Published by El Nuevo Herald on December 29, 2015
Domestic US economy has performed well in 2015; however, locally, they have received some disturbing factors, including the lack of cash.
Indeed, in the last five months it comes to appreciate a considerable increase in the use of so-called "plastic money". In most businesses where we conducted an informal survey, not methodological, only 15% of customers paid in cash.
Particularly in the area of Greater Miami, three factors have influenced this behavior:
▪ More than 7,000 regular taxi drivers who previously paid their services in cash, now have virtually become unemployed by competition from UBER, which does business in credit card.
The market for customers who take taxis is the same, only have moved to UBER. Consequently this clientele now has a larger universe to choose their services as more than 50,000 people are available as taxi drivers.
Of course, it is not the same a market for 7,000 suppliers, than for 50,000. More people can work and provide a cheaper service, but its gain is minuscule now. Since UBER customers use credit and previous 7,000 taxi drivers no longer receive the same cash than before, consumption with cash has decreased, that is, is now lower volume of cash circulating daily in the business of Great Miami.
▪ The furor to lottery play has increased, mainly among people over 54 years old. Games known as "Scratch Off" have become very popular, especially those whose value exceeds $ 20 per unit.
It turns out that the emergence of numerous winners of millionaires in that price level awards, has significantly increased the hope of the population in a sudden fortune. However, what has happened in reality is a decrease of cash held by the public.
The rise of casinos is another factor restricting cash in circulation. Generally, retirees and those receiving federal aid, are mostly regulars casino gambling.
Of course, this is a restrictive factor to business prosperity since those who lose their retirement in the game does not have access to credit and therefore stop consuming in commercial establishments.
For that reason, it is common in the Great Miami a kind of economic boom in subsequent days of collecting monthly federal check aid. And as a contrast, we look at the rest of the month, a very slow economic activity.
Lack of cash is generally costly to employers because it forces them to pay higher financing costs; that is, each time they have to pay more to banks for processing credit cards.
In turn, the unbridled use of cards creates a false sense of well-being in the consumer, it reduces their income level, limiting their ability to commit new debt and endangering his or her economic future.
And what is more serious; the exaggerated use of cards generally leads to increases in individual credit limit bank. The roof of this debt will it grow until it becomes unsustainable and consequently, sooner or later results in loss for the already battered banks, who simply with its poor loan portfolio do not generate enough to undertake the expense involved by thousands of branches and employees.
2015 has been a prodigal year in good economic news. We started the year with a record high of 18,000 points in the Dow Jones index, we increased to more than 2,100 points, the S & P 500 index, we reduced the fiscal deficit to 2.8% and unemployment to 5.1% only. This has allowed corporate profits to have increased by 175% and exports of goods and services by 33%.
In turn, all this economic activity has generated the resources to compensate retired 49 million of retired, 21 million of veterans and 11 million of disabled.
All these figures are promising, but still, we have to be aware of the excessive use of plastic money, that if it were to become a national epidemic, it could finish in another sort of housing bubble, as the previous crisis in 2008.
What would help? Maybe, just doing only one weekly draw in the lottery and controlling the proliferation of casinos. Let's do it.
Benjamin F. DeYurre
Economist and journalist.
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