Evolution of money continues

The Reserve Bank of Australia (RBA) recently released stats on how we use money, here is Peter Martin’s take in The Age and his blog today:

  • ATM cash withdrawals down 1.3%
  • Internet transfers up 7.5%
  • EFTPOS transactions up 7.5%
  • Debit card transactions up 12%
  • Credit card balances up 0.7%
  • Personal cheques down 5.7%

We withdrew cash from ATMs 64.7 million times in January, which sounds a lot but was well down on 65.6 million times the previous January. December was even worse. We took out cash 71.9 million times compared to 73.6 million the year before…. the average size of a card transaction fell to just $89.53 – an all-time low.

The trend is fairly obvious:


h/t The Unconventional Economist

It seems we are moving more towards “pay by phone”, internet purchases and debit cards without a commensurate rise in the stock of credit card debt, which only climbed 0.7% for the year, the smallest annual growth on record.

Let’s put this macro trend in context with a quick history lesson because I think this bears thinking about, especially for the retail and broader service sectors.

There’s a fascinating overview at the RBA’s Currency Museum – I’ve provided the “Reynard Notes” below:

Just after colonisation, a jumbled commodity standard (based on rum – things haven’t changed that much north of Brisbane at least) and barter were the mainstay currencies. Because of a shortage in British coins, foreign denominations were used until promissory notes came into use as a stopgap before the British currency was formerly adopted in 1825 (a specie gold standard)

A gold rush and mining boom from the 1850’s onwards brought about the raising of a Mint with gold coins produced from 1855 onwards and used as legal tender. A banking boom followed with the requisite credit inflated speculative bubble (sound familiar readers?) that crashed spectacularly in the 1890’s. The crisis and depression that followed required a new national currency, but gold and copper coins became the standard again.

From Federation onwards, bank notes rose to prominence again, until subscribed national bank notes took over until just before WW1, but these were fully backed by gold. On the creation of the Commonwealth Bank (before it became the RBA and CommBank), new national paper notes were created and used as currency alongside smaller denomination coins until the decimilsation in 1966.

The new Australian dollar broke from the British pounds/shilling past, and with the dumping of the $1 and $2 notes (due to inflation in the 1970’s), remains with us today, although the notes are now a high tech plastic design with embedded security features.

Here’s the quick version:

rum -> foreign coins -> gold-specie – > unbacked bank credit notes -> gold-exchange – > gold-bullion backed paper -> fiat paper -> fiat plastic -> ????

Where is this evolution heading, or as described (if a bit of a hard slog) by David Graeber in his voluminous book on debt and money, is it just oscillating between paper and gold, credit/debit and debt? From a trend level, the increased use of technology is destined to drive physical currency out of mainstream use, and even for the gold bugs there is an electronic gold standard beginning to take hold, which is effectively the same as the gold exchange standard and fits into the historical paradigm. (i.e new more reliable currency after an epic credit bubble crashes)

Wherever it is going, I want one of these or the evolution thereof:

Here is how it works: the wallet connects to your cellphone via Bluetooth. When the two objects are separated by more than 15-30 feet, the wallet will sound an alarm. So, in reality, it is really protecting you from losing two important items. The wallet also features a biometric fingerprint reader that will only open for its owner.

What are your thoughts on where money is going?


  1. But if they steal both the phone and your wallet the alarm won’t sound! What you need is a bluetooth implant, so that if the wallet or the phone is more than 30 feet from you an alarm sounds. It would also mean you couldn’t forget them/ leave them somewhere by accident.

    And thus would begin the rise of the cyborgs. 😛

    On a more serious note, the use of preloaded touch cards, such as the octopus system in HK is very convienient. Only issue is that it is less secure than normal credit/debit cards and will be able to access more money than you would normally carry. That however is a challenge that could be overcome with some work on the system.

  2. Diogenes the CynicMEMBER

    The evolution of money depends more than a little on the framework of our economic system going forward. If we can sustain the present debt fuelled system then electronic money should become ever more pervasive, if we experience a collapse of the debt-credit system then a return to an older form of money is quite likely. Interesting times either way…

  3. Personally, it is very rare for my to carry physical currency – I regularly go weeks without carrying any notes or coins at all. All items are purchased online or paid with plastic.

    It shouldn’t be too many more years before smart-phone penetration approaches unity. At that point, equipped with NFC chips and existing PayPass card readers at retailers you will no longer need your wallet at all – presuming there is no minimum purchase. Hell, you won’t even need PayPass card readers at the terminal, the retailer will be able to just use their own smart-phone to accept payments. This will be done with integrated applications like Google Wallet and other competitors that will store ALL of your card information; every credit card, every loyalty card, etc and these offerings will quickly become predominantly electronic and expand in number.

