For a variety of reasons, this is not a good article. The author, David Wolman, contends that paper money is not “efficient” enough to be worth it any more, and that governments should end the use of paper money altogether. Wolman does not suggest, as you may be hoping, that paper money be replaced with hard money. He simply wants a completely electronic system of fiat money.
Now, paper money in a fractional reserve fiat system has a myriad of problems, but one doesn’t have to be some kind of hard-core survivalist to know that paper money is a useful option.
Wolman’s pronouncement that paper money is inefficient has a nice neo-classical ring to it, but the people who choose to use it have concluded that it is efficient for them, and it’s not the role of the state to say otherwise. And of course, ending the use of paper money would be a nice nail in coffin of financial freedom. In a system with no paper money, the government can “efficiently” tax every single transaction that doesn’t take place in the black market.
“Little” problems with the elimination of paper money, such as destruction of the tip system, can, according to Wolman, simply be solved by a mandated raise in the minimum wage.
Lest we be accused of being nutty survivalists, we might also mention that it isn’t exactly totally outlandish to speculate about scenarios in which one might not have access to one’s electronic funds for a few days due to a variety of reasons such as financial or natural disaster. Might it be a wee bit helpful to have some cash on hand in such a situation? Is it really wise to assume that the technological infrastructure and financial system will always work without any serious disruption until the end of time?
The article raises some interesting opportunities for speculation. The piece doesn’t necessarily presume a system of fiat money, although it almost certainly does in this case. Efficiency is apparently the primary purpose of money, according to Wolman, but could not such efficiency be obtained with a gold standard? There is no reason why not, although persons would always be free to engage in commerce using gold and silver for smaller transactions.
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Yeah, it’s a bad article, but man what a great title.
This sounds remarkably similar to a common argument against hard currency. (I think even Adam Smith makes the argument.)
Gold is just too expensive to produce for something – money – that provides so little marginal benefit.
Apparently, we’ve gotten to the point where PAPER is just too expensive to produce…
Criticizing the use of gold as money on the basis of the waste produced to extract and coin it must be compared to the havoc wrought by reckless governments at the helm of the printing press.
If we assume that hard money, in the form of gold, results in infinitesemally smaller amounts of waste than the vast quantities of “malinvestments” caused by distorted price signals, then one can argue it is not wasteful.
However, in the combined case where people continue to mine/coin gold at the same time a government fiat monopoly exists, this can be viewed as wasteful in a sense, but can also be treated as the market’s struggle to eliminate waste by preferring physical gold.
Wow there’s so many reasons that this is bone-headed I can’t believe they’d even suggest just doing it (now). At least most people when they talk about how there will be “no paper money” are talking about the future: a Star Trekish place, where technology never fails, crime is wiped out, and poverty is only in the history books.
…and (in Star Trek) where they had “credits” in their first treks out but by the time they had to go back and rescue First Contact they were saying that encountering aliens had “eliminated the need for money”. Oh right…
I think an angle may be being missed here. The removal of paper money, would in a final fell sweep hand governments ultimate final centralised powers to wipe out the purchasing ability those whom they deem oponents. Indeed, it would surely lead to a situation where money has even less meaning than it does right now.
There’s no “waste” involved in extracting gold, given that that is the most valued use it serves its consumers as demonstrated by their actions manifesting their preferences. “Waste” is purely from the POV of the consumer. Evidently they do not find the endeavour “wasteful”…
Although I’m against the idea per se I think the unintended consequences of getting rid of paper money would be marvellous, unlike most other government decrees where the consequences are pure disaster.
Now just imagine for a moment that before prohibition was imposed in 1919 that the Federal Government was the sole provider of alcoholic beverages. Assuming they were able to provide sufficient volume and satisfy the most common tastes at affordable prices (a dubious assumption I know) bootlegging would have been minuscule. Up until the prohibition era that is, when an actual shortage of liquor brings the amazing forces of the (black) market into play. Without the Fed’s monopoly the Capones in the industry start satisfying demand and the inevitable competition leads to arguably better products (just look at the increase in quality of marijuana over the past few decades). Apparently there were more than 30 000 speakeasies in New York alone, enough competition to satisfy even the most ardent of anti-trust advocates. Rampant violence aside, the population would be much more satisfied by the goods provided by the black market then the prior government monopoly. When the prohibition inevitably comes to an end the Fed would face a near impossible task of trying to convince people that they need a government monopoly in liquor again.
I believe something along those lines would occur if the Feds stopped providing paper money. The demand for cash on hand (for the sake of anonymity, security or whatever reason) would lead to the formation of a black market in currencies. Whether those currencies are metallic, made of paper, or based on cans of sardines would be up to market forces and individual consumers. Though I’m rather certain markets (even black ones) will do a better job of providing peoples wants once government monopoly has been removed.
