Superstorm Sandy Demonstrates Need for Traditional Cash

by Richard Giedroyc

December 11, 2012 – During the early 1980s I was the non-commissioned officer in charge (NCOIC) for Class One and Six for the 50th Armored Division, New Jersey Army National Guard. Among my duties was ration breakdown and distribution to more than 30 field kitchens feeding the division when on maneuvers. I was required to come within a three percent accuracy over or under the number of meals ordered compared to the number of meals actually fed. This took a lot of calculating as well as good management.
The modern computer was in its infancy. I was only allowed to do the necessary calculations with the assistance of a computer if I had a fully functioning manual backup system. One night there was a thunderstorm. The computer took a direct hit from lightening, requiring me to use that manual system. If that manual system had not been there then there would have been an entire army division that would have been hungry while not being very amused with my failure to continue the mission.

Since that time we have made amazing advances with computers and subsequently with the many things they can do. This includes an ever increasing number of innovative electronic payment and transfer systems that have many financial and numismatic experts asking if the day of a physically cashless society may be coming. Are coins and bank notes becoming obsolete?

Hurricane Sandy caused dramatic moments: Flooded Avenue C at East 6th Street in Manhattan's East Village neighborhood of Loisaida, moments before the Con Edison power substation on 14th Street and Avenue C blew up. Photo: David Shankbone /

Hurricane Sandy caused dramatic moments: Flooded Avenue C at East 6th Street in Manhattan's East Village neighborhood of Loisaida, moments before the Con Edison power substation on 14th Street and Avenue C blew up. Photo: David Shankbone /

Hurricane Sandy decimated much of the eastern coast of the United States. Entire communities were without power for eight days or more. People stocked up on food and other supplies in advance, anticipating the worst, which unfortunately became a reality. The lack of electrical power following the assault by the storm was more than an inconvenience. Food and fuel were in short supply after the storm. There was an even bigger problem than the short supplies. Gasoline could not be pumped at gas stations, food could not be refrigerated, and cash could not be obtained from banks. What’s more, electronic payment and transfer systems including debit and credit cards could not function.

According to the November 5 issue of Consumer Reports, “Many ATMs [automated teller machines] in Sandy’s path were rendered useless by the storm. Those that remained in operation often had long lines, and some reportedly ran out of cash. Credit and debit cards weren't of much use either, dependent as they are on electronic store terminals.”
Kathy Kinsley posted a comment regarding a related Popular Mechanics blog of November 8 in which she said, “All electronic money tends to be down/dead after a disaster…the few places that are open will only take cash – not even checks (for obvious reasons.). Ever since Hurricane Charley, I routinely carry at least $300 in cash through our hurricane season. And, $200 in the rest.”
Many of the victims of this colossal storm quickly learned that the monetary instruments they now take for granted had been rendered useless. Stores still operational were only accepting cash – coins and bank notes. There was no way for merchants to verify checks were backed by sufficient funds, or to accept any form of electronic payments. Cash was king!
You might anticipate this was a moment when people with a survivalist mentality might say “I told you so,” but it wasn’t. Even if a practicing survivalist had kept a reserve of gold and silver coins, what merchant was going to accept them in turn for goods or services? Even if a merchant did accept gold or silver coins, what made these survivalists think that merchant would give them a fair and equal trade in value for their so-called specie payment? When I say cash was king, I mean current coins and bank notes with which the merchants are familiar, not some item a merchant would view as barter.

The Reserve Bank of India recently conducted a study that indicated 38 percent of those surveyed don’t like to carry coins simply because they don’t want to count them.
German Bundesbank spokesman Carl-Ludwig Thiele recently stated, “The end of coins and bank notes is not yet in sight in Germany. Fifty three percent of all revenues for goods and services are paid in cash, meaning it’s still the best loved form of payment in the country.”
Thiele’s comment followed the release of a 2,000-household study conducted by the Bundesbank that indicated people like being anonymous when spending cash, and they (Germans) don’t necessarily trust electronic payment systems. Of those surveyed, 58 percent preferred cash to electronic payments. It appears there may be a gradual decline in the enthusiasm for coins and bank notes, however the recent survey also identified those preferring cash to electronic payments being in both the under age 25 and in the above age 55 groups. The survey also found debit and credit cards are more likely than cash to be used when the value of a transaction is greater than 500 euros (about $656 US).
According to a December 15, 2011 Chicago Tribune newspaper article, “New academic research shows consumers who pay with a credit card focus on the benefits of a purchase, while those who pay with cash concentrate on its cost.”
Perhaps the focus of benefits of cash or non-cash financial transactions is important to consumers, but should Mother Nature or an electronic jamming system trump your electrical grid physical cash as a “throwback” as it was termed by Investopedia will still prove to be more necessary than we 21st century consumers can appreciate it to be.

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