Cash

The English word "cash" originally meant "money box", and later came to have a secondary meaning "money". This secondary usage became the sole meaning in the 18th century. The word "cash" comes from the Middle French caisse ("money box"), which comes from the Old Italian cassa, and ultimately from the Latin capsa ("box").[1][2]

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In Western Europe, after the fall of the Western Roman Empire, coins, silver jewelry and hacksilver (silver objects hacked into pieces) were for centuries the only form of money, until Venetian merchants started using silver bars for large transactions in the early Middle Ages. In a separate development, Venetian merchants started using paper bills, instructing their banker to make payments. Similar marked silver bars were in use in lands where the Venetian merchants had established representative offices. The Byzantine Empire and several states in the Balkan area and Kievan Rus also used marked silver bars for large payments. As the world economy developed and silver supplies increased, in particular after the colonization of South America, coins became larger and a standard coin for international payment developed from the 15th century: the Spanish and Spanish colonial coin of 8 reales. Its counterpart in gold was the Venetian ducat.

Coin types would compete for markets. By conquering foreign markets, the issuing rulers would enjoy extra income from seigniorage (the difference between the value of the coin and the value of the metal the coin was made of). Successful coin types of high nobility would be copied by lower nobility for seigniorage. Imitations were usually of a lower weight, undermining the popularity of the original. As feudal states coalesced into kingdoms, imitation of silver types abated, but gold coins, in particular, the gold ducat and the gold florin were still issued as trade coins: coins without a fixed value, going by weight. Colonial powers also sought to take away market share from Spain by issuing trade coin equivalents of silver Spanish coins, without much success.

In the early part of the 17th century, English East India Company coins were minted in England and shipped to the East. In England over time the word cash was adopted from Sanskrit कर्ष karsa, a weight of gold or silver but akin to the Old Persian 𐎣𐎼𐏁 karsha, unit of weight (83.30 grams). East India Company coinage had both Urdu and English writing on it, to facilitate its use within the trade. In 1671 the directors of the East India Company ordered a mint to be established at Bombay, known as Bombain. In 1677 this was sanctioned by the Crown, the coins, having received royal sanction, were struck as silver rupees; the inscription runs "The rupee of Bombaim", by the authority of Charles II.

At about this time coins were also being produced for the East India Company at the Madras mint. In Tamil term for money is kaasu[3] may be this is the place where the word Kaasu may get modified into Cash. To be noted is here both the term 'Kaasu' and 'cash' has same meaning, not like money box or something else. The currency at the company's Bombay and Bengal administrative regions was the rupee. At Madras, however, the company's accounts were reckoned in pagodas, fractions, fanams, faluce and cash. This system was maintained until 1818 when the rupee was adopted as the unit of currency for the company's operations.

Traditional holed Chinese coinage is also known as cash.

Paper money was first used in China during the Tang dynasty 500 years prior to it catching on in Europe.[4] During his visit to China in the 13th century, Marco Polo was amazed to find that people traded paper money for goods rather than valuable coins made of silver or gold. He wrote extensively about how the Great Kaan used a part of the Mulberry Tree to create the paper money as well as the process with which a seal was used to impress on the paper to authenticate it. Marco Polo also talks about the chance of forgery and states that someone caught forging money would be punished with death.[5] In the 17th century, European countries started to use paper money in part due to a shortage of precious metals, leading to less coins being produced and put into circulation.[6] At first, it was most popular in the colonies of European powers. In the 18th century, important paper issues were made in colonies such as Ceylon and the bordering colonies of Essequibo, Demerara and Berbice. John Law did pioneering work on banknotes with the Banque Royale. The relation between money supply and inflation was still imperfectly understood and the bank went under rendering its notes worthless, because they had been over-issued. The lessons learned were applied to the Bank of England, which played a crucial role in financing the Peninsular War against French troops, hamstrung by a metallic Franc de Germinal.

The ability to create paper money made nation-states responsible for the management of inflation, through control of the money supply. It also made a direct relation between the metal of the coin and its denomination superfluous. From 1816, coins generally became token money, though some large silver and gold coins remained standard coins until 1927. The World War I saw standard coins disappear to a very large extent. Afterward, standard gold coins, mainly British sovereigns, would still be used in colonies and less developed economies and silver Maria Theresa thalers dated 1780 would be struck as trade coins for countries in East Asia until 1946 and possibly later locally.

