Wednesday, December 14, 2011

Elimination of cash money

There’s never ending BS about money. Now the idea is that eliminating cash will eliminate recessions. The reasoning is full of holes of course.

Governments would really like to do away with cash money. They use the excuse that it’ll eliminate crime. Frankly, I think the biggest economic crimes have already happened with electronic money. The derivative market has gotten so big that there isn’t enough paper in the world to print the money.

What governments want is to be able to tax every transaction. They can’t stand the idea that Bill the painter can paint your living room and give you a discount for paying in cash.

Lets imagine that governments are successful and all official money is electronic. My guess is that there’d soon be a very busy black market operating with silver and gold. No doubt there’d be people willing, for a fee, to launder that metal money into electronic. Don’t tell me it can’t be done. The incentive to do so huge.

Imagine if people get used to electronic money. Who’s to say they have to go through a central government sanctioned bank? What’s to stop people from developing “open source” money, sorta the Linux of money. Get a large enough group of people exchanging “Linux” money for goods and services, and most of a person’s transactions can take place in the unofficial currency. In fact, it wouldn’t be too hard for the open source money to be more reliable than the government money. All the new money people would be concerned with is having a good useful and stable product, unlike the government that has incentive for inflation and political shenanigans.

Then there are all those people who are already deep into barter and gift economies. Electronic money will just give them more incentive to expand barter and gift exchanges.

Electronic money? Bring it on. It’s just the incentive we need to kill fiat money.



  1. OK, I love having a fiat money system. How do you make change for a pig if you want to buy three nails?

    And barter is fine if farmer Brown has eggs and farmer Jones has milk, but what about those of us who provide services and not goods? And what about emergency workers? Everything our "customers" have to barter just burned down.

    There's a reason we moved past barter around the time we invented the wheel. Without a medium of exchange we're all subsistence farmers. I happen to be a big fan of a world with dentists and plumbers.


  2. To continue, how does a road get built on a barter economy? How do we train an army to keep the Huns at bay?

    Is the government being too intrusive? Sure. And we should fight that. But this idealization of stone age institutions is a bit much.

    If you want a world free of government intrusions like a money system, a military, and OSHA or the FDA, well...


  3. Momlady: it sure does

    Paracynic: of course it doesn't work for everything. That's why a sort of open source money would work, something free from exponential growth and inflation. Maybe it'd be based on something like calories.

    Picture a transition period where you work your job and get paid in fiat currency. That money is used to pay your taxes and anybody not taking the new money. Over time, more and more of your activities can be done in open source money. People will like it because it is stable and more reliable than fiat and doesn't have inflation built into it.

  4. I think I need to go gold prospecting again.

  5. There was an article on Medieval economics describing three parallel economies. The Turnip Economy, the Silver economy and the Power economy.

    The problem is that they really don't interact. The Turnip Economy works at the village level, where you trade with the other villagers and hardly ever see hard money.

    Merchants use the silver economy, since transporting goods and building ships and so forth is way beyond the Turnip economy.

    The power Economy is what the nobility uses, and is based on alliances, marriages, treaties, etc.

    But, how many turnips is a ship worth? How many turnips will you pay to have the princess of the neighboring kingdom marry your leader?

    Barter is just the Turnip Economy. Even if you can get your buddy Phil to do a plumbing job for a bushel of turnips, he probably has to pay the hardware store guy for parts, they have to order them from a factory, who has to get raw copper from somewhere. At some point, the turnips have gone bad. It's all well and good at a local level, but can't work large scale. The elite will always have the Power economy.

    The rise of a middle class and progress and innovation and medicine and clean water are only possible with the rise of the Silver economy.

    All money is fiat money. Any and all media of exchange are worth something only because we agree they are. That includes gold. Unless you want to make a lot of false teeth, gold is only worth what the Powers That Be want it to be worth. Any open source money will be fiat money. It may be somebody else's fiat, but fiat it will be. Trading the Deutschmark for the Euro didn't work out so well for the Germans.

    Now, I'm all for dragging a banker out into the street and beating him to death with a tire iron (or a gold brick--hey maybe it is good for something) every week until they stop playing craps with the economy, but once the ambulance company starts paying me in chickens, I'm done showing up for my shifts.

    Maybe the vollies will work for turnips, but at that point, best hope the undertaker does as well.


  6. You'll gladly take chickens when the shelves on the store are empty and a wheelbarrow of money buys a loaf of bread.

  7. I'd prefer money.

    My mortgage payment is locked in. I'd love for it to be the same cost as a loaf of bread. Beats stuffing chickens into an envelope to BoA every month.

    And at that point, I think we have bigger problems, since my company will be praying that Ford and Exxon and Pfizer will all keep the supplies flowing for chickens.

    At that point, we are Somalia with snow.

  8. here is a link about how time banks work,
    of course you cant barter for your mortgage which was created in a different economy but there is lots of ways to bypass cash with barter, i like the theory esp that everyones time is valued at the same, what an idea!!

  9. Sixbear see the comments when you skewer someones preception of reality.The reason trading was replaced with fiat money was so it could be taxed.OBBAMY dont want turnips he fell off that truck.he wants your time wealth and sons to keep him and cohorts on top.Barter isnt taxable WOW i like that!!

  10. Bitcoin is the Linux of money you seek.