What is money?
Money traditionally fulfils three functions:
- a means of exchange, money enables commercial transaction or transactions between individuals to be paid for. It can be exchanged for goods or services. It has an immediate discharging power;
- a unit of account, it enables prices to be established thanks to a recognisable unit accepted by all. It enables the relative value of goods and services to be compared;
- a reserve value, it can be saved and used to keep or transmitted over time.
Whereas the value of money was in the past backed by the value of precious metals, it is today guaranteed by the central banks. It is the trust between citizens and institutions which gives its value to money: we speak of fiduciary money.
The euro has been the only legal tender in France since January 1st, 2002. The Banque de France and the European Central Bank are guarantors of the value of the European currency.
Used every day by nearly 340 million people, the euro facilitates economic movements and exchanges. It has enabled prices and exchange rates to be stabilised, and low interest rates to be guaranteed.
Money: a living symbol
Cash is an element essential to the working of the economy. The value of coins and notes in the eurozone has been multiplied by seven since 2002 and continues to increase by 6 to 8% per annum.
Although the transactional use of cash is tending to decline, cash remains the most common means of payment in France and in the eurozone. In 2019, over 70% of payments made at points-of-sale in the eurozone were in cash.
Cash is a public asset; it is a universal, easy-to-use means of payment. Access to cash preserves freedom of choice between means of payment, and its use protects personal data. Money is not only a means of payment, it is also an economic institution which contributes to a feeling of belonging to a community. Citizens are attached to money: according to the latest study carried out by Ifop and la Monnaie de Paris, 83% of French people are attached to cash.
Cash in the time of coronavirus
Contrary to common belief, the health crisis related to the COVID-19 pandemic did not hasten the end of cash. In 2020 there was a real rush for cash, with an increase in demand for liquid tender of 10%, no doubt linked to a saving phenomenon.
Cash – key figures
1,575 billion euros in circulation in the eurozone in December 2021
Of which 31.2 billion in coins (ECB)
59% of transactions in France paid for in cash
73% in the eurozone (ECB, SPACE study, 2019)
79% of French people are against the disappearance of cash (IFOP, 2020)
To find out more
Marc Schwartz, Chairman & CEO of la Monnaie de Paris has written a reference study on the place of cash in the world, Le grand paradoxe – ou pourquoi le règne du cash est loin de s’achever (The great paradox - or why the reign of cash is far from over). The latter demonstrates in particular that the volume of cash in circulation is constantly increasing, and that cash plays an important role as a means of payment. It also illustrates that if the death of cash was announced, there are many arguments in favour of cash. It is strongly defended today. Lastly, this study envisages the implementation of a digital currency which might present the same advantages as cash.
To consult the whole of this work:
- Le grand paradoxe : ou pourquoi le règne du cash est loin de s’achever (Schwartz, Messaoui, 2021)
Key figures and reference information on fiduciary currency are also provided by the Banque de France:
And by the European Central Bank: