Durable and functional, the plastic stuff will be popular, writes Tim Harford
‘The Bank of England looks set to part company with paper banknotes after more than 300 years, becoming one of a growing number of central banks around the world to switch to plastic tender.’ Financial Times, Sept 10
Most of us already use plastic, don’t we?
You mean credit cards. The Bank of England is canvassing public opinion as to whether cash itself should be made of polymer instead of cotton paper. These are recognisably notes – you can fold them up and tuck them in a wallet. The idea appears to be a Canadian import. Mark Carney, the new of the Bank of England governor, has already introduced them once, when he was running the Bank of Canada. But it’s true the distinction between the purchasing power of a plastic credit card and the purchasing power of a plastic banknote is a subtle one.
Hardly. There’s all the difference in the world. There’s nothing quite like proper cash in your wallet.
That sort of attitude may explain why the BoE is being so cautious about introducing a polymer note. We’ve had one before in the British Isles – the Isle of Man tried it in the mid-1980s, struggled to prevent the ink smudging and gave up.
But we’ve presumably figured out the technical details by now.
It seems so. Australians have been using them since the late 1980s and they seem perfectly happy. The BoE has been touting their advantages – they last longer, they are much harder to forge, and if you dip them into red wine they wipe clean afterwards.
Is this regarded as an important feature?
Oh, yes. And Mr Carney personally demonstrated that you can use a rolled-up polymer fifty to slurp extra-thick milkshake.
I was under the impression banknotes were sometimes used to help take other mind-altering substances.
I wouldn’t know about that kind of thing. Certainly I am not aware of the BoE providing any demonstration.
It all sounds sensible enough, then. But still – people are possessive about their banknotes.
I’m not sure that’s true, actually. All sorts of objects have served as money. Contracts were denominated in salt; hence “salary”. In the 1990s, Brazil had a currency, the unidade real de valour, that had no physical form whatsoever. Prices in the supermarkets were expressed in URV but people paid using (devalued) the cruzeiro real. The Pacific Yap islanders used 2-tonne stone rings as a form of currency. Prisoners of war have used cigarettes, and have even had to deal with Gresham’s law: “bad money drives out good”. Fat cigarettes were kept for smoking and thin cigarettes were passed as money.
We’re adaptable, then. It sounds as though there’s nothing to worry about.
There’s always room for something to go wrong, but I think this looks like a sensible move. It is amazing that we are so happy to accept paper – or polymer – money. Sometimes it feels like a mass hallucination.
Is the illusion ever broken?
It’s very strong. I recall two musicians, Jimmy Cauty and Bill Drummond – famous as dance band The KLF – filming themselves burning £1m of their own money almost 20 years ago. There was outrage at the waste – despite the fact that, as Mr Drummond himself pointed out, all they had done was burn a pile of paper. He had destroyed his own ability to purchase goods and services, but no actual productive capacity had been destroyed – so, logically speaking, he’d donated £1m (in the form of lower inflationary pressure) to the nation. And, if the BoE had objected, it could have printed another £1m quite easily. Yet few people can bring themselves to accept that argument.
So the new money is durable, hard to forge, and people will embrace it with scarcely a thought because money has a kind of magic.
I think so. Just one thing worries me: how to dispose of the outdated currency. An old form of cash was “exchequer tallies”. These were half-sticks of annotated willow indicating that the government owed money to the bearer; the exchequer retained the other half. In principle, one could travel to London and use the stick to pay one’s taxes but it was more convenient to circulate them as currency. The system was used for more than 500 years, until reformers did away with it. The vast archive of “preposterous sticks” was fed into stoves at the House of Lords in 1834. Alas, the blaze was a little bigger than intended and the Palace of Westminster itself was incinerated. I trust the old cotton banknotes will be disposed of with more care.
Also published at ft.com.