    Security concerns are real and valid. But these apps are already being hacked and tested – with Google for example paying decent sums for people to do so – and by the time it is ready for mainstream you should feel as confident about using it as you do a credit card. Plus, in addition to passwords and PINs a smart-phone can give you face recognition, voice recognition, and other biometrics as desired.

    But saying our wallets will disappear into our phones is nothing new. It is an idea whose time has come and only the kinks need to be ironed out.

    Beyond conventional currency the rise of smart-phone powered payments will allow barter and other forms of trade to flourish; the barrier to entry and ease of use is just that much better.

    There may be lucrative opportunities for those who set up exchanges between these different media of exchange, but existing players will be best placed to exploit this – at most a start-up in the space might pitch the 800 pound gorillas as trade-sale / exit opportunities.

    But even this will be comparatively short-lived.

    Beyond the 2030s or 2040s I just don’t see conventional currency of any form – electronic or otherwise – surviving with any real perceived value because I struggle to see capitalism itself surviving past decades in which capital, labour, and the means of production is no longer scarce. These are the decades in which robotics and AI software matures and gains the capability to do all or at least 98% of all human work; any job a human could conceivably do a machine will be able to do better. Manufacturing and production (of food and other goods) will be personal or at least local with advanced 3D printing and materials. Energy will not be an issue; with solar to reach parity later this decade or early next, by the 30s and 40s it will be orders of magnitude cheaper and more efficient.

    A currency of some form might still exist after this point, if only to try to administer a resource-based economy and control excessive consumption. Aside from this the future of money, or of exchange in general, will be via that of our reputations and social capital; thus has it ever been.

    • “These are the decades in which robotics and AI software matures and gains the capability to do all or at least 98% of all human work; any job a human could conceivably do a machine will be able to do better.”

      Automated dairy farming: http://www.youtube.com/watch?v=If7iA4sMpF8

      And in Australia as well: http://www.polyphaz.com/Automated_Dairy_powered_by_POLYPHAZ_single_to_three_phase_converter.htm

      • you seem to be confusing production and money … the 2 things have been seperate for years.
        just see the disparity with wages and production.

    • I really hope that’s not what our future looks like, what a bleak outlook.

      At any rate, saying that money will somehow not exist because robots will do everything is absurd. Who owns the robots? Who maintains the robots? Who gets the fruits of the robots labour? We already live in a society where everyone has more than they need to survive, the idea that property ownership and labour will be a thing of the past simply because robots do everything is pure fantasy.

      How many robots do you own? How many do I own? How do I pay for my robots to be maintained? Who does the mainenance on the robots? What if my neighbour has better robots? The government pays for everything? Where does the government get funds for if nobody works?

      What if I work really hard to get the best, most efficient robots around, but the government takes them off me to ‘stop excessive consumption’? Who decides what excessive consumption is? Etc etc etc…

      Humans, by modern standards, do almost no labour at all compared to what we did just 100 years ago, let alone 1,000 or 10,000 years ago. If we got robots to do 98% of what we do now, then we will find other things to do, other problems to solve and other ways to spend our time productively.

      If the government turns around and says ‘ok we will just pay for everything and no one has to work’ then the countries that DON’T do that will, very quickly, take over and the ‘rich’ countries and all of a sudden we are uncompetetive.

      It is a myth that capitalism is about labour and capital. Capitalism is mainly about ideas and reward for them (ie, how can I do this better). Communist societies fail because they fail to appreciate human nature and calling a communist society ignores the fact that communism is as much about the ‘to each according to his need’ part as it is about the ‘from each according to his ability’.

      • I say this not because I am fond of the outlook or not (disclosure: I am) but am simply stating that this is where the accelerating development of technology is taking us.

        “If we got robots to do 98% of what we do now, then we will find other things to do, other problems to solve and other ways to spend our time productively.”

        I am afraid that this is a fallacy espoused by those who have little or no concept of what the development of artificial intelligence entails. Once a machine is created that can solve problems with the same capacity and seeming intelligence as a man then it can do the work of that man. If given a body (robot) it can perform labour, if plugged into the internet it can perform knowledge work.

        18 months later it will be twice as fast and cost half as much. Once this development arrives there is, by definition, nothing – no work, activity, or input – nothing at all that that you can contribute in a productive capacity that cannot also be done quicker, cheaper, safer, and more reliably by this machine. Whatever thing you might choose to do, someone can direct this machine to do better, put you out of work, and provide a greater service and benefit to society.

        The 98% was an arbitrary figure I threw in there; there is no reason that 100% wouldn’t be reached.

        Do you really think that society can approach anywhere remotely near 90% unemployment without capitalism collapsing? The Great Depression saw 25% unemployment in the US and up to 33% in other parts of the world and yes cracks were showing in the system then. Do you really want to live in a capitalist world in which there is 99% unemployment?

