The Future of Money
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Quote: The Future of Money
‘The Future of Money' written by Benjamin J. Cohen, Professor of International Political Economy at the University of California, Santa Barbara is the third in the trilogy written by the author. His earlier books Organizing the World's Money and The Geography of Money, had reflected his out-of-box thinking pattern that generally takes important cues of the political economy and the evolving global monetary relations, on one hand and the state centric international financial markets on the other.
The foremost thing while following Cohen is to adopt a case neutral position, which is not peppered by the existing norms of monetary and currency policies, pursued by the countries and Central Banks the world over. This would demand a patient understanding for the reader of the book who could often be tempted to make his one harried attempt of conclusions, which would defeat the very understanding of the contrarian position adopted by the author. Once achieved, the book makes an easy but slow and interesting reading.
The author has built up his argument to state that the global population of currencies is set to expand greatly making monetary policies and its governance more complex and difficult.
The idea that Greece, a nation of 10m which has been in default about half of it's 170 year existence, could suddenly bring down one of the greatest currencies in the world seems like hyperbole. However, I am reading articles that imply that kind of possibility.
The Future of Money was a text written by Ben Cohen roughly 5 years ago. He argues that the Euro is an illusion, that the world will begin producing currencies, not less.
We are pretty used to the idea that the cost of goods and services is very flexible. The same hotel room can triple in price depending on outside circumstances. The flat screen TV could cost half as much a year later. We know that currency fluctuates relative to other currencies almost daily. It was only 80 years ago that drop in the price of the British pound made headlines around the world. --- I suppose it is only one step further to imagine a day where I pay for a good with an electronic transfer which is pegged to 1/10 of an ounce of gold, which is closer to transferring an investment, than it is to paying for an item.
Today we have houses that were once worth $500K and are now worth $300K. Nothing about the house has changed, but the availability of money has changed significantly. So what changed? Was it the value of the house, or the value of money?
In Guatemala, there are essentially two currencies. If you are poor your money is the quetzal, if you are rich it is the dollar. Haiti also has a currency called gourdes for the poor, which has an exchange rate of 41 gourdes per dollar. However, if you are rich, you work in dollars. But we associate this double standard with poor countries, not with the first world.
Perhaps we will have more liquid investments which can be transferred person to person without going through the bother of buying and selling them into dollars or Euros. This hypothetical investment/currency might be tied into the average of a basket of currencies. In that sense you are not as tied to the decisions made by any one monetary authority.
Do you think we will have an explosion of currencies in the world?
Quote: pacomartin
Today we have houses that were once worth $500K and are now worth $300K. Nothing about the house has changed, but the availability of money has changed significantly. So what changed? Was it the value of the house, or the value of money?
There is no difference. The "value" of any good, property, service, or rights, is the amount of money, goods, properties, services other people wan't to spend at that exact moment. Running a barbershop is less valuable in times of extreme poverty, although the service itself doesn't change. If people need to either chose to eat food, or cutting their hairs, you are offering a service nobody needs (and wants to spend resources on that).
Same with houses. If your house is in the suburbs, and transportation costs rise significantly (i.e. gas), your house will be less valuable. Although the house might not be any different, the location will be inconvenient, and people are only willing to pay less for your house.
If you own a house, because you want to live in that house, then you don't care about house prices, since you don't want to move out anyway.
The point is, there is no inherent "value of money", the USD is not backed up with some limited resource. It is always the value of goods (services, etc.) which are changing, money itself is worthless.
Well, if its worthless, I'll be happy to take it off your hands for a song. That is what Penn National did to get control of the M Resort ... or just about. Some of Condo developments became Vaporware, Some of those construction projects became unfinished eyesores (of course these days even completed projects sometimes look like eyesores). Some people wound up owning assets with a then present value that was far less than the outstanding mortgage ... of course in South America they seem to do some sort of re-indexing of pensions and prices. We don't. England declared all the sexy blond women in Iceland to be terrorists and seized their accounts. Everyone did what they could to grab present value and stick someone else with problems. Did Iceland have problems? Sure. It is a small country, heavily saddled with klans or klan-like business relationships. There were few watchdogs and even fewer watchdogs that were awake. Everyone was young, sexy, well educated and well-off and too happy to pay attention to threats. In short, Iceland was pretty much like the rest of the world... only the scale differed.Quote: MangoJmoney itself is worthless.
Entrepreneurs make committments and so do the banks. Interest rates change but the banks keep shoveling money at a project whether it be Condos or Casinos. Well, professors write books blaming this or that. The English wrote the best book of all: young, sexy women in Reykavik nightclubs are at fault. Okay. Perhaps the professor is right, perhaps he is wrong. Perhaps the English are right or wrong about those sexy blond nichtclubbers in Reykavik being terrorists.
What happened with Greece is a country used to having freedom in monetary poilicy no longer has it. Imagine if the Fed was not allowed to have QE2. Our interest rates would be far higher. For a small country there is little problem with ceding monetary policy. Panama, for example, has used the USD for years. But for a country the size of the PIGS, it is a bigger problem. A bigger one is when currency discrepencies no longer hide problems.
