tag:blogger.com,1999:blog-582368152716771238.post5359680909055913258..comments2024-03-18T07:59:05.430-05:00Comments on The Grumpy Economist: A world without cashJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-582368152716771238.post-14121361111619962622018-06-26T08:47:49.202-05:002018-06-26T08:47:49.202-05:00Though it is true that on-chain BTC transactions w...Though it is true that on-chain BTC transactions would give the FED increased access to the blocksize and actually be a decrease on the fungibility of cash. That is not true about off-chain transactions (LTN), and that is not true about privacy coins like XMR. They have superior fungibility to cash "no memory" Anonymoushttps://www.blogger.com/profile/07548082505932133750noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24658992007090134622016-08-16T07:48:58.553-05:002016-08-16T07:48:58.553-05:00From my humble perspective, the cash played, plays...From my humble perspective, the cash played, plays and will play a central role in our civilization but we need to understand the world without cash as alternative and complementary to the cash. We all need to step back and do our homework on questions such as where, when and how it will be more efficient than the cash.Lucas Javanihttps://www.blogger.com/profile/15618231289693707035noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-29618261521663052522016-08-12T19:00:49.832-05:002016-08-12T19:00:49.832-05:00Transfering interest to money (cash) holders is no...Transfering interest to money (cash) holders is not making any interest rate like a zero lower bound? I am afraid of liquidity traps.Gustavohttps://www.blogger.com/profile/06696414685209851041noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-61139097319066056812016-08-11T11:40:31.057-05:002016-08-11T11:40:31.057-05:00Cash only please! Thanks Prof.., MCash only please! Thanks Prof.., MMPAhttps://www.blogger.com/profile/05204223669169160577noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40120320764168260482016-08-10T17:09:04.579-05:002016-08-10T17:09:04.579-05:00Anonymous,
The distinction needs to be made betwe...Anonymous,<br /><br />The distinction needs to be made between a cashless society (all dollars are simply electronic entries on a computer) and a currency less society (barter?).<br /><br />I believe John is describing a cashless (not currency less) economy. And so your questions:<br /><br />"How do I give my neighbor half the cost when we replace the fence between our property? How do I pay the babysitter or the kid who mows my lawn?"<br /><br />Write a check to your neighbor / babysitter and funds are electronically transferred from your account to your neighbor's / babysitter's account.<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37418901007917723942016-08-09T10:58:27.308-05:002016-08-09T10:58:27.308-05:00Indeed. One of the major debates raging right now...Indeed. One of the major debates raging right now in the Bitcoin world is about raising the blocksize limit. Currently, it is set at 1MB, so the Bitcoin blockchain is growing, on average, by no more than 1MB every 10 minutes. However, that severely limits the transaction clearing capacity of the system and even at its current scale, the Bitcoin network is now pressed against that limit.<br /><br />Non-bitcoin blockchains used by banks and other financial industry players may not have these sorts of issues since they can use different models of trust and they do not face the same challenges as Bitcoin, which operates globally over the public internet.Davidhttps://www.blogger.com/profile/05467266315906788666noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-48649357504884655402016-08-09T10:42:11.016-05:002016-08-09T10:42:11.016-05:00Interesting. Thanks. When blockchain dollars start...Interesting. Thanks. When blockchain dollars start to be used to clear high speed trades that should be fun. <br />I presume US issued blockchain dollars could be retired and reissued from time to time just like current notes and coins, thus wiping out the history. <br />Perhaps the best analogy is that blockchains are like the strings of endorsed checks that circulate sometimes with cash shortages. I write a check to you, you endorse it to Bob, Bob endorses it to Jane and so forth. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-20268051699307096692016-08-09T10:20:36.819-05:002016-08-09T10:20:36.819-05:00Just to clarify blockchain/Bitcoin technology a bi...Just to clarify blockchain/Bitcoin technology a bit, there is currently no mechanism to prune old and unnecessary transaction information from the Bitcoin blockchain. It is constantly growing in size with no upper bound. That is a problem that should probably be solved (as advances in storage and data transmission technology may not always keep pace with blockchain growth), but it is not going to be easy.<br /><br />The Bitcoin blockchain is validated by the Bitcoin software by cryptographically verifying every block in history that follows from the Genesis Block (hard-coded). If you eliminate that process, you eliminate one of the primary security features of the blockchain.<br /><br />It's certainly possible for certain clients to only care about a portion of the blockchain that pertains to certain coins. However, they still rely on complete copies of the blockchain existing somewhere else. I think this is a solvable problem, but we're not there quite yet.Davidhttps://www.blogger.com/profile/05467266315906788666noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76164407549246037972016-08-09T07:53:09.637-05:002016-08-09T07:53:09.637-05:00But cental bank deposit accounts could make credit...But cental bank deposit accounts could make creditors more likely to run from private institutions - so rather than solving the problem of runs, such accounts could exacerbate runs and make them more likely. <br /><br />The other problem with central bank accounts is that they need to be invested, and who wants central banks playing a (greater) role in resource allocation? Imagine also the sitation central banks allocating an increasingly large volume of funds in the event that creditors run to it?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-55066265823081894532016-08-09T06:30:21.969-05:002016-08-09T06:30:21.969-05:00I did not do so at school, but after graduation I ...I did not do so at school, but after graduation I love to cheat like hell, and glimpse at what others made of it. you should not copy blindly, but it may give you a short cut in thinking. About one century ago in the Netherlands, commercial banks served big business, and did not want petty accounts of shop-keepers and farmers; some cooperative banks were founded, and government was urged to provide some. The Post Offices were used for a very bare online payment service, Bank of Amsterdam type. It could not afford much of debtor control (large numbers of petty amounts), so payment-orders without sufficient balance simply bounced. When I was a student, it served about half of banking traffic; it had fans of the simple solution. Another section of the people favoured the richer service of commercial banks. Big amount transactions in cash were still in use in some kinds of business, and it still was and still is possible to settle without cash or banking money; with or without record, and in cordial traffic that remains necessary, so crime still will be able to abuse it. Once coins and banknotes were very different and now we still have coins and bank notes, but electronic payment is driving it back rapidly. (Before I cannot make the joke anymore: In US-elections some call for "Change"; here they wil not settle for less than bank notes.)<br /><br />Through history administration has claimed a key role in payment traffic without allowing alternatives. There is a monopoly for public coins, and public bank notes, so there should be a public electronic account network, eventually in commercial bank management; the Crane-idea. The practical outcome may not exterminate rudiments rigorously; metal and paper will turn up now and then. Yopehttps://www.blogger.com/profile/18390656124581728998noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87120248181594508642016-08-09T06:18:59.703-05:002016-08-09T06:18:59.703-05:00"
I'd be interested in seeing proposals o..."<br />I'd be interested in seeing proposals on how a cashless society works in practice (I haven't really looked into it). How do I give my neighbor half the cost when we replace the fence between our property? How do I pay the babysitter or the kid who mows my lawn?"<br /><br />Sweden has already solved this problem with Swish, I.e. see for instance: http://ecommercenews.eu/swedish-banks-want-use-swish-ecommerce/<br /><br />When settling with friends, etc. I tend to use Swish for non-trivial amounts - it provides instant clearing between bank accounts with no transaction fees and a very quick and easy user experience (you use mobile numbers for identification purposes - no need to memorize account numbers, etc.).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-62593956631299175482016-08-09T03:50:54.879-05:002016-08-09T03:50:54.879-05:00There'd be no need for the Fed to "explic...There'd be no need for the Fed to "explicitly" create dollars for lending purposes. The Fed / government just needs to print and spend enough dollars into the economy to keep it ticking over at full employment / capacity. As to who lends how much to who, that's entirely up to individuals or individual firms. <br /><br />But what firms would be barred from doing is what banks currently do, namely accepting deposits (i.e. guaranteeing people $X back for every $X they deposit) while lending that money on. That amounts to money creation or "money multiplication".<br /><br />I.e. where someone wants a bank or bank like entity to lend on their money, they'd have to buy into a mutual fund of their choice run by the bank. That's full reserve banking, as advocated by Milton Friedman, Lawrence Kotlikoff and several others.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76412748948169822242016-08-09T03:20:13.649-05:002016-08-09T03:20:13.649-05:00In theory govt could replace cash. In practice we...In theory govt could replace cash. In practice we had a barter economy before cash, and that barter economy would return for those transactions that have value in being cash based. No doubt over time a form of cash would evolve within that barter economy - probably not the salt that used to be used, but some other commodity of reliable value and easy exchange. For all I know it'll be pokemon. The point is that so long as people have a need for cash, cash will exist in one form or another.PaulLhttps://www.blogger.com/profile/17880559466808887420noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52321049614651802222016-08-08T23:45:48.719-05:002016-08-08T23:45:48.719-05:00Ralph:
