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."

Comments

Abandon all your cash

[Anonymous Coward]

I'll take it

Re:Abandon all your cash

[naz404]

While we're at it, I propose the removal of the artificial rounding off of citizens' bank accounts to 2 digits after the decimal point.

It is an outdated model stuck on physical money and a scam run by institutions pocketing the fractions (think salami slicing).

The rise of "paperless" money, rapid currency exchange fluctuations + digital microtransactions at consumer level have made this very feasible.

I want my bank account to be able to say ".0238538327" after the whole numbers' place. If I make games, I want to be able to sell virtual goods at $0.00056 per transaction if I want to. When your audience is the entire internet, small amounts like that can rack up to substantial numbers. I want institutions to be able to do that for me affordably, and I want to see that number reflect in my account instead of being thrown away.

I mean in this age of digital, how much does it cost to actually make/record/monitor a transaction when everything's already digital?

Any takers? Maybe this is an opportunity to create a new startup. Maybe this is a niche that can challenge Paypal. Take it. Run away with the idea. I don't care who implements it, as long as it gets implemented.

Re:Abandon all your cash

[Gerzel]

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.

Re:Abandon all your cash

[muridae]

Who pockets the fractions? So the bank tells you that you get 4.0391759% interest, there is no magical fractions of a penny being made. They round off the number, and pay you from the amount of rounded off payments they get from someone else. All of the money they collect is rounded off from some fraction, but there is no fractional cent being created from thin air.

I know the whole "magic money" thing made for a great plot device in some amusing movies, but can anyone show how it would work? Show your work, double entry book-keeping records for extra credit.

Re:Abandon all your cash

[Ethanol-fueled]

While we're at it, I propose the removal of the artificial limitations of citizens' double precision data to 16 digits with a floating decimal point.

It is an outdated model stuck on cheap hardware and a scam run by institutions paid by institutions pocketing the fractions (think salami slicing).

I want my bank account to be able to say ".0287863987569328746598137649582736985555726938475629835576459837" after the whole numbers' place. If I make games, I want to be able to sell virtual goods at $0.000000000000000000000000056 per transaction if I want to. When your audience is the entire internet and even very poor bushmen from Africa are on it, small amounts like that can rack up to pay for my six-pack. I want computer manufacturers to be able to do that for me affordably, and I want to see that number reflect in my account instead of being thrown away.

Re:Abandon all your cash

[S1ngularity]

I worked at a small community bank for a number of years. The software we used actually did track the decimal out a few places beyond what you see (used mostly for interest calculations). However, the larger infrastructure isn't built (yet) to handle those sub-cent values between banks. Also, smaller institutions have a tendency to have a lot of those transactions printed on paper and stored as per federal regulations (paperless is always almost here!) so there is an actual cost to tracking those little tiny transactions, not to mention that small unnoticeable transactions are the floater transactions that fraudsters use to test the viability of raiding an account. When it comes to cash, it's time to move the opposite direction, nothing less than deci-dollars is worth striking up in coin, drop pennies, nickels and quarters.

Re:Abandon all your cash

[blackest_k]

Your getting close to the real problem of abandoning cash, I live in Ireland and many smaller businesses will not accept a bank card for transactions of less than 10 euro's due to the transaction fee's charged by the banks.

Trouble is a lot of the time you will make small transactions from your morning cup of coffee, buying a paper , a carton of milk and you can't always make the value of the transaction raise above 10. Then there are some transactions which cannot really be done other than in cash, such as taxi rides.

There has to be some sort of symbolic token which can be exchanged for goods and services, like um cash maybe.
Of course you could have some sort of credit account or prepay system but then you can have your micro payment but either your customers have to prepay a minimum amount or your customers all owe you a small amount.

Google is one example if you run Google ads on a small website you need a good number of clicks on the ads before you can even go to Google to get your payment. So essentially you can end up hosting ads for free and Google gets its revenue from the advertisers as they are actually billed per click.

Even the phone company which bills by the second tends to have a minimum of a minute or a 5 cent charge which is largely covering transaction costs.

Money is here to stay even if most of us don't need to carry more than a few dollars/euro's/ ...

Re:Abandon all your cash

[badboy_tw2002]

Yeah, it should be pretty quick and easy to get a decent bank replacement system up and running. A few hours may be a bit short, but lets give the coder 2 days assuming he's using rails and a transactionless NoSQL solution to get the job done in time. We may need to test it a bit, so leave time for unit testing. After all, this is people's money, so you can't be too careful.

Re:Abandon all your cash

[phoenix321]

Assume a bank in the USA will only track dollars to the second decimal. 0,01 USD is then the smallest amount that can be traded.

A bank in Europe has a similar granularity, tracking 0,01 EUR.

Banks in China, Thailand and Turkey track their currency to an comparable precision, so I'm pretty confident a Thai bank will track amounts as small as 0,25 THB. After all, there are coins in actual circulation for that amount. Maybe they follow the worldwide model and track the THB with two decimals, having 0,01 THB as the smallest transaction possible.

Why is it reasonable for a bank in Thailand to track a transaction comparable to 0,00025 EUR (1 EUR ~ 40 THB) while this is seen as unreasonable for European banks?

Re:Abandon all your cash

[JamesP]

From the computational point of view, unlimited precision is not free (and very prone to problems)

a fair rounding system goes a long way

I want to be able to sell virtual goods at $0.00056

Well, you can do that. Take their CC number but only charge them if they go beyond a certain value. And then account for the rounding and compensate accordingly in subsequent transactions.

(also what's with slashdot not allowing copy-paste on the comments??)

Re:Abandon all your cash

[JamesP]

Well, there you go. Also, there's no reason not to have imaginary numbers in currency.

Or even better, prizes sould be in C^3 !

Re:Abandon all your cash

[icebraining]

You assume he's talking about credit cards. I don't know about GP's country, but here we mostly use debit cards.
Most people already use it, but they also keep cash because most shops don't accept it for payments under 5E (they have to pay a fee for each transaction), and because they're still slower than cash.

Re:Abandon all your cash

[icebraining]

He's not demanding, he's suggesting.

Re:Abandon all your cash

[bondsbw]

Your getting close to the real problem of abandoning cash...due to the transaction fee's charged by the banks.

But this is a logical fallacy, right? Your assumption is that electronic transactions cost a minimum amount of money, but cash transactions are free.

But cash transactions do involve work! The bank teller takes money and gives money, all day long. That person gets paid, and all they might do during the day is handle cash. If a teller makes $100/day, and processes 200 transactions a day, each transaction cost the bank $.50.

That entire time, the teller is using computers that interface with backend servers. Each of those machines, and the network routers/switches in between are sucking down electricity. And there are people behind the scenes, making loan deals with the Federal Reserve (in the US). And people who do various paperwork, and people who run collections, people who do technical/customer support, etc., who all work for real money, and whose job is to directly or indirectly support such cash transactions.

In the cash world, the bank "eats" these costs. Obviously, they don't really eat them, they just put them into interest rates. The electronic transaction world really doesn't seem to have any more costs, but banks are requiring transactions fees. In other words, they are trying to recoup their costs up front, something that is impossible to do in the cash world due to tradition.

Moral of the story: There is no such thing as a free lunch. Cash is no better answer than electronic transactions.

Re:Abandon all your cash

[amorsen]

Then there are some transactions which cannot really be done other than in cash, such as taxi rides.

Why those? I can't remember the last time I paid cash for a cab. In the old days they did offline transactions, but these days they just connect via GPRS.

Might I suggest an alternative currency

[Anonymous Coward]

Leaves might be a better choice. Given the country's forests every citizen would become quite wealthy overnight and it wouldn't require any additional infrastructure. I believe the next US Congress will be considering adopting leaves in the next session as the new US currency since leaves are worth more than the dollar.

Re:Might I suggest an alternative currency

[__aatirs3925]

Then we can all agree that money does grow on trees.

Re:Might I suggest an alternative currency

[Anonymous Coward]

I know you're joking (hehe), but in reality that wouldn't exactly be true. The more of a currency there is, the less one unit of it is worth. For example, lets say there are a quadrillion dollars in existence; one dollar by itself isn't worth very much. However, if there were only a billion dollars, the dollar is worth a heck of a lot more. Same with leaves; the more leaves there are, the less each leaf by itself is worth. Every time someone plants a tree and waits for it to grow (err, that might take a while, but disregard that) the value of the currency drops, thus inflation.

We can solve that problem (and effectively revalue the leaf) simply by burning down all the trees.

Re:Might I suggest an alternative currency

[demonlapin]

There's only one problem: when leaves become currency, everyone becomes immensely rich. But there is a small inflation problem owing to high leaf availability. Unfortunately, it takes something like three major deciduous forests to buy one ship's peanut.

Re:Might I suggest an alternative currency

[guyminuslife]

You clearly have not read The Hitchhiker's Guide to the Galaxy series. (I believe it was Restaurant.) If you had, you would know that the early Earth colonists' solution to this particular inflationary dilemma was to burn down all the trees. Problem solved.

I suggest you bow your head and accept that you have been judged on your geekdom, and found lacking. You may recover some lost face by immediately purchasing or borrowing a copy of The Ultimate Hitchhiker's Guide.

Re:Might I suggest an alternative currency

[Vaphell]

it is a natural law of economics. Everything except Imaginary Property has some hard limits built in. When you increase pool of money everybody is willing to pay more in nominal terms to be able to put the hands on desired goods which are not infinite in supply, thus prices are bid-up and new equilibrium is achieved thanks to the supply and demand mechanics. If you are not willing to bid, you will never buy anything with your watered down money. If you are a producer, you are killing your profitability and survivability when prices of everything else rise and yours do not.

Re:Might I suggest an alternative currency

[Fareq]

OK, fine. Nobody raises prices. Instantly all products sell out, since everybody has enough money to buy everything they need, everything they want, and everything that they feel like buying because its just lying there. Only there isn't enough stuff in the whole world to fill everybody's needs, wants, and whims. So people start fighting over the last few items. Someone offers to pay double, then someone offers to pay double that, etc.

Re:Might I suggest an alternative currency

[ChatHuant]

In fact the value of currency is psychological.

In fact it's not. Or more precisely, not only.

If one dollar buys one candy bar, why should that change if there are more dollars? Nothing has really changed in terms of the candy bar's production costs.

The price of an item is a function of its scarcity and of the effort required to create it. If everybody had lots of money, nobody would be willing to work to create more candy (why bother making candy for a buck a piece, when you can just shake the money tree in the backyard, and get more bucks with less effort?). So candy becomes a scarce resource, and everybody competes for the same limited amount of candy. The only way to get the sweet luxury is to pay more. The price of candy goes up, and will continue growing until either people give up on candy, or the price becomes high enough that making candy becomes profitable again.

Re:Might I suggest an alternative currency

[FiloEleven]

Furthermore, those who are first in possession of the new money have a huge advantage: the market has yet to be affected by it, so they can use it to purchase lots of goods at uninflated prices. By the time the new money gets to Joe Sixpack in the form of a necessary wage increase to keep up with inflation, the new equilibrium is all but settled and he ends up about where he was before.

Fiat money is a tool for the rich to get richer.

Re:Might I suggest an alternative currency

[nido]

Fiat money is a tool for the rich to get richer.

But we don't have "fiat" money, we have debt-based money (which is indeed a tool that enables concentration of wealth). The best explanation I've read involved money and anti-money: there is no $ without debt. Here's the quote:

A dollar is only created when it is loaned to somebody. If you take out a mortgage, the bank has just created money 'out of thin air' as some say, but they couldn't create it until the instant you agreed to borrow it. They didn't create it ex nihilo and wait for someone to borrow it - they can't do that - the loaning and creating are one atomic operation.

For every dollar created, an anti-dollar of debt must also be created. This allows the books to maintain balance.

Anti-dollars rack up interest charges, while ordinary dollars do not. You may imagine that you can invest your dollars wisely and pay back your loan, and perhaps you can, but the dollars your investments yield were created by the same process and have their own anti-dollars associated with them. So even if you can pay it back - overall - in the dollar system, everyone cannot pay back all their debts.

The structure of our system places much of this total debt on the Federal government's books. However, this debt would still be unpayable were it owed by private citizens, and would be just as large. It is an unavoidable consequence of our monetary system.

Lincoln proposed an alternative whereby the Federal government would issue 'greenbacks' directly, pure fiat money willed into existence without the need to any bank to 'loan' it to the Federal government or anybody else. And, well, they shot him. Whoever "they" were.

Fiat money is an alternative to debt money. They both have advantages and disadvantages. They're different from each other.

-http://www.kuro5hin.org/comments/2010/11/6/112718/926/18#18

While I'm at it, I just read Ellen Brown's explanation of the Fed's recent Quantitative Easing 2. This should be required reading for everyone who's hyperventilating about the Federal Reserve's recent plans to buy another $600 Billion in bonds.

HTH, HAND.

Re:Might I suggest an alternative currency

[JesseMcDonald]

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. :)

Re:Might I suggest an alternative currency

[icebraining]

"The utility of a thing makes it a use value. But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity. A commodity, such as iron, corn, or a diamond, is therefore, so far as it is a material thing, a use value, something useful. This property of a commodity is independent of the amount of labour required to appropriate its useful qualities. When treating of use value, we always assume to be dealing with definite quantities, such as dozens of watches, yards of linen, or tons of iron. The use values of commodities furnish the material for a special study, that of the commercial knowledge of commodities.[5] Use values become a reality only by use or consumption: they also constitute the substance of all wealth, whatever may be the social form of that wealth. In the form of society we are about to consider, they are, in addition, the material depositories of exchange value."

-- Marx, Das Kapital

Re:Might I suggest an alternative currency

[currently_awake]

Actually money is a form of cloth, not paper. You would realize this if you've ever washed money, as paper dissolves in water.

On the subject of economics and money...

[complete loony]

... I highly recommend people read up on the work of Steve Keen.

a professional economist and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous debts accumulated in Australia, and our very low rate of inflation

Re:On the subject of economics and money...

[Orgasmatron]

Steve Keen knows his stuff. I highly recommend his blog to anyone interested in economics, even though I disagree with several of his conclusions and proposals.

He was recently able to give the full (long) version of his standard presentation in Michigan. Go watch it. http://www.debtdeflation.com/blogs/2010/11/15/why-credit-money-fails/

Re:On the subject of economics and money...

[complete loony]

He's one of 12 economists recognised with predicting the crisis, who had a model to back up their claim.

no thanks

[Trepidity]

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.

Re:no thanks

[0123456]

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.

But that's the whole reason for governments wanting to eliminate cash: it means every transaction will be taxed and no transaction will be possible without their permission.

Well, except that everyone will start using US dollars or whatever for their free market transactions.

Re:no thanks

[iluvcapra]

Use virtual cash to buy ounce of silver, hand silver to friend. Another serous problem is that, if this were done in the US for example, you'd probably have people starving to death because they have bad credit, or at lest you'd be giving banks a huge potential to become rentiers. A solution would be to create a banker or last resort, like a postal banking/remittance system that will do business with anyone.

Re:no thanks

[jc42]

So I won't be able to give $20 to a friend without: 1) being tracked; ...

Yup; and this is exactly why it won't be implemented, not in Estonia, not in the US, not in any other country.

A more illustrative example would be: You want to give $20,000 to your favorite local politician, in exchange for "consideration" during part of the law-making process. This only works well if your "gift" can't be tracked and be made known to the voters (and to legal authorities).

The recent election in the US is a good example. Political gift-giving used to be mostly public information. But recently, our Supreme Court changed the rules, making it legal for anyone to give money to politicians and keep the source of the money a secret. So before this election, political contributions went up roughly an order of magnitude over what they had been in previous elections. Mostly to the Republicans, but the Democrats got a large increase, too.

This would be very difficult with an all-electronic money system. The political system relies on the non-tracability of most of the "gifts". So we can trust that the politicians who got elected won't pass laws that eliminate the money that put them in power.

All the recent news of financial systems being "hacked" and their information made available to the wrong people is all the proof our politicians need that electronic money can't be trusted to keep a secret. So they won't allow it to happen while they're in office.

Re:no thanks

[guyminuslife]

Or Euros because the currency in question is the Euro, and it's already printed and minted in Europe where this is taking place.

Re:no thanks

[Kjella]

if this were done in the US for example, you'd probably have people starving to death because they have bad credit

Heard of debit cards? They're very common over here in Europe and go directly against your bank account. As long as you are using an online terminal, like pretty much every grocery store has, then the card will only work if you have money. The only people taking something on credit would be private transactions or backup solutions if the terminals are offline, everyone who regularly handles money today would get one if they don't already. What I don't like around here is that they're using the "by volume" argument to say removing cash is not a problem, which is ridiculous. It's no secret that I do groceries and pay for utilities and insurance and so on, but maybe I don't want that medical specialist or strip club or whatever on there even if they make up 1% of the volume. Same with my location, I'm often at home or at work so by duration I mostly don't care if everyone knows where I am. Again, it's the exceptions that matter.

Re:no thanks

[khchung]

Please don't use the broken banking system in the US as your reference.

I have no problem doing instant electronic bank transfer of 20 bucks into my friend's bank account at no extra cost to either of us. In fact, we often settle the our lunch bills this way.

Only in America's broken system would you run the risk of losing money by just giving people your account number.

Yes, it made it possible for the govt to find out these records. But you have to fear being taxed only because of America's broken income tax system. Other people in sane countries don't have that problem at all.

Re:no thanks

[iluvcapra]

Heard of debit cards?

A somewhat correctable problem with debit cards is that there ARE some people who's credit is so terrible that they can't even get a checking account -- I'm not saying they don't deserve being frozen out of check writing, generally they do, but if you eliminate cash transactions the merely "unbanked" would become destitute.

A more pressing problem is that debit cards are offered by private companies to individuals on an at will basis -- a bank can cancel or decline your card, or forbid issuing you a card, according to whatever its policy is, and can charge you essentially whatever it damn well pleases for the "service" of giving you the card, let alone for penalties you may incur. It's dangerous when you let private banks become a gatekeeper to your monetary system, because, as I said before, there's a profound risk of them collecting rents instead of competing to deliver service.

As always, the most laissez-faire solution to any monetary problem is to get the government out of the banknote business entirely and only tolerate privately issued instruments, valued according to the worthiness of the issuer. (Of course this solution, like most of libertarian economics, is elegant but completely unworkable.)

Re:no thanks

[rockout]

I believe his point was that if Estonia eliminates the physical Euro so that all tranactions will be taxed/tracked, citizens will start using another currency (like the dollar) for their free market transactions that they don't wish to be tracked.

History teaches us this is likely if only because the US dollar was the black market currency of choice in Eastern Europe during pretty much the entire Cold War. You could exchange your dollars with the Communist government at a rate tilted ridiculously in their favor, or you could ask your taxi driver if he wanted to buy dollars, which he did, and you'd get around 3-5 times the "official" government exchange rate. Dollars were always in demand because they were so much more stable than the constantly inflating local currency.

Re:no thanks

[pjt33]

Only in America's broken system would you run the risk of losing money by just giving people your account number.

Or the UK.

Re:no thanks

[guyminuslife]

They might use a physical currency. They would not use dollars. The dollar was used historically because is stable, it has a wide international reach, and there wasn't any European currency that could compete with it on scale. Sure, you had British pounds and French francs and German marks, but the dollar was the big boy in town.

Nowadays, that's no longer true. The Euro is a completely viable alternative to the dollar on a broad international scale. It's even used as the official currency in countries outside of the EU: see, for instance, Kosovo. The physical Euro has some nice advantages for Estonians: you can drive to the country next door and actually spend themat any retailer, as opposed to trading them as a "black market" currency. And as the summary notes, it's already going to be the official currency of Estonia, even if not in physical form, which reduces barriers to depositing physical Euros into, say, a bank account. You don't even have to do a currency exchange!

Re:no thanks

[khchung]

A somewhat correctable problem with debit cards is that there ARE some people who's credit is so terrible that they can't even get a checking account -- I'm not saying they don't deserve being frozen out of check writing, generally they do, but if you eliminate cash transactions the merely "unbanked" would become destitute.

Just another symptom of the America's broken banking system. In sane countries, you can get a debit card that linked to your savings account.

Re:no thanks

[makomk]

and can charge you essentially whatever it damn well pleases for the "service" of giving you the card, let alone for penalties you may incur.

What's more, apparently they do - to the point that anyone in the US who doesn't have a checking account has to pay a vast fortune to the banks to get a debit card which costs them nearly nothing to issue and run, and which has no risk of going overdrawn.

Re:no thanks

[ArsonSmith]

that is now legally an opt-in service from the bank. If I no longer have the money in my account it denies the transaction, and no fees or interest is charged.

Without cash...

[arunce]

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.

Re:Without cash...

[PietjeJantje]

Wait.. you're afraid to be robbed by a little mug (while apparently carrying all of your money), so you hand over your money to a big mug? It's cute to see you have so much faith in big mugs, to a point where you advertise for them.

Sounds great...

[Beelzebud]

...Until the power goes out.

Re:Sounds great...

[UCSCTek]

Swipe your card through her cleavage.

Ironic

[ebonum]

This comes out at the same time as I have stopped using credit/debit cards. I've started paying for everything with cash ( minus my web purchases... ). The government's ability to track non-cash transactions has improved to the point where I would rather have my privacy and take my chances with the possibility of theft.

Re:Ironic

[TarPitt]

"... take my chances with the possibility of theft."

Compare the chance of a mugging and the average amount of cash in your wallet you would lose

Compare the chance of a mugging and the average amount the crook could charge to your card(s) before you can report it. Maybe you will be able to halt the credit card theft at the regulatory limit of $50, but with debit cards you might not be so lucky.

Now compare the chance of online fraud ("identity theft") or skimmers at an ATM (or other non-intrusive theft) and the potential loss of thousands of dollars along with the value of your time in correcting the fraud

I think carrying lots of cash is less risky than using debit or credit cards for transactions.

Re:how will people pay for dope, sex, gambling

[AnonymousClown]

illegal goods, illegal help, kickbacks, etc. It sounds like this economics professor thinks the answer is, they can't, and therefore all this crime and shady stuff will go away.

