Banknote crises show cash still carries clout in economies
Money has for centuries played a critical role in measuring value and facilitating exchanges of goods and services. Without money, it is almost impossible for "the butcher, the baker and the candlestick maker" to trade with each other. Money sets the value at which such exchanges occur. It allows specialisation of production that is impossible if direct swapping of goods is the only method of exchange. The role of money was once filled by rare and valuable products such as gold, silver, or even cowrie shells. In more modern times, banknotes replaced gold. The value of these notes was protected by the promise they could be exchanged for gold of equal value at the central bank. But with the move off the gold standard in the 1930s, this fell away. Banknotes now require that citizens trust they can be used to obtain goods and services to their stated face value. Technology has reduced the importance of physical banknotes. Initially, cheques allowed transactions to occur without notes ch...
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