But let's begin this argument at the smallest level. It's well established that the pennies make no sense. They can cost almost twice as much to make as they're worth, and Americans throw them away all the time. My favorite factoid is that "breaking stride to pick up a penny, if it takesmore than 6.15 seconds, pays less than the federal minimum wage." They are, quite literally, not worth anybody's time.
Moving on to other coins, they're all expensive little bothers. The nickel, for example, costs twice as much to make as it's worth. As Wolman recounts, minting money cost taxpayers $848 million in 2008, using up 14,823 tons of zinc,
23,879 tons of copper, and 2,514 tons of nickel.And what of our beloved greenbacks? They're bulky and germ-filled, to be sure, but could we really get by without them? Well, it's clear that many of us don't need them, and least not most of the time. Two years ago, card-based payments surpassed paper for the first time ever, and the trend is only increasing. But what would we use in a fully cashless society?
Smart cards and cellphones. Programs like EagleCash and FreedomPay already allow military officers and college students to go cashless in foreign countries and campuses. Wolman also explains how mobile money systems on our phones can already "flash" money to merchants and banks. Interesting developments all, but more the beginning of a paperless currency than its triumph. Coins stink and paper's a pain, but we're still a way from an economy without bulky wallets and jangly pockets.
If we went cashless, there would be no anonymous transactions. No informal economy at all really, unless we found a way to avoid all the tracking that comes with credit cards. That's a big chunk of the economy! (and where would you get your weed?)
Personally, I think we need cash, but the dollar should be revised every year to show inflation. Since the current dollar is worth 5% of what a 1930s dollar was worth, it should be the size of a postage stamp.
Bad idea and I don't see it happening anytime soon although there are always stories about the eminent demise of cash. It would most likely succeed in increasing inflation which already looks like it might be a looming problem for the US (unless we go into an even worse spiral of deflation). Items or services which you have hereto paid for primarily in an even amount, for example, drinks at a bar or items at an informal sale, will now have no incentive to charge an even amount. It would be psychologically and physically easier to increase the price of items and services. Also, have you ever noticed how people are more reluctant to spend cash in hand than just hand over a card? There recently was a well-done study on just this tendency and I have seen in anecdotally for years in different businesses. I believe one of the reasons we are currently in this whole financial mess is due to the shifting over to a "mostly plastic" based culture. A whole lot easier to spend without realizing the expense until later.
As for the informal economy, well forget about ever just paying for a babysitter or a kid to wash your car without the IRS tracking it, not to mention getting a better deal on small repairs to cars and home. It would also give a whole lot more power to the banks to charge fees for transactions. Ever get several $20 charges because your account was overdrawn for a few hours or a day? Look for higher fees and more of them if we change to all plastic. Imagine the government knowing exactly where and when you made every single purchase in your life. Do we really want to hand over our privacy like that?
Overall a bad deal for the average person and a godsend to bankers and the tax man.
Other countries seem to deal with this a whole lot better - maybe USA could bring itself to learn.
In Australia we abolished the 1 cent and 2 cent coins quite a few years ago - exactly for the reasons cited above - too costly, waste of time. We are currently thinking of dropping the 5 cent coin.
Our smallest "paper" currency starts at $5. And the bills are different colours so you can tell them apart. And actually they aren't paper, they're a polymer (floppy, paper-like plastic) which lasts longer and is more secure (and costs less over its lifetime).
There's are plenty of developing countries which have gone in this direction as well - aught not to be that hard, surely. (And maybe then you could think about going metric....)