That's where the black market forms and uses:

1.Another country's currency.

2. Barter

I've got to agree with the Fundies on this....

[Alan R Light]

There's much to be said for streamlining financial transactions, but there are limits to what we should allow, for reasons others have stated. There is simply too much opportunity for mischief in an economy where there can be this sort of control.

I'm surprised no one mentioned it, perhaps the /. readership is too young and secular to remember the concerns of Fundies from the 60's, 70's, and 80's, but I will give the relevant quote from the Book of Revelations, chapter 13, verses 16 & 17:

"16 It also forced all people, great and small, rich and poor, free and slave, to receive a mark on their right hands or on their foreheads, 17 so that they could not buy or sell unless they had the mark, which is the name of the beast or the number of its name."

(The number is, of course, 666, or in a few ancient texts 660.)

Regardless of whether one believes ancient prophecies, I think those Fundies had one thing right: Don't trust ANYONE - not even the "Majority" - to have that sort of control over humanity.

Better yet: stop using debt as money

[Anonymous Coward]

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

Re:Better yet: stop using debt as money

[complete loony]

You are confusing a stock (debt) with a flow (income). It is quite possible for money to circulate around the economy more than once in a year. Assuming bankers spend the money they make from interest, it is entirely possible for debt's and interest payments to reach an equilibrium in the economy without the continual creation of new debt. See the video from Why credit money fails linked earlier for more details and simulations of such a working economy. Of course it never works in practice because bankers are greedy.

Re:Better yet: stop using debt as money

[orlanz]

Wait, what? Why was this marked interesting? That's not how money actually works. Ideally, you borrow from the future (debt) so that your value growth is increased today. Eventually the additional growth increase produces enough value to offset the amount of value you took into the past. A very simple example: A farmer in a poor country spends a day walking to a market to sell his goods. The trip ruins 40% of his goods (say milk). Now he takes a small loan, buys a cart, reduces his trip, and thus only loses 10% of his goods to waste. Say he makes 20% more profit due to demand. That cart increased his effciency enough to pay for itself and then some.

Always increasing debt is when you borrow w/o enough of a increased value growth. You keep hoping that your continued borrowing will provide enough additional growth today to offset the already there debt and this one too. Crashes only happen when there is no one left to believe in your investment. Also, unlike European and American economies, some cultures such as middle eastern, Indian, and the Japanese do belive in over saving. The opposite problem... little investment is like lending to the future, but results in little growth that means more and more inefficiency... stagnation.

Re:Better yet: stop using debt as money

[wrook]

Your value may grow, but money is not a measure of value (it's an odd concept, I know). It's really lubrication that allows you to realize value. So in your example, with the extra money, the farmer can realize value and we get growth. The money supply *does* increase, but not because we increased value. It increases because we increased debt. Even if the farmer doesn't increase his efficiency, we will still increase the money supply because money is created when we have debt. Someone will have more money -- whether or not it is the farmer is a moot point.

The real question comes when you wonder, "where does the money come from to pay the farmer his extra 20% profit". Well, that also comes from debt. And that money also has to be repaid with interest. So we have bank who makes 2 loans. Loan f goes to farmer F and loan b goes to buyer B. Farmer F sells his produce to buyer B and gives him the money b. The money b is equal to the farmer's load f plus the interest on f. Farmer F uses the money to pay off his loan. But B now has food and a debt for b (which is bigger than f, remember). What can he do? Well he can sell some of the food at a profit. But the money from that has to come from the bank. So the bank make a loan to C for c amount. C buys the food and B repays his loan with c. Remember c has to include the interest for b, so it it bigger than b.

Since all money poofs into existence from loans, the debt gets bigger and bigger. There isn't enough money in the money supply at any one time to satisfy the debt. It just keeps getting bigger and bigger until people default on their loans and the whole thing comes crashing down. It is a classical Ponzi scheme.

Except, earlier in this discussion someone pointed out that there is an alternative. The banks make profit, which is the interest that they made on the loans. If they spend their money in on consumable items (like food, fuel, etc), they this money will make it back into the economy and can offset the problem. However, banks aren't really renown for spending their profits on consumables. They usually use those profits to invest in more profit making enterprises.

The main point is that unless we have continuous growth, we can potentially have serious problems. This is why government panic so much when their population decreases, even when they are overpopulated.

Re:Better yet: stop using debt as money

[roman_mir]

"Debt free money issued by your government" - what? :) What a laugh.

Gov't is the FIRST DEBTOR. What are you smoking - 'debt free government'?