Take the example of the Niagara Falls US/CAN area. For years people went to Canada because it was nicer but also because your dollars went further. I did Chrismas Shopping in Canada saving 20% or more at the same time found a few unique items. Without the savings there is no reason to do this. Now imagine all of the exports of a country the same way.
Currencies do amaze me. What amazes me most is how Japan keeps doing it. The USD has lost over 2/3 of its value over the Yen since the collapse of Bretton Woods. For example:
in 1970 a Dautsun 240Z was just over $3500.00 USD. It took 360 Yen per USD. Today the Yen is about 80 per dollar at a historic low. Even at 100 per USD that would be $12,600 in USD in 1970, a very expensive car. But that is before inflation........
$1 in 1970 is worth about $5 today. So today that Dautsun would cost $17,500. (this ignores cost of improvements in design.) That would be a little of a bargain for a small sports car as the 240 had no established record as a sprorts car then and most Japanese cars were rustbuckets then. But at today's exchange rate (100 YPUSD) it would cost $63,000!
That is one killer difference. All over what some paper is worth.
Quote: FleaStiffThe English wrote the best book of all: young, sexy women in Reykavik nightclubs are at fault. Okay. Perhaps the professor is right, perhaps he is wrong. Perhaps the English are right or wrong about those sexy blond nichtclubbers in Reykavik being terrorists.
That statement needs some explaining to me. I know that the British lost a lot of money in Icelandic internet banking, but I fail to get the connection.
In 1954 the greek drachmae was pegged at 30 drachmae = 1 United States dollar. In 1973, the Bretton Woods System was abolished; over the next 25 years the official exchange rate gradually declined, reaching 400 drachmae to 1 U. S. dollar.
The largest banknote was 10,000 drachma, which was exchanged for €29.35. The standard banknote of the EMU (the one in almost all ATM's) is the €50 at the official exchange rate of 340.75 to the euro.
Do you think if Greece had their own currency for the last decade they would be worse off, or better off? They fought like crazy to qualify, as they were left out of the initial group.
Quote: pacomartin
Today we have houses that were once worth $500K and are now worth $300K. Nothing about the house has changed, but the availability of money has changed significantly. So what changed? Was it the value of the house, or the value of money?
This is no more striking than in the collectibles market. Whats worth $300 today can be worth nothing next week. Two examples. Remember the Cabbage Patch doll craze in 1983? The week before Xmas, the thing was going for hundreds of dollars, if you could find one. A week after Xmas, you couldn't give them away. And there's a silly show called Storage Wars, where these dumpster diver type people by the contents of storage lockers at auction, hoping to find treasure. One guy found hundreds of newspapers from 1977 with headlines of Elvis Presley's death. New condition, two different papers. He had them 'appraised' and the expert told him he could get $10 each for them, a total of $60,000 for all. This is a complete joke. As soon as he lists a few of them on Ebay, and the Elvis collectors all have a copy, the rest of the papers will be worthless because all he can do is flood the market with them. The total value was closer to a few hundred dollars, not 60K.
Money is an idea, its an illusion. Value only means what somebody is willing to pay for something today, and today only.
Iceland had a banking program where it took UK deposits and paid high rates on them. Obviously the high rates were paid because this IceBank stuff was more risky than a UK bank. The UK depositors received their high earnings but when the entire program was about to go under, the British Home Secretary declared Iceland to be a terrorist state and seized all the funds under an English law allowing the Chancellor of the Exchequer to seize terrorist funds. So all those sexy blonds, all the young children and all the sheep in Iceland were suddenly terrorists. And the UK managed to do that without having any professor write any books.
Quote: FleaStiffAh, I was just trying to inject a bit of levity. Iceland had a banking program where it took UK deposits and paid high rates on them. Obviously the high rates were paid because this IceBank stuff was more risky than a UK bank. The UK depositors received their high earnings but when the entire program was about to go under, the British Home Secretary declared Iceland to be a terrorist state and seized all the funds under an English law allowing the Chancellor of the Exchequer to seize terrorist funds. So all those sexy blonds, all the young children and all the sheep in Iceland were suddenly terrorists. And the UK managed to do that without having any professor write any books.
One of the casualties of the financial crisis which has gotten little notice in the US is Iceland, and it went down in a particularly ugly fashion.
I was not aware that Gordon Brown used the term "terrorist state".
It does show you how quickly the ranks of nationalism close when there the going gets tough.
Germany falls only 11% short of china as the first and second country in world exports. Netherland is much higher than Germany on a per capita basis. USA and Poland are about equal in terms of exports per capita, and Greece is about half of that.
Maybe the Euro is not to blame for Greece, but it may just be the fall guy.
The UK government and police have been particularly adept at using Anti-terrorism laws to remove civil liberties... people have been arrested under the anti-terrorism act for acts that are certainly not terrorism, but are things that other people may not want to hear (http://en.wikipedia.org/wiki/Walter_Wolfgang)
There's a good recent podcast in via Planet Money that talks about the $1 coin and it's over production. I just listened to it, and thought of PacoMartin (http://www.npr.org/blogs/money/2011/06/29/137402941/the-government-spent-300-million-making-coins-no-one-wants).