Cash has now become a very small part of the money supply. Its remaining role is to provide a form of currency storage and payment for those who do not wish to take part in other systems, and make small payments conveniently and promptly, though this latter role is being replaced more and more frequently by electronic payment systems. Research has found that the demand for cash decreases as debit card usage increases because merchants need to make less change for customer purchases.[7]

Cash is increasing in circulation. The value of the United States dollar in circulation increased by 42% from 2007 to 2012.[8] The value of pound sterling banknotes in circulation increased by 29% from 2008 to 2013.[9] The value of the euro in circulation increased by 34% from August 2008 to August 2013 (2% of the increase was due to the adoption of euro in Slovakia 2009 and in Estonia 2011).[10]

In economic theory (according Keynesian economics), the cash holding of cash (especially sight deposits) is roughly attributed to three motives:[11]

• Transactions motive
• Precautionary motive
• Speculative motive.

The transactions motive covers the business needs of economic subjects, the precautionary motive serves to hold money for liquidity purposes and to provide for crisis situations, and the speculation motive, according to John Maynard Keynes, results from the uncertainty about future interest rate developments and relates to financial investments.

In addition to this purely economic importance, there are other aspects of cash use:[12][13]

• Activation of a reward center in the brain (anticipation of reaching a specific goal)
• Expenditure control (immediate physical payment)
• Tradition (haptic experience, e.g. monetary donation; long-term reliability of value retention)
• Inclusion (anonymous payment without disclosing personal data)
• Identification (symbolic character, solidarity and group membership)
• Educational tool for children (objective handling of assets and expenses)
• Paying a tip as immediate recognition of good service.

Cash in circulation is characterized by strong seasonal fluctuations. Wage and salary payment dates, tax payment dates or holidays lead to statistically perceptible increases in cash in circulation, for which the credit institutions are preparing. Since cash holdings at banks do not earn interest and can also lead to security problems (bank robbery), banks usually only hold very small amounts of cash. They are therefore forced to involve the central bank in times of higher cash requirements. Therefore, the cash in circulation only remains unchanged if the banks hand over cash from their own cash holdings to their bank customers or take cash deposits from their customers into their own holdings.

The ratio of the cash in circulation in relation to the gross domestic product (cash to GDP ratio) is a good indicator of cash usage and payment behavior in an economy. In countries like the United States, increased use of debit and credit cards is increasing the amount of cash in circulation at a slower rate than in countries with a high amount of cash payments. In 2018, it ranged from 1.3% (in Sweden) to more than 21% (in Japan), 10.5% in Switzerland and 10.7% in the eurozone.[14]

Since around 2018, exacerbated by the COVID-19 pandemic, cash in circulation in the eurozone has increased significantly while the share of cash payments (i.e. transactions) has decreased, known as the paradox of banknotes. Analyzes show that private households are increasingly keeping cash as a precaution against crises and that negative interest rates also play a role.[15] This effect is also observed in many other currency areas, e.g. in the USA and Japan.[16]

Theoretically, it is possible to track cash usage by capturing the unique serial numbers on the banknotes during transactions. To do this, the serial numbers would have to be recorded personally for all withdrawals from automated teller machines (ATM) and for each payment transaction at a retail checkout, including change. In practice, such comprehensive tracking requires a high level of technical effort and generates immense amounts of data. It would combine the disadvantages of payment methods, the somewhat cumbersome nature of cash from the offline world and the lack of anonymity of electronic money from the online world. In addition, in most countries, personal tracking of payment transactions is not permitted for the reasons of information privacy.

There are the following exceptions in cash applications:

• Registration of ransom money for blackmail (e.g. for the Oetker kidnapping[17])
• Macroeconomic studies of cash flows through the central bank[18]
• Statistical recording of the lifespan of banknotes by the central bank[19]
• Tracking the (location-based) migration of individual banknotes using EuroBillTracker for euro banknotes, Where's George? for US dollars and Where's Willy? for Canadian dollars as a hobby
• Use of individual banknotes for sharing messages with recipients using the mobile app smill.[20]

Since 2016, the People's Bank of China has requested the recording of banknotes issued and deposited at ATMs and bank counters, arguing that counterfeit money will be prosecuted.[21] However, the serial number is not a reliable indicator, because counterfeit banknotes mostly use serial numbers from real banknotes in circulation. In addition, damaged or scribbled banknotes may cause reading errors. With Directive ECB/2010/14, the European Central Bank (ECB) therefore requires to check the authenticity of deposited and withdrawn banknotes at bank counters and ATMs using tested devices and to trace the origin of suspected counterfeit banknotes to the account holder and physically seize it.[22]

• Davies, G. (1994). A History of Money From Ancient Times to the Present Day. Cardiff: University of Wales Press. ISBN 9780708313510.
• Spufford, P. (2008). How Rarely Did Medieval Merchants Use Coin?. Utrecht: Stichting Nederlandse Penningkabinetten. ISBN 9789073882218.