OMG, what a mind job.

Everybody would be better off if the gov't let go of economy altogether and let the people decide what value is, what money is, forget about central planning - central planning is the reason that there are crashes.

The real money cannot be printed by governments to hide their true spending and debt, the real money will not allow somebody to inflate the monetary supply and take away your money by inflation through taxing your entire net worth.

Real money exists today, just hold that. Real money - gold/silver/some other commodity.

Of-course it's better if money is invested into productive land/productive business, something that generates value, because the true wealth of society is NOT money but production capacity.

The true measure of wealth of society is how much and what the society produces, not what the society consumes.

Consuming is easy, it's trivial, it's a consequence of production, not the other way around. The gov't (US especially) believes that consumption is the true indication of wealth.

Well, wait until you have nothing to consume, because nobody who is producing is giving it to you to consume, then tell me what real wealth is.

Re:What about tipping peopel like bellhops / skyca

[FatLittleMonkey]

In many countries, wait staff are paid a decent working wage so they don't need to rely on tips to survive. The listed price is the price you pay. (In fact, tipping is banned in some industries, such as casinos.)

The price of gas

[poptones]

Seriously? It ain't that hard to see all around you. The gas station prices their gas something something-point nine. Say it's 2.50 a gallon rounded up, but it's really 2.49.9 - so for every ten gallons you buy, you keep a penny of that 2.50. Whoopee right?

Now you're the government. You tax everyone at 7 percent.A sale of 5.33 now becomes 5.7031 - except it isn't, because registers are set to round up. So it's actually a sale of 5.71. Multiply that by how many Billions of sales in a year? In a year that's probably an extra $15.00 a year from every man woman and child. It may not make the difference between you going broke, but it does add up to those who collect the money.

Re:The price of gas

[Pikoro]

I used to work at a place where we did credit card transactions with our customers every month. We would automatically pull the amount from their card. Catch is, we bill in yen but the customer's bank accounts are in USD. We commonly would pull the equivalent of around $15000 per month. On a whim, we decided to add in some code to our test run to show what those fractions would add up to since in USD you have $x.xx and yen has no decimal point so everything is rounded. Turns out that that $15000 would generate about $0.02 (two cents) every month since the rounding up and rounding down tend to cancel each other out. Hardly worth the effort. I would imagine that dealing with equivalent of millions of dollars of transactions per day might net you something, but otherwise it's not all it's cracked up to be.

Re:The price of gas

[jonbryce]

In Britain, taxes are rounded down. For income tax, you round down to the nearest pound, and then apply the tax rate to that. For VAT (sales tax), you round the VAT on each line item down to the nearest 10th of a penny, then round down the total to the nearest penny.

Re:And just person to person transactions

[Cederic]

Indeed - I stuck £40 in crisp used notes through a neighbour's door yesterday. I could have done an electronic bank transfer but she'd have panicked if I'd knocked on the door and asked for her bank account details.

I like using cash anyway, it gives me a tangible way to observe my general expenditure. If I used a card for everything I'd have less of an emotional link between spending money and having a lower bank balance.

Whatever is quicker and mor efficient, will win

[PolygamousRanchKid]

I live in central Europe, and the trend to here is moving towards always paying with your EC bank card. A EC card is basically debit and ATM card, and this is quite common for purchases over 20€. However, it takes longer at the supermarket than paying with cash, because they print out a receipt that you have to sign. Even typing in a PIN takes longer than if you pay in cash. The cashier chicks at my supermarket have built-in abacuses in their heads. And when they grab into the cash registers for change, I have noticed that do not even look at the coins . . . they know from feeling the size how much is right.

A lot of folks like to pay with cards at the supermarket, because it gives you time to bag your groceries. No, there are no teen-aged "bag boys" where I live, and supermarkets here try to rudely toss you out, as soon as your bill has been paid. It's always a hoot and a half when I visit the USA with my girlfriend: she always jumps to start bagging the groceries, while some teenage guy gives her a look like, "Are you trying to steal my job?" Aldi is the worst offender: after your purchases get scanned, they are pushed to a packing place that is smaller than an average dinner plate. If you don't pack fast enough, they push your stuff onto the floor. If their prices were not so cheap, no one shop there, unless they are masochists who get sexual pleasure from being abused by assholes.

So anyway, the last time I visited ThePolygamousRanchSister in scenic New Jersey, I asked her where an ATM was. She told me that she never used cash any more. And my observations were that everyone, down to fast food joints, just swiped, and that was quicker than using cash. As soon as swiping a card without a print out and signature or PIN number is possible here, cash will be out.

