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Estonian Economist Suggests Abandoning Cash
J-Georg writes "Raul Eamets, professor of macroeconomics at the University of Tartu, proposed today during his TEDx talk that Estonia should stop using cash at all when adopting the Euro as the national currency (Estonian original). He also pointed out that abandoning cash would not be only important for the Estonian economy as a whole but also is a real challenge for both IT and banking sectors and would also improve Estonia's image as an IT-tiger."
So I won't be able to give $20 to a friend without: 1) being tracked; and 2) giving a cut to some payment processor like PayPal? I'd rather use cash.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
No way. Economies can't work without thieves or corrupt politicians. Even if something emerge to fill the gap, like gold, drugs, diamonds, name it, the neighbor country with real cash would get the benefits. At the bottom, cash on your pocket grants some privacy... and security.
...Until the power goes out.
Oh sure. Like most any man on the street he happens to have the time, income to support himself, money to start the project, PHDs in encryption, economics, programming and good expieriance at international diplomacy to implement this himself and not be a lazy ass.
Few people realize that we use debt as money in our monetary system. All those dollar bills and Euro notes? Those are actually IOUs that have to be repaid with interest to central banks. All those dollars in your bank account? They too are just debt markers that have to be repaid with interest. The problem is that in order to repay the interest, new money has to be created; but the only source of new money is new debt, with more interest, that requires more money with more interest ad infinitum.
The net result is that: 1) if all debts in society were repaid there would be no money and commerce would sieze up; 2) all debts can never be repaid because the principle + interest always exceeds the money supply; 3) the amount of debt is always increasing until there is a crash.
Everyone (except bankers) would be better off if we used debt-free money issued by your government, rather than debt issued from privately controlled central banks.
http://www.youtube.com/watch?v=vVkFb26u9g8
The important point that you're missing is that currency behaves just like any other good. The shopkeeper's revenues must compete with all the other dollars in existence for the goods and services the shopkeeper requires (personal and business), just as those goods and services must in turn compete with all other goods and services for the higher-order goods (like raw resources and labor) required to produce them.
If the shopkeeper were to decide not to raise his prices despite the existence of more dollars in circulation, then he would receive the same revenues per candy bar sold and thus be limited to bidding for new ones at the same prices as he used to pay. However, other shopkeepers who did raise their prices can now outbid him, which means he won't be able to get enough new candy bars to replace his old stock; the same amount of dollars won't buy as many as it used to. If all the candy-bar retailers banded together and chose not to raise any of their prices then the same problem would still exist regarding the higher-order goods required to produce the candy bars in the first place. Some of these goods, such as labor, are common to all production, which means that all products compete with one another to some extent—and that injecting money anywhere will affect all prices eventually.
Essentially, in order to prevent a general rise in prices you would have to convince every single holder of dollars, including those who hold the newly-created ones, to act as though the supply hadn't changed. Good luck with that. :)
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat