Saved by the cash

April 26, 2018

Pat Heller

The government of Sweden has been trying to eliminate the use of physical coins and currency in everyday commerce. Even street beggars are required to use portable card readers to enable electronic donations. The latest information I have received from that nation is that about 98 percent of all transactions are now conducted electronically.

However, a small but growing backlash is developing in that country against this effort to eliminate the use of physical mediums of exchange.

Perhaps the strongest objection to having only electronic transactions as the legal medium of exchange is what would people do if there were no electricity available to power the equipment that processed such commerce.

Thus far, this is largely a theoretical concept within Sweden, with the biggest concern possibly being some kind of interference from Russia. However, the idea of a widespread loss of electrical power is not just theoretical.

On Aug. 14, 2003, there was a widespread power outage that included New England, parts of Ontario, Canada, New York, Pennsylvania, Maryland and all the way to the Midwestern states. The edge of the power outage hit about half of the Lansing, Mich., area, where I live and work. Within four hours of the first power outage in Indiana, about 55 million people lost electric power.

Over half the people in the affected areas had electric power restored within 24 hours. However, not all service had been restored by Aug. 19, five days after the initial outage.

In September 2017, Hurricane Maria knocked out electrical service to 80 percent of the residents of the island of Puerto Rico. As of five weeks ago, 7 percent of the island’s residents, more than 120,000 people, had not yet had electrical power restored. There were some towns where only about half the residents had power – eight months later! The U.S. Army Corps of Engineers expressed a hope that at least 95 percent of electrical service would be functioning by late May 2018.

When there is no electric power, banks, credit unions, credit card processing equipment, ATMs and the like are unable to function. In other words, people who depended on access to debit or credit cards or being able to write checks were largely unable to conduct transactions.

Even if you initially have a cell phone on which you could conduct some financial transactions, the batteries would eventually drain. If there was no place to charge them, even access to cryptocurrency accounts would not be available.

In both disasters, when people needed to purchase groceries (assuming they were able to find an open store), having coins and currency in hand was readily accepted for payment. Many merchants that were able to stay open when the power was out declined to accept checks until after power was restored and they could deposit such payments.

So, the obvious lesson for the people of Sweden and everyone else around the planet is that physical coins and currency as a medium of exchange will always be needed, even if only for emergency situations. Therefore, as part of any disaster planning preparations, it would be prudent to keep some quantity of coins and currency in your immediate custody, no matter what means you use for conducting transactions on an everyday basis.