Quote: EvenBobOne guy found hundreds of newspapers from 1977 with headlines of Elvis Presley's death. New condition, two different papers. He had them 'appraised' and the expert told him he could get $10 each for them, a total of $60,000 for all. This is a complete joke. As soon as he lists a few of them on Ebay, and the Elvis collectors all have a copy, the rest of the papers will be worthless because all he can do is flood the market with them. The total value was closer to a few hundred dollars, not 60K.
Same on the stock market ^^ It is ridiculous to estimate the value of a company by the value of it's shares. As soon as you are trying to sell (or buy) a larger part of that, the price will change - because no-one want's your stuff besides pure speculation.
Quote: MangoJSame on the stock market ^^ It is ridiculous to estimate the value of a company by the value of it's shares. As soon as you are trying to sell (or buy) a larger part of that, the price will change - because no-one want's your stuff besides pure speculation.
The truly valuable items are one of a kind, like historical artifacts, art work, antiquities. Invest in them and you'll never lose money.
Quote: thecesspitThere's a good recent podcast in via Planet Money that talks about the $1 coin and it's over production.
The £1 coin seems to be very popular since it's introduction in 1983. There are roughly 1.5 billion in circulation. The most recent survey indicated a counterfeit rate of around 2.5%.
I think it is the thickness of the pound coin that I like. It feels like it's worth more than the fractional coins without being much heavier. They made 1.7 billion Sacagawea dollar coins, and 2.2 billion presidential coins. I wonder which ones are in the warehouse at the mint?
Generally a country has to make far more coins than the bill it is replacing. People temporarily lose coins and they are not as efficient. So ironically, the US mint is only making 400 million dollar coins a year, which is far too few to replace the dollar bill (if you stopped making the dollar bill), but just enough to pile up in the warehouse if you don't get rid of the dollar bill.
Yes, "terrorism" is a very popular rubber stamp now. A terrorist was seized in Central America and extradited back to the USA recently. His underlying crime that caused him to be stamped a terrorist? He and his live in girl friend went out drinking and came home. She started packing a suitcase, he calmly and non violently unpacked her suitcase a few times. He then got a gun and waved it around but never aimed it at her or threatened to use it on her. He did though soon fire a round inside his house and afterward his TV didn't work too well. This is the act that made the local sheriff stamp his file "Teorrist". Gonna look good at budget time I guess. Gonna get him some grant money too, probably. A drunk who shoots his own TV set is not a terrorist, except in the USA.Quote: thecesspitThe UK government and police have been particularly adept at using Anti-terrorism laws to remove civil liberties....
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Pacomartin: Thank you very much for that image which I assume is from an Iceland nightclub of some sort.
Quote: CalderI'm no economist, but I'd guess if Greece still had its own currency, it would have defaulted two years ago. Only the comparative strength of the northern tier of the E.U. has kept it afloat this long.
I can picture that instead of defaulting they would have Zimbabwe-like inflation. That is the one "out" that they can't do know, tied to the Euro. But I'm not an economist either. For some reason Argentina defaulted in the past and apparently the disastrous consequences of that haunt them even today.
Quote: odiousgambitI can picture that instead of defaulting they would have Zimbabwe-like inflation. That is the one "out" that they can't do know, tied to the Euro. But I'm not an economist either. For some reason Argentina defaulted in the past and apparently the disastrous consequences of that haunt them even today.
Sometimes I am not sure if it matters if you are an economist. We seem to be in some virgin territory.
Iceland goes into disastrous default, and people believe the solution is to join the Euro. Greece goes into default and people are talking about them leaving the Euro.
The argument is that Greece's exports are so low (less than $2K per capita) that devaluing there currency won't help because they have nothing to sell. But Iceland's exports are relatively high $15K per capita. So you would think that devaluing their currency would help. But they want to join the Euro because they are upset over the loss of spending power of the Icelandic krona.
Question for the Brits. Is it much cheaper to go clubbing in Iceland now that their currency has devalued? Or did they just raise the prices? Or are you so poor now that the idea of going to Iceland to go clubbing is impossible?
FWIW, many Christians believe that a one-world currency or even a cashless society, is the vehicle for the predicted Antichrist to control all buying and selling:
Quote: Revelation 13:16-17He required everyone—small and great, rich and poor, free and slave—to be given a mark on the right hand or on the forehead. And no one could buy or sell anything without that mark, which was either the name of the beast or the number representing his name.
The "he" there isn't the Antichrist, but the false prophet, basically his predicted propaganda master, but still, it's kind of creepy. You can see control of all buying and selling happening from this point in history and technological advancement. I'm not sure I'm on board with the whole Antichrist/false prophet thing, but I am totally on board that some political tyrant could control whole economies with "marks" you need to buy and sell. <chills>
Quote: ItsCalledSoccerFWIW, many Christians believe that a one-world currency or even a cashless society, is the vehicle for the predicted Antichrist to control all buying and selling
For most of history it was assumed that the Anti-Christ would be a political figure. When the Omen movie came out in the 1970's it was the first time the idea of the Anti-Christ coming from the world of global business was popularized.