One can only hope that people will remember this once government wants to reinforce its monopoly.
The point that this article and many of you miss, is the TRUE emoney would be just as untraceable, untaxable, and uncontrolled as paper money. This article and many of you seem to posit that these transactions would work like ATM/Credit card transactions: where your account is looked up, funds/credit verified, etc.
True emoney would be on the card, in the chip. A transaction would occur when the card itself lowered it’s balance and “gave” money to a transaction machine. The transaction machine would transfer that money onto another card or account perhaps, but the source would be unregistered “ecash”
Think of it like this, ATM/Credit cards offer “card loss prevention” a true emoney could not offer you any more protection than if you dropped a 5 dollar bill.
The problems listed in this article don’t make any sense. Tips would be affected? Who doesn’t leave a tip when they pay by credit card/ATM?
The problem with this type of “emoney” is hackers that would break into cards/transfer points and steal non-existent cash.
But how’s that any different than what the Govt. does when it prints more money?
Wayne,
Of course, government would no doubt want periodic uploads of card activity, and the electronic records could be required to contain exquisite detail of its use. If any card interfaced with the broad financial system, it could be used to trace the transaction history hundreds of other users, and you will have interface on a regular basis.
Of course, it would definitely raise the value of computer jocks on the black market.
The idea that paper money is less relevant is not new or offensive to me, but the giveaway in the Wired article was the suggestion about tips and the minimum wage. Makes me want to bash my head against an iron spike.
destruction of the tip system, can, according to Wolman, simply be solved by a mandated raise in the minimum wage.
Nobody who says anything this dumb is worth wasting time on.
OK I did waste my time by clicking on the article, and I found this gem:
Killing currency wouldn’t be a trauma; it’d be euthanasia.
In the end, euthanasia in one form or another is always the socialist solution.
I agree with cputter — if the US government stopped printing paper, and required all transactions to be electronic, then there would be an instant resurgence in gold.
The true purpose of electronic money is the destruction of privacy. People who want to do business without state intrusion need a currency that is (a) safe and (b) private. Paper notes satisfy that need now, which is why it’s the currency of the non-statist economy. But if paper currency were to disappear, people would need something else that is reliable and difficult to counterfeit.
That’s gold.
I disagree with Magnus that the true purpose of electronic money is to destroy privacy. In the hands of the market, electronic money is a quicker method of transaction. It is, of course, a very different thing in the hands of government.
With that in mind, I think any push by governments to encourage electronic money is not so much an argument for market efficiency, so much as a way to more easily tax, inflate and steal people’s wealth.
So I think a more apt statement would be: In the hands of the state, the true purpose electronic money becomes the destruction of privacy.
Yes, I was unclear. I was referring to government’s motives.
Private individuals used gold, but they also invented the use of paper, as a cost-saving measure, increased security (for some types of transactions) and general convenience. Banks and other institutions moved to electronic transfers for the same reasons.
And if I pad my account to the tune of a few dozen zeros, I can outdo the entire history of inflation in one night. Buy large numbers of products from unrelated markets and the gears of economic ruin begin to turn at high speed. Now multiply that effect by the number of people sure to figure out the same thing and you’ve got a damn good chance of widespread social collapse.
This is the biggest waste of bandwidth ever. The author is intrigued with futuristic fantasies, never mind that the article doesn’t make any sense whatsoever.
He mentions the technology of the 21′st century.
Is it the marvleous technology of Diebold machines? First of all who will program these e-cards? Microsoft? What technology is he talking about! A look at Windoze Vista is enough to reduce one to tears. The intrusiveness, the disrespect of people’s privacy, common with almost every tech company out there ( except Open Source and Linux of course ).
Second he mentions the cost of printing money and coining. Something like 800 million a year. Well what would the cost of these e cards be. One still has to produce them, it is a hundred times more expansive to produce these “tech gadgets” than to print or coin,. what would the cost of maintaining them be, upgrading their security to protect from threats etc, upgrading servers, satellite equipment etc.
Third the issue of privacy. He mentions paying through you cell phone, i have seen such a thing in japan. Anybody with basic knowledge on technology would tell you that cell phones are the least secured gadgets on the planet. In fact anything like an e-card would interact in the same way with military owned satellites in space. Every single transaction would be scrutinized, as i said the technology does not exist to secure something totally, something which is essential to money.
Than is the economic issue of storing money. How would one store money if everything you own exists in a chip in your cell phone or your e- card guarded by Mr.Norton, or by Windows defender and firewall, software that can’t even protect against script kiddies.