Aw, the poor cash counterfeiters . . . this will wreck their business model.

Re:Whatever is quicker and mor efficient, will win

[RockDoctor]

Aldi is the worst offender: after your purchases get scanned, they are pushed to a packing place that is smaller than an average dinner plate. If you don't pack fast enough, they push your stuff onto the floor.

The way that the system is meant to work (at least in the several Aldi(i|s ?) I use regularly ; Lidls too) is that you unload your cart onto the conveyor, then you go past the cashier (who notes anything in the trolley and challenges you on it ; stop shoplifting!) and then s|he starts to scan your goods, placing them on the "dinner plate" area. You take each scanned item from the "dinner plate" area and deposit them back into the empty trolley. You then pay, and take the trolley away to pack your goods into the rucksack (dump them in the car, or whatever), while the cashier gets on with the paying work of processing the next customer.

You still need to take your trolley back to the storage area to release the coin that freed it from it's chains. So why would you not have your trolley with you at the checkout?

It seems pretty obvious to me, and it is actually very efficient. Which is part of the reason, I suppose, that Aldi (and Lidl) have relatively low prices. (The main reason that I go there is that they have things on the shelves that I can't normally get. Bottled cherries and good sausage in particular.)

Ah, perhaps like me, you want to arrange the cans at the bottom of the rucksack ; uncrushable veg on top of them ; household chemicals in the side pockets, then crushables in the hand baskets? That you do on the big wide shelves at the front of the store, not blocking the payment tills from their allotted purpose of processing payments.

Now that I think about it, I suspect that there was a time-&-motion man somewhere in the design of the system.

That is what the banks want you to believe.

[Anonymous Coward]

Better yet, you save money from your ongoing business profits and as soon as you have enough money, you buy a small cart.

That whole 'debt and lending is required for an economy to prosper' is just a meme the banks want you to harbour.

Re:What about tipping peopel like bellhops / skyca

[shoemilk]

Wow, this is the first argument I've heard that's made me want to support this.

Re:Pie in the sky

[metaconcept]

Advantages of no-cash: [...] All the rich people would have to pay all their taxes.

This would only be the case if all the rich people happened to carry their vast wealth around as cash in order to avoid the tax collector. They don't. They keep it in banks and investments.

"ATM cards" vs. "debit cards" in USA

[tepples]

Where I come from debit cards are useless without the PIN.

In the United States, this is true of an "ATM card", which carries only the ATM network logo (Cirrus or PLUS) and has no embossed number on the front. These can be used only for PIN transactions. The term "debit card" is more commonly used to refer to a debit card that carries both the ATM network logo and a MasterCard or Visa logo and an embossed number. These can be used for PIN transactions or for signature transactions. They became popular because when they were introduced, few merchants took ATM cards.

Re:Barter is the workaround when cash is abolished

[M. Baranczak]

Bartering is all well and good until you have to make change for 1.95 goats.

Re:Regulation D

[voidptr]

It allows the bank and Federal Reserve to better classify deposits for the purposes of maintaining reserves. For every dollar on deposit at a bank, they need to have some fraction readily available to repay withdrawals, and another fraction on deposit at the Fed.

By limiting withdrawals on a savings account, the reserve fractions can be lower, since statistically speaking, you're less likely to have single large redemptions from the entire account base at once. If I've got $5M in aggregate savings accounts from all my depositors, it's likely I'm not going to have redemptions that claim a significant fraction of that in any limited time span (days or weeks).

On the other hand, if I've got $5M in aggregate checking account balances, I may end up redeeming a much larger fraction on any given day, like the first of the month when everyone pays their mortgage. I need to keep checking account deposits much more liquid than properly classified savings accounts. In return, a bank generally pays better interest rates on the savings account.

Re:Flamebait

[Raenex]

So what you basically want to say is that it is OK to break international law?

I'm not passing judgment. I'm describing the way the world works.

And this is not a "border change", this is making of a country that never existed in history.

That happens all the time too. That's the history of the world.

I really didn't expect from you guys to feed me some copypasta from Fox News.

What did I copy and paste from Fox News? The only thing I copied was a link to Wikipedia containing a factual list of countries that recognize Kosovo, including the United States and most of the European Union. Yes, plenty of countries don't recognize Kosovo. That's why it's a disputed territory, and certainly not the only one in the world.

Here's another Wikipedia link: International Court of Justice advisory opinion on Kosovo's declaration of independence

"the declaration of independence of the 17th of February 2008 did not violate general international law because international law contains no 'prohibition on declarations of independence'."