This table below is about 2 years old, so the numbers are out of date. But this analyst was trying to figure out how much fiat currency was in the world. A lot of banknotes were printed in the last two years and the dollar has generally lost value. The USA is now up to a trillion dollars, and Japan is way over a trillion.
Canada is closer to $60 million today.
| Country/Union | Code | (Billion US$) | Percent |
|---|---|---|---|
| European Union | EUR | $1,035.2 | 24.30% |
| United States | USD | $850.7 | 19.97% |
| Japan | JPY | $762.4 | 17.90% |
| China | CNY | $492.3 | 11.56% |
| India | INR | $140.3 | 3.29% |
| Russia | RUR | $110.8 | 2.60% |
| United Kingdom | GBP | $87.5 | 2.05% |
| Canada | CAD | $43.8 | 1.03% |
| Switzerland | CHF | $40.3 | 0.95% |
| Poland | PLN | $37.7 | 0.88% |
| Brazil | BRL | $37.3 | 0.88% |
| Mexico | MXN | $34.3 | 0.81% |
| Australia | AUD | $32.4 | 0.76% |
| Others (89) | - | $554.9 | 13.03% |
| Total | $4,259.9 | 100.00% |
Quote: pacomartinFor most of history it was assumed that the Anti-Christ would be a political figure. When the Omen movie came out in the 1970's it was the first time the idea of the Anti-Christ coming from the world of global business was popularized.
My understanding is that, generally, Christians believe the Antichrist to (eventually) be a political leader, whether he rises through the ranks in politics, business, or whatever. But I always thought it was dangerous to make any assumptions in the "how."
If you believe this and you're looking for it to happen a particular way (politics, for example), then you may miss it if it happens a different way (business, etc.).
Quote: ItsCalledSoccerMy understanding is that, generally, Christians believe the Antichrist to (eventually) be a political leader, whether he rises through the ranks in politics, business, or whatever. But I always thought it was dangerous to make any assumptions in the "how."
If you believe this and you're looking for it to happen a particular way (politics, for example), then you may miss it if it happens a different way (business, etc.).
Like most theological items, there is a small reference to a person or a type of person who is identified with a liar. Over the last several thousand years, a whole mythology grows.
1 John 2:18 KJV
Little children, it is the last time: and as ye have heard that antichrist shall come , even now are there many antichrists; whereby we know that it is the last time.
1 John 2:22 KJV
Who is a liar but he that denieth that Jesus is the Christ? He is antichrist, that denieth the Father and the Son.
1 John 4:3 KJV
And every spirit that confesseth not that Jesus Christ is come in the flesh is not of God: and this is that spirit of antichrist, whereof ye have heard that it should come ; and even now already is it in the world.
2 John 1:7 KJV
For many deceivers are entered into the world, who confess not that Jesus Christ is come in the flesh. This is a deceiver and an antichrist.
But, we deviate.
It seems to me one of the great advantages of having a national currency is that it allows the government to give everyone a pay cut at once without having to negotiate with a hundred different labor unions. I know that is a bit of a stretch, since currency exchange is a free market with government intervention. That fact makes it seem like George Soros and his group of investors can force a pay cut on everyone in the UK without having to negotiate with unions.
It goes back to the original post. Do you think special interest groups will form their own currency? By currency, I mean something that can be a store of value, and can also be used for exchange purposes to buy and sell. The implicit understanding is that it will be controlled by some entity other than governments.
Quote: pacomartinLike most theological items, there is a small reference to a person or a type of person who is identified with a liar. Over the last several thousand years, a whole mythology grows.
Probably true, I would say that was the core process that led to the Reformation. Searching any bible website shows that the four places you quote are the only places where the actual word "antichrist" appears, but even in these, there's not clarity between "antichrists, " - eg, anyone who lies and deceives - and "the antichrist," - which is a force behind all this, the Christian devil. OTOH, the character in Revelations is specifically called the beast.
This shouldn't surprise, this site has debated the rapture before when that crazy group forecasted the end of the world a while back. The word "rapture" never appears, but is a commonly used word to refer to what does appear. I think this is just another example of that.
I think there is a distinction here that the common language isn't very clear on. I think the Christians call the beast capital-a Antichrist, which can create confusion with other antichrists. But, in any event, I think the theology is clear in teaching that there are lots of antichrists but only one beast (capital-a Antichrist). Whether or not someone believes this is their thing, but the teaching is pretty unambiguous.
Hitler was a type of antichrist, even down to hatred of Jews. But if the Christians are right, the coming capital-a Antichrist will make Hitler look like a kindergarten teacher.
Quote: pacomartinIt seems to me one of the great advantages of having a national currency is that it allows the government to give everyone a pay cut at once without having to negotiate with a hundred different labor unions. I know that is a bit of a stretch, since currency exchange is a free market with government intervention. That fact makes it seem like George Soros and his group of investors can force a pay cut on everyone in the UK without having to negotiate with unions.
