Tag Archives: electronic dollars

[Revised] U.S. government better gets ready for rising of private e-dollars.

On March 5th, 2014, WSJ editor columnist, Michael Casey, wrote a thought provoking article which made me think of the next “runner” after the collapse of Bitcoin. Before, I have never thought of a private company can handle such an overwhelming duty of money exchange, yet I have changed my mind after reading this article. It is possible. Either by the government or by private company; the next runner of ‘money exchange’ will mostly like be the electronic dollar. Use of electronic dollars and its benefits, in terms of our professor’s blog posts, How governments can and should beat Bitcoin at its own game, can convince people to believe that complete use of electronic dollars can get rid of zero lower bound problems as well as stimulating economy more effectively than under the use of paper currency. In theory, I think that the use of electronic dollars is very profound and plausible which likely to happen in real life sooner than what most people expect. Once again, this WSJ article, What if the Bitcoin End Game is a Digital Dollar?, gave me a spark on which I have not thought about it before. That is, the possibility of U.S. government losing its own game.

Not a long ago, we saw Mt.Cox crashed because Bitcoin algorithms were hacked. This left a big punch hole inside of the most important function of Bitcoin use which is trust.  Bitcoin fans, entrepreneur, and enthusiasts of Bitcoin supporters are disappointed and many of them left the market. However, those people are not given up their dream of what seems to me is like dethroning U.S. government dollars. It seems to me first that their dream must be the “Mission Impossible”, yet I start to doubt and ask questions: “What if?”

“History repeats itself” is very powerful phase. This gave me chill when I began to write this post. Think about the time when gold standard was getting replaced by paper money. I can imagine economists back then might also have been having very similar discussions as now we are talking about possible scenarios of electronic dollars replacing paper currency. For example, what I think the reason why the gold standard was dethrone by the paper currency is that U.S. government wanted to devalue their paper currency against hyper-inflation, yet they were unable to achieve because their paper currencies was originally pegged to gold. Similarly, having zero lower bound prevents the U.S. government to more economic stimulus when it needs most. In the past, U.S. government, precisely under the President Franklin Roosevelt, had forcefully yet covertly taken out the gold standard out of U.S. in order to achieve their goal of stabilizing paper currency. In side Bloomberg, How Franklin Roosevelt Secretly Ended the Gold Standard, better explains the power of U.S. government and how it was attained its goal of changing medium of money. However, it is questionable if today, U.S. president can enforce similar foot-steps of Franklin Roosevelt when it comes to politics and money matters.

This is why I think that a giant company with right approach may complete its “job” faster than U.S. government. If a giant private tech company can invent impenetrable and secure algorithms for electronic currency, it is possible that the use of electronic money may popularize faster than previous Bitcoin spread. When it does, it will also gain huge political powers. Before this time comes, U.S. government better have been prepared to win its own game against a giant private tech company, otherwise U.S. government fiscal and monetary policies may not work as effective as before.

Creativity of individuals and their own powers are influencing billions of people around the world today. With the help of more advance technology, it is quite possible that private company issued electronic money behaves like U.S. dollars. May be, someday, it even can dethrone the U.S. dollars if it get enough political and worldwide supports. This can be a disaster for many of us. This may be the end of the liberal democracy. I cannot imagine how rules and regulation will be change in the future, yet in human history, so much power in the hands of few always brought the end of empire. Thus, I hope that U.S. government getting prepared to bit its own game by considering more seriously about potential gains and losses of using electronic money.

U.S. government better gets ready for rising of private e-dollars.

On March 5th, 2014, WSJ editor columnist, Michael Casey, wrote a thought provoking article which made me think of the next “runner” after the collapse of Bitcoin. Before, I have never thought of a private company can handle such an overwhelming duty, yet I have changed my mind. It is possible. Either by the government or by private company; the next runner will mostly like be the electronic dollar. Use of electronic dollars, in terms of our professor’s blog posts, How governments can and should beat Bitcoin at its own game, can convince people to believe that complete use of electronic dollars can get rid of zero lower bound problems as well as stimulating economy more effectively than under the use of paper currency. In theory, I think that the use of electronic dollars is very profound and plausible which likely to happen in real life as well. This WSJ article, What if the Bitcoin End Game is a Digital Dollar?, gave me a spark on which I have not thought about it before. That is, the possibility of U.S. government losing its own game.

Not a long ago, we saw Mt.Cox crashed because Bitcoin algorithms were hacked. This left a big punch hole inside of the most important function of Bitcoin use which is trust.  Bitcoin fans, entrepreneur, and enthusiasts of Bitcoin supporters are disappointed and left the market. However, those people are not given up their dream of what seems to me is like dethroning U.S. government dollars. It seems to me first that this must be the “Mission Impossible”, yet I start to doubt and ask questions: “What if?”

“History repeats itself” is very powerful phase. This gave me chill when I began to write this post. Think about the time when gold standard was getting replaced by paper money. I can imagine economists back then might also have been having very similar discussions as now we are talking about possible scenarios of electronic dollars replacing paper currency. If a power private company could invent impenetrable and secure algorithms for electronic currency, it is possible that electronic dollars get popularized faster than previous Bitcoin spread. When it does, it will gain huge political powers. Before this time comes, U.S. government better have been prepared to win its own game against a giant private tech company which has gained supreme power of producing crypto-currency.

Creativity of individuals and their own powers are influencing billions of people around the world today. With the help of more advance technology, it is quite possible that private company issues electronic money that can behave like U.S. dollars. May be, someday, it even can dethrone the U.S. dollars if it get enough political and worldwide supports. This can be a disaster for many of us. This may be the end of the liberal democracy. I cannot imagine how rules and regulation will be change in the future, yet in human history, so much power in the hands of few always brought the end of empire. Thus, I hope that U.S. government getting prepared to bit its own game by considering more seriously about potential gains and losses of using electronic money.

A Response to “The Paperless Economy”

I feel good and privileged by taking this course and reading all the blog posts and online economic news. Today, I would like to talk about the concept of electronic dollar and raise a few questions. Because the boundary of my knowledge is very restricted, I know if I try to argue about the technical difficulty of pulling electronic dollars into the real life, I will be hammer. Instead, I would like to throw out philosophical questions which stick out in my mind after I read an article on Slate, The Paperless Economy, written by our professor, Miles Kimball.

I think that professor Kimball does terrific job explaining his ideas about why should electronic money be a better solution for ending recession faster and stimulating economy more than under the paper currency economy. I also read a critique about this concept of having electronic dollar from the Economist, Shrink this e-dollar, to understand better about the concepts of paperless economy.  However, the author was not clear about his point. So let me know if you can give me a summary of his article.

 

As I said earlier, what I want to consider about electronic money is not focus on stimulating economy but it is about having free choice. When interest rates are below zero, leaving your money in a bank account becomes “illogical”. So it “FORCES” people to spend their money under recession and it “FORCES” save more money when economy is booming. I believe this will work much better than having positive interest rates with positive inflation, because as professor argues, consumers are better off by spending their money somewhere which stimulates economy.

What about the case which I am the person who likes to save my money under my mattress or a safe and enjoy looking at it?  Hypothetically, it seems to me that electronic dollar is diminishing my leisure of staring money I saved. Is this “right” thing to do? With an exchange of faster recovery of economy to the price of diminishing my leisure seems very small, but my free choice now becomes no longer free. I am losing my money when I keep staring my money on my bed. What if I care more about my leisure of staring my money than what happens with the economy? Is it right for our government to put a price tag on my leisure which was once free?

Second question is about widening wealth gap. This idea is very rough, so I do not blame if someone comes with harsh comments on this idea. However, I still think it is good factor to consider before we actually start using electronic money. Under the electronic dollar, “velocity” of economy will be much faster than under the paper economy. If then, investment bankers as well as people who are good at maximizing their benefits will find ways around the laws which will allow them to make more money. Not everyone make smart decisions with their money, and I am saying that costs of not making smart decisions will be much higher when we use electronic money than paper currency.  As a result, poor and less smart people get frustrated and may cause more social problems than now. Some may argue it will be not much different than what it is already happening, yet I believe having solid papers that takes space and have weight in existent lessens or ,at least, slowdowns the speed of money being disappear from your wallet.