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 ½ 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.
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 will 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.
Ileana
Johnson
Copyright
2012 All Rights Reserved
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