It goes back to the original post. Do you think special interest groups will form their own currency? By currency, I mean something that can be a store of value, and can also be used for exchange purposes to buy and sell. The implicit understanding is that it will be controlled by some entity other than governments.
I think special interest groups (whatever form they take, even, say, "good" ones who work the black market under an oppressive regime) will always have their own currencies. So, in that sense, yeah, there will always be "currencies." In that sense, there are as many "currencies" as there are subcultures (or whatever). I think the sense of the original question was "currency" in the "issued by government(s) for use by its citizenry." I think the answer to that question is, there will be fewer. It's also in the sense where the whole "cashless society" thing would happen -- even in that time (if it comes about), people who don't participate in it will have their own "currency" (in the subculture-sense).
Quote: ItsCalledSoccer
I think special interest groups (whatever form they take, even, say, "good" ones who work the black market under an oppressive regime) will always have their own currencies. So, in that sense, yeah, there will always be "currencies." In that sense, there are as many "currencies" as there are subcultures (or whatever). I think the sense of the original question was "currency" in the "issued by government(s) for use by its citizenry." I think the answer to that question is, there will be fewer. It's also in the sense where the whole "cashless society" thing would happen -- even in that time (if it comes about), people who don't participate in it will have their own "currency" (in the subculture-sense).
The book I was quoting was not about currencies issued by governments. But the Icelandic Krona is a currency issued for the sole purpose of small purchases among it's 300+ thousand citizens. The entire series of banknotes and coins trades for roughly US$300 million.
I am imagining private currencies that are available to anyone, but normally are only used by a few hundred thousand people. Digital gold could be the most obvious one. Maybe we will have contracts where the amount due is 37.5 ounces of gold at the termination of the contract. It won't be a dollar amount, since that could change relative to the price of gold. It will be a legally enforceable contract with a specified amount due in digital gold.
Quote: pacomartinIt goes back to the original post. Do you think special interest groups will form their own currency? By currency, I mean something that can be a store of value, and can also be used for exchange purposes to buy and sell. The implicit understanding is that it will be controlled by some entity other than governments.
This goes back to my favourite Economic Podcast... Planet Money. They also did a report on the Porcupines in New Hampshire. They are a vague amalgamation of libertarians who run a camp every year, and there seems to be several people there trying to run their own metal-backed currency systems.
Course it's small potatoes.
The LETS and BitCoin and the Linden Dollar are all examples of people trying to create their own currency systems. And Gold in World of Warcraft is effectively a usable currency within a limited, but not completely trivial system. As is Canadian Tire Money....
Local banks often issued coin or script.
The company store scrip was not transferrable but often vegetable gardens became sources of barterable items.
Prisons have had various currencies, often cigarettes.
At all times such currencies have had to be localized.
With the internet? Who knows.
Quote: thecesspitCourse it's small potatoes.
I am trying to set up a realistic scenario. Let's suppose that there is an app on smart phones that allows the transfer of money from one account to another. The transfer is as irrevocable as exchanging paper currency, but it leaves a record which can be subpoenaed by the police.
Now looking at the currencies of NZ and UK (where exchange rate is approx £1 = NZ$2). Of the major currencies these two seem to be the most cash shy. In light of the popularity of person to person transfers of cash. parliament makes the decision to stop printing the largest banknote (which is currently circulating at the rate of about 3 per person):
| Per Person | $5 | $10 | $20 | $50 | $100 | Notes pp | PerCapita | Pop. | Millions notes | Value bn | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| New Zealand | 4.9 | 4.3 | 14.7 | 4.4 | 3.3 | 31.6 | - | $912 | 4.3 | 140 | $3.9 | |
| £5 | £10 | £20 | £50 | |||||||||
| Bank of England | 4.0 | 10.2 | 24.0 | 2.9 | 41.1 | - | £801 | 62.7 | 2,576 | £47 |
Transferring reasonably large amounts of money via banknotes in the country's currency becomes nearly impossible. Almost every transaction now leaves a permanent record.
1) Are the citizens safer against robbery? I would think so. Even if someone forces you to transfer money using your phone app, there would be a permanent record.
2) Has the citizens rights to privacy been unfairly infringed upon? Many people in the USA would say absolutely.
3) Has parliament created a need for alternative currencies if they get rid of the large notes? Are car and antique dealers unfairly singled out?
As a secondary question, these two currencies have very small numbers of large value banknotes per person. In addition the value of the largest denomination banknote is low compared to most countries. Cash loving Japan, for instance, is circulating a banknote worth £77 at the rate of about 60 notes per capita. If you live in one of these countries, do you think more notes should be printed?
Quote: pacomartin
1) Are the citizens safer against robbery? I would think so. Even if someone forces you to transfer money using your phone app, there would be a permanent record.
2) Has the citizens rights to privacy been unfairly infringed upon? Many people in the USA would say absolutely.
3) Has parliament created a need for alternative currencies if they get rid of the large notes? Are car and antique dealers unfairly singled out?
As a secondary question, these two currencies have very small numbers of large value banknotes per person. In addition the value of the largest denomination banknote is low compared to most countries. Cash loving Japan, for instance, is circulating a banknote worth £77 at the rate of about 60 notes per capita. If you live in one of these countries, do you think more notes should be printed?
I can offer an NZ perspective.
1. We are safer against robbery, because any given person on the street is relatively unlikely to be carrying much if any cash. You could still be held up for your PIN number and then forced to withdraw cash at an ATM.
2. Privacy is compromised, no question. Your bank, and by extension the government, can see what you spent and where. The price of security perhaps?
3. I don't think there is any plan to abandon the NZ$100 note. It has been the largest note in circulation since 1967, and inflation has steadily devalued it in real terms. So over time it automatically becomes a relatively smaller value note. You probably could have bought a good second hand car with $100 in 1967! Now it won't even fill the gas tank.
NZ is so in love with electronic transactions that cash will decline in usage naturally. Again, no need for government intervention. Most people already pay by credit card or "EFTPOS" (direct payment from a check or savings account, usually commission-free for both parties). No more fiddling with coin change and large wallets. It helps that we don't have a tipping culture, where cash is more or less required. Some merchants add a "Tip?" option to electronic payments, which is unpopular - the "tip" goes straight into the merchant's bank account, not to the person you may have wanted to tip personally.
Downside? Occasionally the network goes down - once it famously went down for a few hours on Xmas Eve under the strain of too many transactions per second, and had a negative impact on retail sales. And if it was impaired for a longer period of time, what happens then? The ATMs would be rapidly emptied by people rushing to get cash instead. So we still need good old cash as a backup - it always works.
I wouldn't be surprised to see electronic terminals for buying chips on casino tables in the future. Slot tickets are already here and saving money for the casinos.
Quote: algleI can offer an NZ perspective.
Cash usage is relatively high in Australia compared to Canada. The USA is higher than Australia, but most of the currency is circulating overseas, so domestically it is between NZ and Canada. Of the four countries, Australia is the only one who seems to regularly use the $50 bill.
Why do you think the attitude in NZ is so different than Australia? There are small countries in Europe like Norway that still use much more cash.
| Per Person | $5 | $10 | $20 | $50 | $100 | Notes pp | PerCapita | Population | Millions notes | $ Billions |
|---|---|---|---|---|---|---|---|---|---|---|
| New Zealand | 4.9 | 4.3 | 14.7 | 4.4 | 3.3 | 31.6 | $912 | 4.3 | 140 | $3.9 |
| Australia | 6.2 | 4.5 | 6.1 | 21.8 | 9.5 | 48.1 | $2,210 | 21.8 | 1,047 | $48.1 |
| Canada | 6.1 | 3.4 | 24.5 | 4.9 | 8.4 | 47.3 | $1,688 | 34.3 | 1,623 | $57.9 |
There is a segment of society in the USA the it is adamant about cash usage as an American freedom. Florida started confiscating cash from people in cars and the driver could not provide any documentation as to why he had the cash. The cash is held by the local police, and the driver has to produce some evidence of where he got the cash before it is released. Clearly this policy is related to the amount of drug trafficking in Florida, but civil activists are very alarmed.
Quote: FleaStiffLocalized special currencies have existed in the USA from time to time.
Local banks often issued coin or script.
The company store scrip was not transferrable but often vegetable gardens became sources of barterable items.
Prisons have had various currencies, often cigarettes.
At all times such currencies have had to be localized.
With the internet? Who knows.
Migrant workers sometimes were paid years past in special stamps, or whatever you want to call them, for pre-harvest work and became currency. When the crop came in and was harvested, they were exchanged for real money. In the meantime, they traded them amongst themselves and merchants would accept the script. I can find nothing about this on the internet, but I know this went on in Arkansas in the early 20th century for strawberry pickers.
Quote: odiousgambitMigrant workers sometimes were paid years past in special stamps, or whatever you want to call them, for pre-harvest work and became currency
The same with coal miners in PA. The primary use is that it kept people from leaving before the project was finished. It also forced people to shop in company stores and pay rent to corporate housing. Sometimes it was called scrip.
It's a good example of how alternate currencies can make life more restrictive, instead of more liberating.
Detroit prints a community scrip to encourage people to spend their dollars in the city
Quote: pacomartinThere is a segment of society in the USA the it is adamant about cash usage as an American freedom. Florida started confiscating cash from people in cars and the driver could not provide any documentation as to why he had the cash. The cash is held by the local police, and the driver has to produce some evidence of where he got the cash before it is released. Clearly this policy is related to the amount of drug trafficking in Florida, but civil activists are very alarmed.
That's not really a currency policy its simply an asset forfeiture program. Once those were started, arrests for drug use started to take place inside vehicles so they could be seized and the interstates became hunting grounds for bonus-seeking cops. It has tripped up some people who are not as committed to credit cards as everyone else seems to be. One cop even seized a car that the driver had purchased at a DEA auction claiming that the secret compartment, although empty, was evidence of drug income.
