New coin fires debate over money’s future
As a centrepiece of the new government economic plan, ministers have unveiled designs for a 12-sided British pound. It will be much harder to counterfeit, but are the days of cash numbered?
It was a budget announcement guaranteed to cause a stir. Cynics derided it as a cheap diversion, while nostalgics celebrated a return to past glory. The cause of controversy? From 2017, Britain will be using a new pound coin.
‘A more resilient pound for a more resilient economy,’ chancellor George Osborne quipped during his budget speech yesterday. The new pound will be a dodecahedron, and is based on the old brass threepenny bit, retired from use in 1971 after the arrival of decimal currency.
The Treasury believes that the current pound is now too easy to counterfeit and estimate that three percent of all pounds in circulation, amounting to 45 million coins, are fakes. The new coin will be the hardest in the world to forge, and part of an anti-fraud strategy.
But is cash still the trusted and valued medium of exchange it once was? For thousands of years, people would barter and exchange goods, swapping a goat for an axe, for example. But from 1200BC in China and across many parts of the ancient world, cowrie shells began to be used as a basic form of currency.
Valuable metals like silver and bronze took their place, but carrying them became impractical, especially for the wealthy. This lead to the creation of banks, where treasure could be deposited in exchange for receipts, which the bearer could then pass on to others in exchange for goods. At the Bank of England, this took the form of individually handwritten ‘IOU’ notes, until the first printed bank notes appeared in 1853.
And yet, since plastic payment cards first appeared in Britain in the 1950s, cash has become increasingly irrelevant. Debit card purchases overtook cash for the first time in 2010 and British online sales are expected to increase by more than 15.8% this year. At least one study has found that only eight percent of consumers believe cash will be their preferred form of payment by 2020. With new mobile phone payment apps in development and the ubiquity of plastic, should we carry on with coins at all?
The penny drops
As digital currencies like Bitcoin gain popularity and card readers sit on counters in almost every shop, some think releasing new coins is a waste of time and, well, money. The UK will see plastic banknotes in 2016, but even this is a little dated. Last year Canada abolished its cent coins; it is time we lighten our penny-laden pockets and move into the digital future as well.
Others respond that digital currencies make purchases feel too abstract. Coins may no longer be made of precious metals, and notes no longer represent wealth in private caskets, but money is still not an obsolete remnant of economic history: it’s a physical symbol of our labour, and our hopes.
- Would people spend money differently if there was no more cash, only card or digital payments? Why might you need to replace it?
- People used to bite coins to make sure they were not fakes. Why does it not matter now whether they are made of precious metal?
- One side of the new pound coin will have the queen’s head, but there will be a competition to decide what goes on the other side. Design an entry and compare with the class.
- If three percent of the pound coins in circulation are fakes, and this amounts to 45 million coins, work out the total number of pound coins in circulation.
Some People Say...
“If no one believed in money it would cease to have value.”
What do you think?
Q & A
- Why should it make a difference to me if I use coins or a debit card?
- Well, what if you find yourself in a shop that doesn’t take cards and you have no cash? For some, money is a physical symbol of their labour and the effort they have made to earn it. Without this physical sign, spending money seems divorced from reality.
- Do banks still have store cupboards full of treasure?
- That’s not how it works anymore. While the value of money used to be pegged to gold in the UK, now the Bank of England tries to control how much things are worth. The word ‘credit’, meaning a person’s ability to pay for things, comes from the Latin word ‘credo’, meaning faith. It is only worth what we decide it is worth.
- Budget speech
- Once every year, in March, the second most senior member of the UK government, the chancellor of the exchequer, stands up in the House of Commons and delivers a long speech setting out how the economy is faring, official estimates of various measures of economic health, as well as spending and tax plans.
- The Greeks and Romans often bought slaves with salt because it was a valuable preservative and in some parts of the empire, soldiers were paid in salt. This is the root of the word ‘salary’. That is an example of a currency — something that another will accept as a trade for goods or services.
- As a reminder of their history as IOUs, British banknotes still have written on them, ‘I promise to pay the bearer on demand the sum of…’.
- This is a digital currency which is not administered by any country’s central bank. Its value has been very volatile in recent months as traders have gained then lost confidence in it. Since Bitcoin appeared in 2009 it has spawned many rivals.