Just a Piece of Paper

The Comedy Festival is in full swing here in Melbourne.

I heard a great joke from one of the comedians, Ivan Aristeguieta.

Ivan is recently divorced, after 16 years of marriage.

When people ask him if he will ever get married again, his answer is: ‘heck yeah, I would love to.’

Hearing his enthusiasm, one of his friends asked him why. After all marriage is just a piece of paper.

Here is the gist of Ivan’s response:

Just a piece of paper? Since when is a piece of paper just a piece of paper. Since we were kids we were told that pieces of papers are one of the most important things in life.

He then went on to mimic the conversation between a parent and a child:

How was your day son?

‘I had the best day of my life. We had a footy game and it was awesome.

‘Did you score any goals?


‘Made any good passes?

‘No. I was on the bench the whole time.

‘Did you win?

‘No, we lost badly.

‘So why are you saying you had a great day?

‘Well, because after the game the coach gave me this piece of paper. It’s a certificate of participation. The coach says it is a very important thing. It is more important than winning, scoring or playing. It is very important because it has a scribble from my coach at the bottom.

As Ivan continued, pieces of papers are the only thing we trust.

If we get sick, we go to the doctor. Can you prove you are a doctor? Here is a piece of paper…framed and with scribbles.

The house is on fire. You grab the family, the dog…and all the important pieces of paper. Which ones? The ones that have scribbles on them…

Marriage, that piece of paper, is a certificate of participation…in someone’s life.

And divorce papers…are like a diploma to me. It means I have learned something. It means I can say:

‘Hey baby, I don’t really know what to do to have a successful marriage, but I do know what not to do.

‘Can you prove it?

‘Here is a piece of paper.

As Ivan said, we place a lot of value on pieces of paper.

What’s another piece of paper with scribbles on it?

Banknotes. Well, technically in Australia they are more plastic than paper. 

Why do we value physical cash so much?

Banknotes are a promise from the bank, payable to the bearer on demand. Originally, banks where obliged to redeem them for legal tender, like gold and silver.

While this is not the case anymore after money went fiat, banknotes are still backed by the government.

It is a promissory note that you can hold in your hands…not that that necessarily means it will be honoured.

But that disappears when we go cashless.

You may remember on Friday we wrote about Sweden being close to becoming a cashless society. Swedes are starting to realise that going completely cashless could make them more vulnerable.

Well, Japan is the complete opposite from Sweden.

The Japanese love cash.

In fact, they love cash so much that they use it…a lot. According to Bloomberg, Japan has 20% of cash in circulation to GDP, the most in the world.

This is a stark contrast to Sweden, who only has 1.4% of cash circulating to GDP.

But, the Japanese are giving a big push to go digital. They think that digital payments will boost the economy.

How can digital payments boost the economy?

As reported by The Economist:

Handling notes and coins is expensive for businesses; many operate on tight margins because a persistent lack of inflation has inhibited price rises. The government reckons more cashless payments could help the economy, too, encouraging people, including a growing number of tourists, to spend more. (And help it collect more tax.).

We spend more money when it is in digital form than in physical form. The truth is that we place more value on those pieces of paper than when we see them as a number on the screen.

A recent study called ‘Paper or Plastic’ conducted by Avni Shah, a professor from the University of Toronto, confirms this.

Avni was looking to find out if the way we pay for a good or service influences our connection to the object. She also wanted to see how much we value the object after we purchase it.

In the study, according to Forbes, Shah sold each of the participants a mug for US$2, with half paying in cash and half in plastic. The mug’s actual value was US$6.95.

After selling them the mug, she told them she had made a mistake and needed the mug back. She would buy it from them at the price they named.

The ones who paid with credit card gave up their mugs more easily, for the asking price of US$3.83 on average per mug. The ones that paid in cash asked for a higher value, an average of US$6.71.

We are making payment processes easier and quicker. Just a tap and you are done.

Yet this makes us think less about our purchases, and makes them less valuable to us. Going cashless means we are losing our connection to what real money is and its value.

But, the great thing about cash is also that it gives you some financial freedom.

Holding cash gives you control over how and when you spend it. Pushing to digital transfers some of that control to the authorities.

Countries going cashless give us no option but to place full trust in the current fiat system. It’s hard to do so after seeing the potential damage a collapse like the one in 2008 can cause.

Having cash transfers some power and freedom on our money over to us.

How can we prove it?

Well, here is a piece of paper…


Selva Freigedo,
Editor, Markets & Money

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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