# Cash

Cash in different currencies

Cash is money in physical form in the form of banknotes and coins , which is used in payment transactions as legal tender for the payment of goods or services or for other transactions (e.g. gifts ).

## General

Cash is in most countries a legal tender . It is created by the central banks of the states or international communities with their own currency and put into circulation through commercial banks . In contrast to book money , the flow of cash cannot be observed and controlled in detail. This is the reason why criminal transactions such as money laundering , undeclared work or other shadow economies are often paid for with cash, because the respective holder of the cash cannot be traced and documents such as invoices or receipts are usually not issued or issued incorrectly. On the other hand, cash offers consumers an opportunity to enforce the confidentiality of their purchasing behavior without having to rely on data protection commitments from electronic payment service providers . In contrast to electronic forms of payment, cash enables payment transactions even if the electricity supply fails . The possibility of hoarding cash makes it difficult for politicians and the financial sector to enforce negative interest rates , but does not make it impossible.

## history

The barter is a very early form of trade . In its simplest form, two goods are directly exchanged for one another ( real exchange ). Certain goods such as grain , cattle , mussels , silver or gold turned out to be special goods. They were widely valued, available in limited but not too small quantities, and not perishable. These goods could therefore not only be exchanged once for another immediately desired good. They could also be accepted as an "intermediate medium of exchange" in order to later exchange them for the goods actually desired. These goods thus had their first monetary function as a general medium of exchange. The first goods used as a medium of exchange were commodity money , which consisted either of natural objects ( natural money ), pieces of jewelery ( jewelry money ) or general objects and useful objects as well as farm animals .

Paper money was invented in China as early as 1024 during the Song Dynasty . In the European Middle Ages came weight of money used. Here were precious metals in particular coins of silver and other metals - - not by number or face value traded, but after weighing value . Divided bars, pieces of jewelry or foreign coins were used. Buyer and seller determined the relevant weight by double weighing. Paper money was first issued in Spain for the scarce metal coins in 1483, followed by Sweden on July 16, 1661 and England in 1694 . Here it was the central banks that were authorized to issue paper money. Therefore, the term central bank can be traced back to its privilege to issue banknotes.

In Europe, as the forerunners of today's banknotes, banco slips and cash register orders came into circulation. Initially, banknotes were not viewed as cash, but were claims for payment against bankers . The banknotes therefore determined which coins were to be paid out in exchange for the banknote. The establishment of the Banco di gyro d'affrancatione on March 2, 1705 in Cologne by Elector Johann Wilhelm II served to issue such banco notes, through which the pompous Elector tried to solve his money problems. Formally, the banco notes were interest-bearing, limited in time and could be transferred by means of an endorsement (giro). After Germany, France followed in 1716 and, from July 1, 1762, Austria , where they were also called Bancoicket.

## Motives for holding cash

In economic theory (according to JM Keynes ), cash holding of cash (especially sight deposits ) is roughly traced back to three motives:

The transaction motive covers the need for business of economic subjects , the precautionary motive is used to hold money for liquidity purposes , and the speculative motive arises, according to Keynes, from the uncertainty about future interest rate developments and relates to financial investments .

In the case of cashless payment transactions , in addition to the documentation of the payment itself, the personal details of the payer are usually linked to the data of the payee . This enables exact traceability of the payment process for the payer and the payee, but also harbors the potential for abuse by any third parties. The steady increase in digitization leads, among other things, to an increasing digitization of cashless payment transactions and their documentation. Since this digital documentation is usually more centralized than before, the potential for abuse increases. The actual money functions are therefore expanded to include the anonymity function for cash.

## Cash in circulation

From a microeconomic point of view, the currency in circulation is part of the entire central bank money stock of an economy and is made up of the banknotes and coins in circulation. The amount and timing of cash in circulation depend on traffic habits , payment behavior, trust in the banking system and the payment technology of the non-banking sector , but cannot be influenced by the central bank. The supply of cash is ensured by the credit institutions , which procure the cash from the central bank at the expense of their central bank balances. From the balance sheet point of view of a central bank, such cash requirements by banks are therefore an exchange of liabilities (lower sight deposits from banks, but higher banknotes in circulation). Every change in the currency in circulation thus leads to direct changes in liquidity in the banking sector.

The currency in circulation is characterized by strong seasonal fluctuations. Wage and salary payment dates, tax payment dates or the travel time lead to statistically perceptible increases in cash in circulation, for which the credit institutions are preparing. Since cash holdings at credit institutions are not interest-bearing and can also lead to security problems ( bank robbery ), the banks usually only hold very small cash holdings. You are therefore forced to call in the central bank in times of higher cash requirements. Therefore, the cash in circulation is only not changed if the banks deliver cash from their own cash on hand to their bank customers or take cash deposits from their customers into their own holdings.