Money needs to last, it should have the property of being stored with ease, and be secured.
The article is a boring fantasy of an overgrown child. Speaking of fantasies. I bet you if we ever are to find any civilization out there, no matter how technologically advanced, we would probably find them with sachets of gold, silver, hanging from their belts, or maybe some other rare metal fused in the latter stages, unknown to man yet. Their first words would not be ” Live long and Prosper ” but ” How much in gold for the goat ”
Hey I’ve just discovered this guy:
http://www.cfr.org/bios/1637/benn_steil.html
He’s with the CFR, but I’ve just watched this video
http://www.cato.org/event.php?eventid=6102
and both of them are quite good, almost Austrian (especially the latino guy). Sorry for OT, but I thought it might be interesting for other Misesians.
At least most people when they talk about how there will be “no paper money” are talking about the future: a Star Trekish place, where technology never fails, crime is wiped out, and poverty is only in the history books.
Which is funny since in virtually every Star Trek episode there’s a failure of technology, a crime, and considerable poverty.
Of course, government would no doubt want periodic uploads of card activity, and the electronic records could be required to contain exquisite detail of its use. If any card interfaced with the broad financial system, it could be used to trace the transaction history hundreds of other users, and you will have interface on a regular basis.
Properly implemented, it would make all of those things impossible (for some definition of “impossible”). Of course, governments would never allow a proper, secure, implementation.
Every single transaction would be scrutinized, as i said the technology does not exist to secure something totally
That depends what you mean by “totally”.
I’ve been a subscriber to wired for some 10 years, but recently let my subscription lapse. They just don’t have the libertarian paradigm that they used to have.
I heard this idea from a banker in 1975 and he predicted it would happen within ten years. Pooh then pooh now.
i really just cant handle the stupidity of this world. how we use money when it is completely and utterly worthless. along with gold, silver, diamonds, etc. and you cant prove me wrong. u cant because we just gave it value because of the way it looked or wat we used it for, or with money we just gave it value for trading which is really stupid. cause we shouldnt have to have paper money in order to get food, clothes, and shelter, but no one will do anything about it. people think were working on making this world better, FUCK NO!!!! we are just making it worse, especially after having the most retarded president ever, fuckin’ george bush. so really im just tellin you this so you know and maybe u can do something about it cause i actually want to improve our world and way of life which no one else is doing. and if you want email me at skulluks16@hotmail.com
I think we should get rid of currency altogether.
http://baldwinsworld.com/2010/04/28/get-rid-of-cash-and-coins-save-our-country-money/
While I personally very much prefer electronic transactions and only perform a small amount of transactions in cash, your reasoning regarding the advantages and disadvantages is, in my opinion, flawed. My main counterargument is that absence of cash increases the incentives to move the financial flows outside of the country, so they become more difficult to track, rather than easier. If both the seller and buyer have accounts outside of the country, the country has no legal instrument to obtain the information regarding transfers between them. Also, it is quite likely that people would start using commodities (e.g. gold) to replace cash transactions.
To avoid the problems described, heavy monitoring of virtual (e.g. internet) and physical interaction would need to be implemented. I doubt the gains would outweigh the costs.
i guess you distinguish between paper money and paper currency??? i dont know.
personally i would like to be able to have a physical money to access rather than solely a n electronic or ledger note.
Paperless money system would put a massive dent in crime and drugs! Imagine trying to buy or sell illegal narcotics with a government issued money card? The cartel would have to fold up! I’m all for it! Besides if there is a power outage ATM’s don’t work anyway nor will the Bank’s conduct business so that is a lame excuse fir not going this direction.
yes good title very unproductive though to offically get rid of paper money is to issue tranaction cards for each transaction made the card is exchanged by parties with written vaule on each card acting as a value and a receipt a party that has to divide vaule between more than one person does so through same process as transaction. cards are cashed at banks yeh more federal laws. bank cards are for business to consumer. if i missed something please add btw a fourm on this could of solved it sooner.
good title very unproductive though to get rid of money transactions cards must be issued for each transaction parties exchage cards with value on both acting as a receipt and payment the receiving party can divide payment same as transaction. cards are marked as receipt or payment. payment cards must be signed by the consumer.to improve security .cards are cashed at banks. issues with this is bounced payment probally solved with federal law you do not want to owe the goverment money they technical own you thankfully your inocent until proven guilty. another issue is security theft from a previous transaction payment receiver hike.unless you notarise a new signiture everytime pray for brain memory solution .issue three the cost of transaction cards might raise taxes.boo i am only human if i missed something please add btw a fourm on this could of solved it sooner. one love
Chris, Mike, did either of you read any of the comments above?
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