Digital Money, Fiat Money, Species
What Would the World be like without Cash or with one Currency
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A recent CBS World News article quoted Bjoen Ulvaeus, former member of the group ABBA, saying, “I can’t see why we should be printing bank notes at all anymore,” advocating that the world’s economy should run without cash.
Our ancestors did not need money. Early humans were self-sufficient, hunter-gatherers, who relied on their surroundings for shelter and clothing. There are still remote tribes that do not use money as a medium of exchange but barter with other tribes when they have excess food. We are still bartering services today in modern societies.
The most famous example of bartering is “Peter Minuit’s swap in 1626 of $24 in beads and trinkets for the island of Manhattan. Its property value in 1998 was assessed at $23.4 billion.” (Wall Street Journal editors)
Bartering is more difficult because it is based on an economic “coincidence of wants” which takes time, whereas currency enables consumers to postpone purchases. In modern society, bartering can be done through advertising, which is costly, or by word of mouth.
Commodity currency was used throughout history. Roman soldiers were paid with salt, salarium, a rare commodity at the time, hence the word salary. Pelts, tobacco, animal teeth, beads, stone wheel money on Yap Island, ivory, cigarettes, elephant hair, tusks, brick tea money in Siberia, soap, perfume, silk, chocolate have served as commodity money.
Species, a form of gold promissory note, was a guarantee that the carrier had a certain amount of gold in the safe keep of the village goldsmith.
Babylonians expressed the idea of money in bills and receipts dating back to 2500 B.C. Earliest notes can be traced to China. “In 1282, Kubla Khan issued paper notes made of mulberry bark bearing his seal and his treasurers’ signatures.” The Kuan, the oldest surviving paper money, was issued in China by the Ming dynasty between 1368 and 1399. Sweden was the first European country to issue paper money in 1661. The British offered promissory notes (IOUs) to soldiers in Massachusetts in 1690. (Kenneth M. Morris and Virginia B. Morris)
Twenty-six countries around the world call the dollar their currency. The dollar was a silver coin called Joachimsthaler from 1519, minted in St. Joachim valley in Bohemia, now the Czech Republic. Thaler is German for valley.
Prior to the National Banking Act of 1863 that established a uniform currency, we had locally issued paper money called scrip, gold and silver coins that could be compromised by shaving off the edges and selling the gold or silver dust (hence the ridges on our coins to prevent such shaving), and even wooden coins. Colonists cut up coins to make change and they called them four bits or two bits.
Coins were valuable, durable, and portable. They were made of silver, gold, copper, and electrum (an alloy of gold and silver). The current U.S. penny is worth more because the price of copper is relatively high. When money was based on silver and gold, it was called commodity currency. When it could no longer be redeemed for precious metals (since 1971), it became fiat currency. Fiat currency value is determined by faith in the government and the people’s desire to purchase assets and goods in the country of issuance of that currency.
Fiat money printed in excess of goods and services produced in a year causes inflation. During the American Revolution, $1 was worth 2 ¬Ω cents. During the Weimar Republic, between 1918-1923, one German mark was inflated to 726,000,000 marks.
Zimbabwe’s hyperinflation is a more recent example of a grossly mismanaged monetary policy and economy. Inflation, initially caused by the civil war and the subsequent confiscation of white-owned farmland, snowballed into hyperinflation when food capacity fell by 45 percent, manufacturing fell drastically, and unemployment rose to 80 percent.
The recent U.S. QE1 and QE2 (quantitative easing) printed dollars to cover our budget deficit. The Federal Reserve System (Fed) calls this monetizing the deficit. Every time money is printed repeatedly in excess of goods and services produced by the economy in a year’s time, inflation results. Keeping interest rates low reduces the speed with which inflation grows.
The U.S. dollar is used to quote world oil prices (petrodollars) which further complicate its worth or lack thereof, vis-à-vis the price of oil and its available, deliverable, or refinable supply. Add world instability, futures speculators, and bad energy policy into the mix and you have a Gordian knot.
The CBS World News article presents Sweden as being at the forefront of digital money vs. cash, advocating a cashless global economy. Globalists prefer a one-world currency. A small number of businesses in Sweden accept only credit cards, including some churches. Elderly people prefer cash, especially in rural areas.
Bjoen Ulvaeus believes that cash encourages theft, citing his own son who was the victim of armed robbery three times. Cheating and theft have declined in Sweden but cybercrimes are on the rise.
Privacy issues are important since electronic transactions leave a trail. There is no anonymity left to donors. Technology to use smart phones as digital payment is already in use. Opponents believe that the drive to a cashless world is driven by banks and their desire for higher profits.
There are many issues to ponder in the policy dilemma of no cash or a one-world currency, and the list is not exhaustive:
- On the upside, there are savings deriving from a cashless society in terms of special paper, printing, ink, labor, and metal alloys
- If an attack occurs on the Smart Grid and there is no power, there are no financial transactions possible without cash
- If there is a national disaster, earthquake, tsunami, hurricane, tornado, or power interruptions, there will be no transactions of goods and services without cash
- An EMP attack or intense solar flares would make cash or a one world currency worthless, we would have to resort to barter or theft
- A cashless or one global currency could result in extraordinary powers given to banks, potentially, with no cap on interest rates
- Cashless transactions would leave no option to be off the grid, everything would be traceable
- One world currency would eliminate exchange rates, currency trading in futures, eliminating a substantial sector of the job market and thus revenues
- There will be no black market involving cash or illegal activity, everyone would be forced to pay taxes
- Children under 18 would be excluded from holding credit cards and thus excluded from financial transactions if cash disappeared.
- Migrant and illegal workers would be paid electronically, forcing accountability in taxation and employment if society became cashless
- Prostitution would have to be legalized, taxed, and clients’ names be public record
- Muslims would no longer be able to use hawala transactions which are based on cash
- Conducting monetary policy, money stock, interest rates, and inflation would be altered in a cashless society
- In the case of one-world currency, who would conduct monetary policy, decide interest rates, the digital money stock, and taxation? Would it be the United Nations?
- Would society alter dramatically because labor would be purchased with digital credit as opposed to cash? How would the one-world currency value be decided? Will it be tied to precious metals such as silver, gold, and platinum or will it be arbitrarily decided by the United Nations?
- In a time of war, how would one country destabilize the economy of another by dropping off counter fit currency over another country’s territory if the entire world uses the same currency?
- In the case of cyber attacks and hacking, how much would be affected if all banks, companies, and institution would be connected to a single grid of digital money
- What would happen to third world nations that are not so electronically wired and depend heavily on cash or barter? Could they be required to make transactions in digital money?
- Finally yet importantly, who would police the counter fitting of a one-world currency across the globe?
The idea of a digital money society or a one-world currency may capture sound bites on TV and the imagination of liberals and conservatives alike, especially when running for political office, but it opens a new Pandora’s box of ills that most countries are not yet equipped to resolve.
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