Yes, floating liabilities are run-proof. Bu...Ralph:<br />Yes, floating liabilities are run-proof. But if the Thai bank issues 100 baht, and its assets are worth $99, and it tries to maintain convertibility at $1=1 baht, then there will be a run, since the bank will run out of dollars before the 100th baht is redeemed for a dollarMike Sproulhttps://www.blogger.com/profile/12949235460682126524noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-16456275981909980682016-08-08T20:32:24.985-05:002016-08-08T20:32:24.985-05:00I'm trying to figure out why negative rates wi...I'm trying to figure out why negative rates will stimulate the economy when negative interest rates (reducing the money supply) semm to me to logically imply deflation, which most economists look at with horror.<br /><br />Then again, without being an economist and without being able to make a good argument for it, I think if the Fed were to bring rates back up to more traditional (3-5% levels) we'd see the economy take off much more than today. I can't give a reason other than that the big economies which have tried near zero interest rates (Japan for years, the US, UK, EU, etc. for a shorter time) all seem to sit in the doldrums.<br /><br />Or it says interest rates don't really matter.Thomas Whttps://www.blogger.com/profile/05701283200252131890noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-38627450155117522722016-08-08T19:33:54.571-05:002016-08-08T19:33:54.571-05:00In your world without cash, privacy is eliminated ...In your world without cash, privacy is eliminated since every transaction can be traced by a subpoena or a court order.<br /><br />Even the most honorable of us have certain purchases or payments we'd rather not leave a record of. That is still the calling card of cash.<br /><br />cranky investorhttps://www.blogger.com/profile/01390486725310648848noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13377713431727261072016-08-08T18:28:21.374-05:002016-08-08T18:28:21.374-05:00John believes in the risk free return either funde...John believes in the risk free return either funded by taxpayers or printed into thin air by the central bank. (He is not clear on which). I don't believe in either.<br /><br />The interesting part of John's article is this:<br /><br />"With digital money, the government could view any financial transaction and obtain a flow of information about personal spending that could be used against an individual in a whole host of scenarios."<br /><br />"This really is a big change in how money works. Traditional cash has a lovely property, that it has no memory."<br /><br />And yet most people these days deal from checking and savings accounts that have memories. The U. S. Treasury used to sell bearer bonds, but now all issues are sold with a C.U.S.I.P. (Committee on Uniform Security Identification Procedures) identification.<br /><br />And so let me be the first to say that I don't see the loveliness.<br /><br />Continuing on:<br /><br />"Its physical properties determine its value in a way independent of its history."<br /><br />It's physical properties (lightweight, uniformity of manufacturer, durability, etc.) make it ideal for transactions, but I wouldn't say that alone determines the value of a currency.<br /><br />And finally:<br /><br />"It is incredibly efficient, in a Hayek information sense. The economy does not need the memory of every transaction. Blockchains turn this around."<br /><br />Is improved data collection by the BEA and BLS worth the liberties given up?<br /><br />http://www.bea.gov/about/infoqual.htm<br /><br />"Source Data: BEA receives data from a variety of reliable sources. Most of the data, however, come from over 360 surveys and other data collections sponsored by other Federal agencies, that is, from statistical agencies, aggregate tax data sources, administrative and regulatory sources, and private trade sources."<br /><br />Why conduct surveys when the BEA could simply look at the transaction history of each individual?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-39726222989528480612016-08-08T17:20:32.649-05:002016-08-08T17:20:32.649-05:00Yes, yes. Each of us shall have an account at the...Yes, yes. Each of us shall have an account at the Fed tracking our wealth and all of our transactions. This account shall be linked to the microchip embedded in our brain stem at birth. Oh, think of the enumerable efficiencies! A Brave New World indeed. <br /><br />I think I'm going to go buy some gold coins.The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41401053641616192542016-08-08T17:17:37.793-05:002016-08-08T17:17:37.793-05:00Currently most dollars are created by banks when l...Currently most dollars are created by banks when loans are made. If all dollars were on the books of the Fed, the Fed would have to explicitly create new dollars for lending. This would be a big change in the way the economy works.<br /><br />The main driver of eliminating cash is the policy decision to go to negative rates. If rates go sharply negative from today's levels, eliminating paper cash will be absolutely necessary to maintain monetary velocity.