Sunday, November 23, 2008

Cash machines and their effect on consumer spending and inflation



Chris Dillow points out that the late Reg Varney was the first person in the UK to use a cash machine. This leads him to speculate on the impact of the development of the cash machine on consumer spending and inflation.

It is possible that the invention of the cash machine reduced the 'shoe-leather' costs of inflation and so made it more likely that inflation would rise. Also, the ease of getting cash from a cash machine may have contributed to higher consumer spending. However, I am not sure about that. The main thing that has made consumer spending 'easier' to increase has been the greater availability of credit (and greater use of credit and debit cards which are more convenient to carry around than cash). I am not sure cash machines on their own contributed that much to the process of the expansion of credit.

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