A Flip Of the Coin

Myth, Magic, and Money

So, is cash dead?

Edmund Moy, the director of the Mint -- who is the very picture of 19th-century banker probity in his three-piece suit with a silver chain across his vested tummy -- acknowledges that cash is losing market share. But, he is proud to tell you, the Mint is making more varieties of coins than ever, including these new ones mandated by the Presidential Dollar Coin Act of 2005. They are popular at automated car washes, he says.

Nonetheless, rare is the convenience or liquor store in America without a big plastic jug next to the register into which, in the name of some worthy cause, you are encouraged to throw away your change.

Coinstar's business model is turning "coins to cash." Interesting concept. It assumes we think they aren't. And sure enough, last year people happily paid a typical 8.9 percent to have the coin-counting gizmo turn the nuisance of billions' worth of metal discs into something useful, like a chit to pay for your groceries. Coinstar estimates that $10 billion worth of coins is sitting idle around American homes.

High-value coins are still used routinely in Canada, England and the eurozone, but only because people there have no choice. The equivalent units of paper money, like the one-pound note, have been eliminated. In the States, where choice is far more sacred, people go for dollar bills almost every time. "It's very difficult to legislate a change in consumer behavior," Attinger notes.

Cash is increasingly reduced to three arenas, Weatherford says. It is used for transactions performed by poor people -- "the unbanked population," as they are picturesquely known; anybody's small purchases -- like an ice cream cone; and for illicit activities like tax evasion, extramarital trysts and drug scores -- for which anonymity is at a premium.

Visa and its competitors are hard at work eliminating low-income people's need for cash. Already, more than 30 states deliver payments to the needy -- food stamps, child support, unemployment benefits -- via cards welcomed at retail establishments.

"Micropayments" -- under five dollars -- are the huge future for electronic money, especially for the young, who are accustomed to paying digitally for ring tones or iTunes. You can go into a 7-Eleven, grab your beef jerky, wave your card at a reader and be gone in a flash.

To be sure, electrons are not problem-free. Identities can be stolen; computers can be hacked; power can go off. That's why Moy mentions a fourth use for cash -- crises. "When the Fed plans for a doomsday electronic crash," he points out, "they're not stocking Visa cards in a bank vault, they're stocking cash. When Katrina wiped out the electronic financial infrastructure, what did most Americans turn to in order to buy goods and services?"

No one at the Mint really knows how many dollar coins are in commercial circulation compared with how many languish in sock drawers. What it does know is that there is a brilliant reason for continuing to make coins. The Mint turned a $775 million profit in the last reporting year, which it dutifully handed over to the U.S. Treasury.

A key reason is "seigniorage." Because it costs the Mint 20 cents to make the new dollar coin, and people pay a dollar for it, the margin on each one is 80 cents. If people proceed to squirrel the coin away, and not put it in circulation, this is wonderful. The government gets to keep that 80 cents forever.

That's one reason the Mint views those quarters with images from the 50 states on them as such a success. Collect them all! That's why these new dollars are part of a series that will ultimately sport the images of each of the more than 40 presidents.

They'll make a mint!

Even Attinger, however, admits that the world he is building is one in which invisible money is nothing more than a means to acquire commodities. He acknowledges that it's hard to cherish electrons.

That's why, as new things become money, the old ones become sentimental items, as is the case with vinyl records and typewriters. That's why, if you want more than just a means of exchange, if you want a relic, a totem, a symbol -- if what you want is myth and magic -- well, that's the last bastion of cash.

So what's the final frontier for Visa, you ask Attinger. The laundromat?

"No," he says.

"It's the tooth fairy."