        Don’t get me wrong – I love capitalism. It has been an excellent model for society to swiftly develop and improve the standards of living for its citizens. But make no mistake, by striving for ever-greater productivity gains it is inventing and growing itself out of existence. It is not a matter of if, but when.

        You say that “If the government turns around and says ‘ok we will just pay for everything and no one has to work’ then the countries that DON’T do that will, very quickly, take over and the ‘rich’ countries and all of a sudden we are uncompetetive.” but it is actually the countries that don’t do this who will suffer.

        Right now we have the technology to put safe, self-driving vehicles on the road that require no human interaction. Once fully introduced, there goes every taxi driver, truck driver, tractor driver, bus driver, etc – these jobs are gone. Commercial Airline pilots are practically worthless too – once people are comfortable with vehicles driving themselves they won’t mind planes doing the same.

        Look at IBM’s Watson supercomputer. It played and beat, no, SMASHED, the top two human players of Jeopardy. This thing answers factual general knowledge questions better than any human. What happens when you can access this via an app on your smartphone and it is plugged into the whole internet?

        Look at Foxconn, one of the largest manufacturer of electronics in the world, which makes most of the Apple products (and many more others) everyone loves. It employs over a million people. Yet it is embarking on a major CapEX project so that by 2015 it plans to have installed over a million new humanoid-shaped/functional robots on its production lines. Jobs and wages will be smashed. Productivity will skyrocket. And all of its competitors will have to follow suit to stay competitive.

        There are even software programs that write basic news articles, create decent basic music, and design decent basic art. In future their creations will not be so basic and we will be inundated with a flood of novel art and content, more creative and beautiful than a normal human could hope to come up with – the works of men at that stage will be viewed by us much like we view the works of our children now; “Oh, isn’t that cute! Nice effort!”

        The thing is . . . when you have converted an entire value chain, replacing labour with robots and AI software, in order to convert raw materials and natural resources into new products delivered to your door, when it is all automated . . . it doesn’t actually cost anything to PRODUCE these goods. They are essentially free. The only cost is to the environment. The only value is possibly the information or knowledge that went into the design.

  4. russellsmith55

    First I started thinking that ‘cash jobs’ and the black economy will suffer because of the decline in physical currency, in favour of traceable online transactions. This would make taxation ‘fairer'(?) and increase the amount of tax revenue available to be wasted by governments(!). But then I thought, people will probably just funnel money through World of Warcraft gold farming, dodgy gumtree ‘transactions’ and cuckoo-smurfing.

    I’m not sure which of any of the points I’ve raised above I should be shouting hooray for (if any).

  5. From an interface point of view I think we will eventually head to a system which doesn’t require a plastic card/wallet, but rather uses your mobile phone (e.g. such as Mastercards PayPass).

    What else do you carry in your wallet? Library card, train ticket, drivers license, medicare card… I could see all these being ‘app-letised’ for use with a mobile device at some point.

    Of course the way in which you use your money/currency does not really have a bearing on what system we have. Plastic, paper or electronic fiat is still fiat, lipstick on a pig 😉

    Some of the recent ‘innovations’ such as Euro Pacs Gold backed credit card look interesting:


    However it’s fairly impractical as you still need to sell the Gold and fund the card with cash before it can be used.

    Unless Gold is once again a fixed price in fiat dollars it remains pretty impractical for day to day use (especially with recent volatility like the 5% drop the other night).

    Will we return to a Gold backed currency (fixed dollar value)? My opinion is no, although I suspect the continued ascent in Gold’s price will point to a public that increasingly continues to favour Gold as a store of wealth over government issued alternatives which are anything but…

  6. I was thinking about this evolution recently and wondered if the world fiat system as it is now might give rise to some kind of non-government distributed electronic payment system. It was really just a bit of a thought experiment, but I was wondering if it were possible to build a electronic system that didn’t require a central entity to print money. A system based on a IOU where anyone could create electronic promises to pay. The IOUs could be passed on between people until a clearing house settles all the IOUs. The cryptographic security mechanism based on “Web of Trust” could be used to work out who to trust. The IOU could be based on gold or other things of value. I like the idea of a currency that isn’t effected by inflation or debt, but wasn’t sure how you could build that into a system.

  7. I really hope it does not come to this; but with the massive debts right around the globe – private, corporate & Government that may never be paid off (unless you allow massive inflation), then only a debt jubilee and a rebooting of the system will suffice. What would this look like? Perhaps a One World Currency and using existing available technologies like computer chips inside bodies? Biblical & 666 stuff – but a genuine possibility to avert a total worldwide economic collapse. I hope not though, as you lose your nations sovereignty & personal freedoms.

  8. MsSolarFelineAU

    There is no other feeling of self-ownership than holding au and ag in my hands, and thinking that when the Fiat Ponzi Scheme *really* becomes more unstable than it is now, I have done more than 99% of the sheeple out there have done.