, it makes very little sense for governments and central banks to permit a new unregulated and untraceable currency to take its place in the funding of crime.
Paper money is not the only thing to disappear in the near future. A lot of jobs will be taken over by robots and artificial intelligence. And with the decreasing number of letters sent by private persons, even postage stamps are rapidly becoming a thing of the past, hurting in particular specialized issuers like San Marino. In my youth, almost every boy collected stamps, and some developed impressive collections. Not that many do that anymore. With the demise of physical money, collectors and ordinary citizens will lose another important symbol of value and sovereignty.
To be honest, we Europeans have lost much of it already, because of integration. Compared to the many national currencies of the past, with notes decorated by pictures of poets and painters, kings and statesmen, the euro notes are both boring and bland. With their bridges and porticos, they may symbolize what binds us together, but they are also a sorry testament to the state of the European project. Whatever Europhiles may say, we are still, first and foremost, members of our nations. Europe has yet to produce the kind of supranational leaders and artists that can compete with what nation states find in their own rich heritages. Fortunately, for another while at least, we can still see Washington, Lincoln, Grant and Hamilton on dollar bills whenever we cross the Atlantic.
Electronic money has many things going for it. It is easy, safe and efficient. But, however much you would like to do so, you can’t celebrate independence or honour the heroes of your nation on electronic money. You can’t paint it either, at least not the way you can paint old fashioned notes and coins.
Isabella Cabral’s homage to the Real is therefore timely. We live in the twilight hour of both national currencies and paper money. They are, however, an important, some would say all-important, part of our financial, political and cultural past. We owe it to future generations to preserve as much as possible of that past. Isabella has done her part, gloriously.