## Money supply

Together with sight deposits SE and central bank money ZBG, cash BG forms the money supply M1:

${\ displaystyle {\ mbox {M1}} = {{\ mbox {ZBG}} \; + \; {\ mbox {BG}} \; + \; {\ mbox {SE}}} = {{\ mbox { MR}} \; + \; 2 \; {\ mbox {BG}} \; + \; {\ mbox {SE}}}}$

The aggregate of the money supply also includes the cash holdings. If the amount of cash increases, the amount of money increases - all other things being equal ( ceteris paribus ) - and vice versa. The cash aggregate also influences the ability of credit institutions to create money , which is restricted as the amount of cash in circulation increases.

The central bank money supply ZBG, in turn, is the sum of the cash in circulation BG and the minimum reserves MR of the credit institutions

${\ displaystyle {\ mbox {ZBG}} = {{\ mbox {BG}} \; + \; {\ mbox {MR}}}}$

The aggregate of the central bank volume is made up of sub-aggregates that the banks can neither create nor influence.

The cash quota is called the currency in circulation in relation to a flow variable (e.g. gross domestic product ) or as a proportion of a stock quantity (e.g. money supply, financial assets ). It makes statements about the (cash) payment behavior in an economy. In countries like the United States, the increasing use of debit and credit cards means that the amount of cash in circulation is increasing more slowly than in countries with a high cash ratio, which means that the cash ratio tends to decrease or stay constant.

The amount of money in cash in industrial economies is far smaller than bank money (book money).

## Payment history

The use of the various means of payment by economic entities is considered to be payment behavior .

### Germany

In Germany, citizens paid more with credit and debit cards than with cash for the first time in 2018. In 2014, 53.2% of sales or 79.1% of all transactions were settled in cash, in 2008 it was 57.9% of sales and 82.5% of transactions. When it comes to cashless payment instruments, the Girocard (the former EC card ) is the favorite, clearly ahead of the credit card . It was used in 2014 for 30% (2011: 28.4%, 2008: 25.5%) of the total expenditure, the proportion of transfers was 8.2% (8.9%), followed by the credit card, whose proportion increased doubled to 7.4% (3.6%). Other payment instruments play practically no role. According to the study, the threshold amount at which the consumer switches from cash to cashless payment is between € 20 and € 50, from € 100 the girocard predominates. In 2015, the share of cash payments in retail sales was 52.4%, followed by Girocard / EC-cash (23.2%), EC direct debit (14.2%) and credit cards (5.7%). The highest percentage of cash payments are found in pubs , cafes and fast-food restaurants ; 96% of the payments are made in cash.

According to the Deutsche Bundesbank, Germans carry an average of 103 euros in cash with them.

The cost of using cash in retail is estimated at 0.08-0.2% of sales. In Belgium and the Netherlands, cash costs amount to around 0.91% of gross domestic product, which is three quarters of the total payment processing costs.

#### Discussed abolition of cash

The abolition of cash is discussed again and again in Germany. In a study, Deutsche Bank warns - in the context of the discussed abolition of the 500 euro note - of the possible consequences of the complete abolition of all coins and banknotes and thus of cash. Abolishing cash would mean unlimited access to citizens 'money on the part of the bank and thus massively restrict citizens' freedom. The abolition of cash would be much more than just a technical process; rather, according to Deutsche Bank experts, "[...] the public may lose confidence in the euro and in the entire financial system." The head of Deutsche Bank also comes to this Conclusion that there is a high probability that there will be no more cash in 10 years. The finance scientist Aloys Prinz sees it differently. The German writer Hans Magnus Enzensberger commented on the discussed abolition of cash in Germany as follows: "Whoever abolishes cash abolishes freedom."

On the other hand, proponents of the abolition of cash, such as the economist and “economic approach ” Peter Bofinger, object that with today's technical possibilities, cash would represent an “ anachronism ”. With the abolition the "markets for illegal work and drugs could be dried up". In addition, it would be easier for central banks such as the European Central Bank to implement their monetary policy and thus support the economy. The economist Larry Summers considers the abolition of cash to be necessary from 2007, regardless of the global economic crisis , because “despite low interest rates, more money is saved than the banks give out as loans. Supply and demand would only balance each other out at an interest rate of minus four to five percent. Only then would the huge savings of citizens be channeled away from the accounts into private and state investments ”.