I can't imagine a time when "local" paper money would be allowed to thrive in a situation where a national tax system requires a common means to measure value of goods and services. Even gaming cheques are officially prohibited from non-gaming uses (gift shops, news stand, food and drink) in the casino that issued them.
Also, the IRS requires tax to be paid on non-cash (i.e. barter) income, so there is no escape from the tax man.
Quote: AyecarumbaI'm futurecasting a scenario where there are many more national currencies, but the abiltity to exchange them occurs conveniently and instantly through electronic means. Sort of a global instant currency exchange. No actual paper or coins changes hands, just an easy electronic transfer.
I can't imagine a time when "local" paper money would be allowed to thrive in a situation where a national tax system requires a common means to measure value of goods and services. Even gaming cheques are officially prohibited from non-gaming uses (gift shops, news stand, food and drink) in the casino that issued them.
Also, the IRS requires tax to be paid on non-cash (i.e. barter) income, so there is no escape from the tax man.
The problem with your futurecast is that people make a tremendous amount of money on fees in changing from one currency to another. Even if the hard notes and coins change don't change hands, I'm afraid the fees will remain. A free foreign exchange would have common people shifting from one currency to another in an effort to make a profit.
Governments are very afraid of alternate currency. Hence the almost ridiculous prohibitions on using tickets or gaming chips outside of the casino. But the avoidance of taxes would be precisely why people would want to pay in digital gold. It may be difficult to police.
Of course if we follow this all the way thru to Star Trek realm, there won't be any currency at all :)
Quote: slytherI vote fewer currencies. I think at some point you will end up with a 8-10 or so 'super currencies' We are on that road already with the Euro, and with most Caribbean nations accepting the US Dollar. Sovereign monetary policy then becomes the issue, as others have stated.
Of course if we follow this all the way thru to Star Trek realm, there won't be any currency at all :)
Certainly, over half the currency in the world is tied in to the three existing "super currencies", the US Dollar, the Euro, and the Japanese Yen. A great deal of Africa is fixed to the Euro, and a several nations in North America are shadowing the dollar. Bahamas just prints Bahamian dollars exactly equal to the US dollar, they accept US dollars, and their currency is backed pretty much one to one by US Savings bonds.
But the idea of Canada or Australia joining a currency union with the USA is anathema to most people. And yet their dollars are very nearly the same as the US dollar, and their is a tremendous amount of trade.
Here is a ten year old article about Ecuador and El Salvador dollarizing. Frankly I thought by now that Dominican Republic, Belize, and Costa Rica, possibly Columbia would have considered dollarizing. But there seems to be no serious move in that direction.
And the process of expanding the Euro has gone much slower than most people would have thought. In 12 years only 5 small nations have joined. And people are constantly questioning its value outside of the German/Austrian - France - BENELUX main axis. It doesn't look like Britain will be any closer to join in another ten years.
Quote: thecesspitThe Canada/US/Australia parity has only come about in the last few months. Who knows if it'll stay that way....
Canadian dollars were the same as US dollars in the 1970's. But there is an opportunity here to link the exchange rates. A century ago the Scandinavian kingdoms of Denmark, Norway and Sweden all issued a currency called "crowns" which were set at parity. People spent Danish crowns in Oslos and Swedish crowns in Copenhagen. During WWI the parity fell and the crowns began trading at different rates. Today they are still within 20% of each other (except for the break-off Icelandic crown which is worth much less).
But here is a chance for Canada, USA, and Australia to reduce the cost of doing business by linking dollars. But nobody is interested because Canada and Australia have exports as a much bigger portion of their economy than the USA. Both countries know that USA will not consult anyone else before making monetary decisions. Despite the huge amount of trade and similarity of culture, the economies are very different.
Hence my belief that we are not headed for 8 major world currencies. People are more concerned with national objectives than they are concerned with the convenience and reduced costs of larger currencies.
At Commerce, a restaurant in the West Village in Manhattan, the bar menus read, “Credit cards only. No cash please. Thank you.” The owner of the restaurant said it wasn't worth the security risk of taking the cash to the bank. Only 15% of his customers paid in cash.
Quote: NY Times
The number of dollar bills rolling off the great government presses here and in Fort Worth fell to a modern low last year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills.
Unfortunately, the article does not mention that production of the $10 and $50 banknote was suspended so the Treasury could build up an inventory of the new high security $100 banknote. There is still no sign of any break in the production issues that has left an entire warehouse full of over a billion $100 notes that can't be released because they are of unsatisfactory quality.
If Timothy Geithner resigns as Secretary of the Treasury, then his replacement may simply order the bills destroyed. The bills are all series 2009, with his predecessor's signature, are of low quality, and won't be distributed until the year 2012. It would be kind of humiliating.
Quote: EvenBobPaco, ever read 'The Jungle' by Upton Sinclair?
Of course. My great grandfather worked in those company towns his whole life where my mother grew up in squalor in company housing. Eventually the black lung disease gets you.
Quote: pacomartinOf course. My great grandfather worked in those company towns his whole life where my mother grew up in squalor in company housing. Eventually the black lung disease gets you.