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-73140250106382432252016-08-08T16:22:49.454-05:002016-08-08T16:22:49.454-05:00I can’t see why anyone would join a run on a centr...I can’t see why anyone would join a run on a central bank. It wouldn’t make sense for depositors to run to commercial banks because a deposit of $X at a commercial bank is simply a promise by the commercial bank to give the depositor $X of central bank money if the depositor wants it.<br /><br />Depositors could run to another currency. In Thailand in 1997, the Thai government had incurred a lot of debt denominated in other currencies, and the value of its currency collapsed. So running before that collapse would make sense. But the US government has incurred no such debts: its debts are denominated in US dollars.<br /><br />Runs make sense where someone is trying to ARTIFICIALLY maintain the value of something (e.g. the pound Sterling in 1992 before the UK crashed out of the ERM). But a currency which FLOATS is just like shares in a bank (as distinct from deposits). Shares are a non-runnable liability. <br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-81868040152171757592016-08-08T13:48:58.319-05:002016-08-08T13:48:58.319-05:00The end of individual liberty and the onset of ins...The end of individual liberty and the onset of institutionalized slavery. this is nothing but NWO propaganda.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40168282418922488012016-08-08T13:42:20.533-05:002016-08-08T13:42:20.533-05:00I doubt we'll ever abolish cash, if for no oth...I doubt we'll ever abolish cash, if for no other reason than too many people (in particular politicians) benefit from the occasional truly anonymous transaction.<br /><br />I'd be interested in seeing proposals on how a cashless society works in practice (I haven't really looked into it). How do I give my neighbor half the cost when we replace the fence between our property? How do I pay the babysitter or the kid who mows my lawn? Buy something at a garage sale? Let my kid ride the pony at the grocery store (which is still 1 cent)? Will all vending machines have to be tied to the internet?<br /><br />How are transaction costs handled? Today there have been scandals when the government moved to non-cash benefits for food stamps, etc. and banks added fees to many / most transaction types. I can see the law to abolish cash subtitled the "guaranteed bank profit act" with it becoming impossible to make a purchase without a bank taking 1-2%.<br /><br />I also wonder how this will affect teaching kids about money. When I was growing up my parents setup a savings account for me. It was passbook savings, so I could see exactly how much money I had and how much interest I earned in the passbook. I found it much harder to teach my kids about bank accounts in the 90s because they didn't have the passbook. Instead a statement occasionally showed up in the mail showing one or two transactions, much harder to explain.<br /> <br />If we move away from cash I can see a new generation not having a clue about money. They can sometimes buy something, sometimes not, and never really understand what's going on. With cash it's easy to set aside money for the rent or a payment by physically setting the money aside. In a cashless society we've eliminated a whole class of money management techniques which have worked well for a large percentage of the population.Thomas Whttps://www.blogger.com/profile/05701283200252131890noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87252499307918618532016-08-08T13:25:04.343-05:002016-08-08T13:25:04.343-05:00"If all "money" is backed by the Tr..."If all "money" is backed by the Treasury or Fed, financial crises and runs end."<br /><br />That's overly optimistic. There are two ingredients to a bank run:<br />1) an insolvent bank<br />2) a bank that tries to maintain convertibility of its money at a rate it can't afford. <br />Central banks can usually suspend if they want, but if for some reason they do not (Think Thailand, 1997) then they will face a run, whether the money they issue is paper dollars or checking account dollars.Mike Sproulhttps://www.blogger.com/profile/12949235460682126524noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-56131610024520516292016-08-08T13:02:21.637-05:002016-08-08T13:02:21.637-05:00I have a question, what of the possibility of achi...I have a question, what of the possibility of achieving the necessary capabilities of a cashless society, without it being facilitated by a government body. I look to Bob Kocher's recent WSJ article referring to the success of independent physician led accountable-care organizations over their, larger, consolidated and highly respected counterparts. Can we see a path for the private markets to achieve these goals?Anonymoushttps://www.blogger.com/profile/07146970491494198120noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-31541559893768501972016-08-08T13:00:03.120-05:002016-08-08T13:00:03.120-05:00I think eliminating cash is a very bad idea. We ha...I think eliminating cash is a very bad idea. We have already lost a lot of privacy due to terrorist threats. I do not want the government or faceless others tracking every penny I spend and being, ultimately, to control MY money. Nope. Bad, bad idea.Anonymousnoreply@blogger.com