March 6, 2025 l Manila Bulletin
If you’re fortunate enough to be cash flow positive and have money in the bank or investments, you might glean some insights from this. The phrase “cash is king” first appeared in George N. McLean’s 1890 book “How to do Business,” where he stated, “Avoid credit, remembering that cash is king, credit is a slave.” This phrase has been bandied about by folks in finance and business, especially after a major market collapse or some other catastrophe. But is it really true that cash is king?
Certainly, cash still plays an important role and has its uses in today’s world. The advantage, of course, is its universal acceptance in routine transactions at stores, supermarkets, restaurants, and even when tokens or electronic payment systems are required—they usually start with physical cash as their funding source. However, physical cash has its downsides, like being stolen, lost, damaged, counterfeit bills, and not having the exact amount needed.
While we see the increasing use of electronic payment systems in lieu of cash, they too have limitations. First, there’s the cost of the software and infrastructure, which someone has to pay for, meaning users get hit with various fees. Second, there are limited places where these cashless systems can be used, forcing most people to still carry cash. Third, you need a smartphone, Wi-Fi or cell signal, and the know-how to use the system.
Does this mean we should keep most of our money in cash? Definitely not! Sure, you’ll need some physical cash for daily needs, but keeping your investment money solely in cash isn’t in your best interest. Take the Philippine peso: inflation alone will erode whatever interest income you earn on time deposits or money market placements, which are also subject to a 20 percent withholding tax! But the real kicker is the peso’s continuous devaluation against the US dollar. Thirty years ago, in 1995, the average exchange rate was ₱24.1983; by the time I wrote this, it was already ₱57.885 to one US dollar. That means your peso is now worth only 41.8 percent of what it was 30 years ago!
Should you have kept your money in the mighty US dollar? While that would have been a better option, there are far better alternatives. If you’d bought country club shares or real estate here 30 years ago, you could have easily increased your pesos 20-fold, a 2,000 percent increase! Even adjusted for peso devaluation, you’d still have increased your dollar equivalent by more than eight times!
Some folks like to keep their possessions, like cash, “under the bed,” within reach. Even then, there are better alternatives, like precious metals such as platinum or gold in the form of bullion, jewelry, or coins. Personally, I prefer gold coins with numismatic value. Thirty years ago, in 1995, an ounce of gold was $378.85, while platinum was $419.50. As of Feb.27, 2025, gold is at an all-time high of $2,926.43, while platinum is currently at $972.42, having peaked on March 4, 2008, at $2,276. Just based on gold’s metal value, you’d have increased your investment nearly eight times in US dollar value in 30 years!
While some may believe “cash is king,” I think the golden rule from the 1967 comic strip The Wizard of ID by Brant Parker and Johnny Hart is more fitting: “Whoever has the Gold, makes the rules!”
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email georgechuaph@yahoo.com. Photo is from Pinterest.