### International

In Austria in 2011 a total of 65% of the volume and 82% of all payment transactions were processed in cash.
In Switzerland , the cash share fell from 90% in 1990 to 60% in 2014.
A leader in cashless payment behavior in Europe is Sweden , where in 2014 95% of all retail transactions were cashless. In the UK it was 62%.
In the United States , after the financial crisis in 2007, payment transactions developed from a primarily credit card-based cashless to a debit card market . Here the cash share was only 23% (turnover) or 46% for transactions.
India has been trying to restrict the use of cash since 2015. In November 2016, the then government of Prime Minister Narendra Modi surprisingly declared the two most common rupee banknotes invalid ( demonetization in India 2016 ), which
meant that 86 percent of cash was de facto turned into paper waste overnight.

## Legal issues

Before 1915, the concept of cash in Germany was reserved for the Kurant coin .

In the cash legal tender are owed currency in nominal value of the amount of money owed by the debtor in accordance with § 929 BGB to the creditors via suitable . According to traditional understanding, this cash payment is the “actually” owed performance of the debtor and leads to the fulfillment of the debt with the acquisition of ownership of the transferred means of payment .

Cash has the highest marketability of all movable objects , as it is generally legally permitted as a means of payment . While a bona fide acquisition of stolen , lost or missing -down stuff to § 935 para. 1 BGB is not possible, these restrictions do not apply to money and bearer securities ( 935 § para. 2 BGB). Accordingly, it is possible to acquire ownership of stolen cash if the buyer is in good faith .

In Art. 128 para. 1 TFEU is determined that the European Central Bank has the exclusive right to the issue of euro banknotes within the EU member states to approve and together with the national central banks of issue shall be entitled these notes. The delegation of the issuing right to the Deutsche Bundesbank can be found in section 14 (1) sentence 2 BBankG . The issuing of euro coins is the responsibility of the member states ( Art. 128 (2) TFEU). The euro banknotes issued are the only unlimited legal tender and are shown on the liabilities side of the central bank's balance sheet. This shows that banknotes are a requirement of the central banking system.

For the obligee in all states, the legal tender is associated with an obligation to accept (one also speaks of an obligation to accept or a debt-discharging obligation to accept). He must accept euro banknotes across the EU as the fulfillment of his monetary claim, since "the banknotes issued by the European Central Bank and the national central banks are the only banknotes that are legal tender in the Union" ( Art. 128 (1) sentence 3 TFEU) . For euro and cent coins, the obligation to accept is limited to a maximum of 50 coins. According to Art. 11 Clause 3 of this EC Regulation “with the exception of the issuing authority (...) nobody is obliged to accept more than fifty coins for a single payment”.

## Accounting

Cash is an asset that, according to German commercial law , must be taken into account on the assets side of the balance sheet . When accounting is by § 266 2 B IV para. HGB cash in the balance sheet item cash expel. This also includes types , i.e. all legal tender from abroad. Accounting according to the International Financial Reporting Standards records the cash on hand in the position “cash and cash equivalents” (IAS 1.66).

Wiktionary: Cash  - Explanations of meanings, word origins, synonyms, translations

