Before reading make sure you’ve read Part I and Part II of “Why We Have Money” from last week.

What does the future hold for me and my dollar?  Well that is actually two questions.  First we’ll look at the future of actual currency.

Take a moment and think about how often you use regular money.  My paycheck is direct deposit, but even if I got a check it wouldn’t be actual cash.  It’s an electronic transfer of funds from one account into 4.  No physical transaction has taken place.  All my bills are paid either online or by check.  Most of my regular expenses and impulse purchases are taken care of electronically.  Only after I include a expenses for work did I realize I use cash for anything anymore.  I participate in a few programs that do require the passage of a dollar or two every once in a while.  We also have a nearby food stand that only accepts cash.  When it all boils down less than 1% of 1% (that’s not a mistake) or .01% of my cash flow is in actual cash.  With a few exceptions, it is likely most of your are in the same boat.

What are some places where you still use cash?  Many waitresses carry quite a bit of cash, but as more and more of us leave tips on the receipt, it won’t be long before their nightly payout will just be a line item on their paycheck.  If you think about it, many cash transactions are used for illegal operations.  Paying illegal workers under the table and drug dealing both use cash because its much more difficult to trace.  If most of the cash is changing hands for illegal operations the government has an incentive to move away from paper currency altogether.

Which leads us to the future of my dollar as in the future of money.  If everything is going electronic, how will it work?  Unless you look at John McCain like a young buck, you’ve likely used a credit card before.  It used to be processed on paper and then sent to the credit card company.  Then they could dial it in, the logical progression was the swipe machines we see now.  They still communicate by a phone line (sort of) but the progression has been linear.

The next step in the progression will eliminate the checkout process altogether.  Imagine walking into a store with a shopping cart, and the in-store network recognizes you.  I could be based on your cellphone, credit card, or some type of rewards card you sign up for; like the preferred shopper programs at many grocery stores.  Regardless, the store knows who you are and what type of money you have to spend.  You pick up a shopping cart with a special sensor, and as you place items in a screen reads out how much you’ve spent so far.  This is possible by technologies like RFID (Radio-frequency identification).  Think of it as a wireless bar code and the scanner is your cart.  When you reach the end of your shopping you simply walk out the door.  As you leave the cart sends the purchase information to your bank and a receipt is document on your account.  No cash ever changed hands, and you never even had to dig out of your pocket.  These technologies are already being tested in certain stores around the world.

Now imagine your entire existence like that.  The swiping of cards will be dead in a couple of decades, replaced by wireless technologies.  You will buy gas (or hydrogen?) just by filling up and leaving.  You can loan a few bucks to your deadbeat sister by linking your accounts momentarily to transfer funds, the loan will be logged by your bank so you’ll be able to keep track that she still hasn’t paid you back for those concert tickets.  Need to pay for that parking meter?  I’ve seen credit card islands that print tickets for you and San-Francisco is implementing a complete wireless parking system.

The simplest of transactions will spell the end of currency.  We’ll probably always value tangible items, and its the value of these items, like gold, that will continue to be the backbone of the economy.  No, we’ll never go back to the gold standard.

Finally tomorrow I’ll try and answer the question of if we’ll ever go back to a time when there is no money?

Related posts:

1. Why Do We Have Money? Part II
2. Will We Ever Not Have Money?
3. Simple Ways to Save Money
4. 5 Things a Crack-Head Can Teach You About Money
5. 6 Lessons Star Wars Can Teach You About Money

Related posts brought to you by Yet Another Related Posts Plugin.

Liked this post? Hated this post? Hate me? Email me and let me know: Philip@weakonomics.com