There are ghost towns here and there in West Virginia that were company towns for the coal mines. You lived in a company house and bought everything at the company store and you never got ahead. The houses were shacks and you spent 12 hours a day in the mine, where it was a constant 100 degrees.
Quote: EvenBobThere are ghost towns here and there in West Virginia that were company towns for the coal mines. You lived in a company house and bought everything at the company store and you never got ahead. The houses were shacks and you spent 12 hours a day in the mine, where it was a constant 100 degrees.
It was all the same coal fields and the same companies in Western PA.
Quote: pacomartin
But here is a chance for Canada, USA, and Australia to reduce the cost of doing business by linking dollars. But nobody is interested because Canada and Australia have exports as a much bigger portion of their economy than the USA. Both countries know that USA will not consult anyone else before making monetary decisions. Despite the huge amount of trade and similarity of culture, the economies are very different.
Canada and OZ would never go for it, they would link at historic highs. GM already has canceled plans to import OZ cars (for then Pontiac) dut to the highs.
Quote: AZDuffmanCanada and OZ would never go for it, they would link at historic highs. GM already has canceled plans to import OZ cars (for then Pontiac) dut to the highs.
Well, they may not have any choice. The US dollar is not likely to drop again. Canada may have to get into the business of exporting $100 bills like the USA.
The government has a program designed to encourage the use of the dollar coin. If you order boxes of dollar coins on your credit card, they will deliver them to your home with no shipping costs. Use the coins to gamble, and you can turn them back into paper currency.
Dollar coins are set at 56 coins per pound. So if you are laundering 3000 coins per month that would be 53 pounds of coins. Probably impossible to do without a weekly visit to the casino.
Information site
They have gotten wise to people who simply take them to the bank and deposit them.
Huh? Who is going to buy in at the casino with dollar coins?Quote: pacomartinHere's a cheap way to build up frequent flyer miles. Probably enough to get a trip a year.
The government has a program designed to encourage the use of the dollar coin. If you order boxes of dollar coins on your credit card, they will deliver them to your home with no shipping costs. Use the coins to gamble, and you can turn them back into paper currency.
Dollar coins are set at 56 coins per pound. So if you are laundering 3000 coins per month that would be 53 pounds of coins. Probably impossible to do without a weekly visit to the casino.
Information site
They have gotten wise to people who simply take them to the bank and deposit them.
"Changing 200 dollar coins!"
Huh? Who is going to buy in at the casino with dollar coins?Quote: teddysThey have gotten wise to people who simply take them to the bank and deposit them.
"Changing 200 dollar coins!"
I didn't say it would be painless. You would charge $1000 every 10 days and get an 18 lb box of 1000 coins wrapped 25 per sleeve. If you use them for things you might otherwise charge with your credit card, it sort of defeats the purpose of trying to get free frequent flyer miles. Some of them have to be turned into cash so you can pay off the credit card.
Banks are wise to people simply walking over to the bank and cashing in the 18 pound box every ten days. I think the bank can refuse to accept them, or try to report you to the program.
Are there slot machines that accept gold dollars?
Quote: AyecarumbaCould the cage refuse to accept your freshly wrapped coins? I expect they would still crack each one open, and pour it into the counter. I've never, ever seen them even offer gold dollars for change.
Are there slot machines that accept gold dollars?
On a blog regarding this matter one person said he was given no grief about cashing $250 in freshly wrapped coins at a casino cage. That would be ten rolls weighing just over 4 pounds. So if you had two casinos at $250 apiece in the cage, and you could feed $100 at a time into the machines, and turn in $50 at the table games a few times I suspect you could launder the $1000 every ten days. You could spend some of them on small purchases like tips, and fast food meals, so you aren't completely taking advantage of the program.
I don't think there are slot machines that accept gold dollars, but I imagine the cash machines accept them. Maybe you have to mix in some dollar bills so the machine doesn't just dump your coins back at you. You wouldn't want to change very much at a time if there are people waiting behind you.
I suspect that going to casino twice every ten days would be more reasonable. It would be easier to walk around with 9 pounds of coins in a coat pocket than it would be with 18 pounds. You would have to walk around with a box.
So that would get you a bout $36,500 charged onto your credit card in a year in addition to your normal spending. That should be good for a plane ticket every few months.
The production problems with the new $100 banknotes is getting worse. They barely even tried to print new ones in August. Attempted production has been only 12% of last year.
Roughly 13.5 billion $100 notes have been printed since 1996 when the big heads were introduced. Over 7 billion are still in circulation. The complete failure of the BEP to print the new notes may mean a potential crisis if the counterfeiting gets worse.
Although production figures adding up to 1.4 billion of the new $100 notes have been released, the failure rate is so high, that no one knows if they will ever be worth anything. They may all have to be destroyed.
Although, I initially suggested the idea almost as a joke, I am starting to think that casinos should get together and develop a failsafe $1000 chip with RFID encoding that will be changeable at any casino in the country. It would provide an alternative currency for limited use. The casinos would make a fortune since people will turn in $100 banknotes to get these chips, and circulate them outside of casinos.