## Individual evidence

1. a b Why cash should really be abolished. In: Focus online , June 1, 2015. Accessed April 19, 2017.
2. ^ Daniel R. Headrick, Technology: A World History , 2009, Oxford University Press, pp. 85 ff., ISBN 978-0-19-988759-0
3. Gerald Görmer, Geldwirtschaft und Silbervergrabungen during the 9th to 13th centuries in the Baltic Sea region , in: Geldgeschichtliche Nachrichten, Volume 41, 2006, , pp. 165–167, p. 165.
4. Michael Brueckner, Von Bullen, Mäusen und Moneten , 2012, o. P.
5. Peter Fuchs (Ed.), Chronicle of the History of the City of Cologne , Volume 2, 1991, p. 90
6. John Maynard Keynes: General Theory of Employment, Interest and Money . 11th, again improved edition. Duncker & Humblot, Berlin, ISBN 978-3-428-12912-6 , pp. 144 ff . ( Limited preview in Google Book Search [accessed April 19, 2017] English: The General Theory of Employment, Interest and Money . 1936. Translated by Fritz Waeger).
7. Thomas Klemm: Pecunia non olet: Good reasons for cash. In: faz.net. February 8, 2016, accessed April 19, 2017 .
8. Jürgen Becker: The continuous supply of liquidity to the banking system. Duncker & Humblot, Berlin 1969, p. 25 ( preview in Google book search).
9. Jürgen Becker: The continuous supply of liquidity to the banking system. Duncker & Humblot, Berlin 1969, p. 25 f. ( Preview in Google Book Search).
10. Josef Puhani: Economics: Basic knowledge. 2003, p. 81.
11. Reinhard Kohler: Limits of the Federal Bank Policy. Duncker & Humblot, Berlin 1979, ISBN 3-428-04370-7 , p. 56 ( limited preview in Google book search; accessed April 19, 2017).
12. Reinhard Kohler: Limits of the Federal Bank Policy. Duncker & Humblot, Berlin 1979, ISBN 3-428-04370-7 , p. 63 ( limited preview in Google book search; accessed April 19, 2017).
13. Cashless payment - why the Swiss prefer to pull out a bag. In: srf.ch . May 12, 2019, accessed May 13, 2019 .
14. a b c Payment behavior in Germany 2014 . Deutsche Bundesbank, Frankfurt am Main 2015, ISBN 978-3-86558-863-0 , p. 9 (PDF; 1.3 MB).
15. ^ Deutsche Bundesbank: Payment behavior in Germany 2011 . October 17, 2012, p. 8 (PDF; 1.6 MB).
16. ^ Deutsche Bundesbank: Payment behavior in Germany 2011 . October 17, 2012, p. 9 (PDF; 1.6 MB).
17. Share of payment methods in retail sales in Germany in 2015 . In: de.statista.com . Retrieved April 19, 2017.
18. What's coming . In: Süddeutsche Zeitung . No. 67 , March 21, 2015, p. 26 .
19. ^ EHI Retail Institute, quoted in Hanno Bender: Combat the cash costs . In: etailment.de , January 30, 2010. Retrieved April 19, 2017.
20. Study by the GFS-Zurich, quoted in Händlerinfo . In: scard.de . P. 2 (PDF).
21. The chip card of the banks and savings banks: cost-saving, secure, future-oriented ( Memento of July 7, 2012 in the web archive archive.today ). Initiative GeldKarte eV, March 28, 2006.
22. ^ A b "Citizens would become subjects": Deutsche Bank warns against the abolition of cash . In: Focus online , January 14, 2017. Retrieved April 19, 2017.
23. Holger Steltzner: Cash is freedom . In: faz.net , February 5, 2016. Retrieved April 19, 2017.
24. ^ A b Marc Beise: Cash means freedom . In: sueddeutsche.de , February 3, 2016. Retrieved April 19, 2017.
25. Financier Prinz - "End of cash not in sight". In: zdf.de. September 14, 2019, accessed December 9, 2019 .
26. Influence for central banks: Economist Bofinger calls for the end of cash. In: Spiegel Online . May 16, 2015, accessed June 9, 2018 .
27. ^ Coins and notes under criticism
28. ^ Austrian National Bank : Use in Austria . In: oenb.at , 2012. Retrieved on April 19, 2017.
29. see also Mischa Stünzi: Banks say goodbye to cash . In: derbund.ch , September 18, 2018, accessed on the same day.
30. Sacha Beuth: Cash or Card? - that is the question here . In: Tagblatt der Stadt Zürich , June 2, 2015. Accessed April 19, 2017.
31. Capgemini / RBS: World Payments Report 2015 ( Memento from April 19, 2017 in the Internet Archive ). 2015, p. 6. Accessed April 19, 2017 (English; PDF; 2.5 MB).
32. John Bagnall, David Bounie, Kim P Huynh, Anneke Kosse, Tobias Schmidt, Scott Schuh, Helmut Stix: Consumer cash usage: A cross-country comparison with payment diary survey data (pdf, 0.3 MB). Discussion Paper Deutsche Bundesbank No 13/2014, 2014, ISBN 978-3-95729-037-3 (Internet version), ISBN 978-3-95729-036-6 (print version), p. 27 Table 1; accessed on October 21, 2019 (English).
33. Julia Wadhawan: India: The sham reform. In: ZEIT Online. March 11, 2018, accessed March 12, 2018 .
34. Guido Toussaint: The law of payment transactions at a glance . Verlag de Gruyter, Berlin 2009, ISBN 978-3-89949-532-4 , p. 11 ( limited preview in Google book search; accessed on April 19, 2017).
35. ^ Otmar Issing: Introduction to Monetary Policy . 5th, revised edition. Vahlen, Munich 1993, ISBN 3-8006-1784-6 , p. 8 f.
36. Regulation (EC) No. 974/98 (PDF) of the Council of May 3, 1998, Official Journal L 139 of May 11, 1998.