 Oh good, somebody who knows what he's doing. Thank you for coming.
I think that competing, private forms of money can work just fine, as long as there are not too many of them. The empirical evidence suggests that three or four "mediums of exchange" is about all that the market wants to see. Beyond that, people get tired of dealing with multiple vendors. We see Visa and Mastercard succeeding, and American Express is a player, but after that things go downhill fast. Discover was not really welcome, and Diners Club is all but dead. So if one of the things we want in a "money" is universal acceptance, we shouldn't expect to see more than a handful of providers. I agree that today there is no sensible reason to insist that we have only one. I think in Alexander Hamilton's day it made sense, and it also made sense for the "one" to be the government, since there were no such things as trusted nationwide brand names like Visa and Mastercard.
Urgent note to kookburgers: If you are reaching for the Reply button to tell me that I am confusing currency and credit cards, or some similar crap, then you don't know what we're talking about here. This is about universal acceptance, not whether the stuff is paper or plastic. Let's stipulate that these providers should be selected by market competition, after a period during which we might have fifty or a hundred would-be "money" suppliers issuing various sorts of stuff that they propose we use as a medium of exchange. Let's also stipulate that a whole bunch of people are going to get burned when the losers lose, which will tend to stack the deck in favor of big names like American Express, and away from upstart currency wannabes like PayPal and Norfed.
I don't think many people want a return to currencies backed by individual banks, such as we have had at various times. Those were OK when people used horses for transportation, but today nobody would want to fly from Philadelphia to Seattle and try to spend a bank note from the Second Bank of Harrisburg. You certainly don't want that guy in front of you in line at the seven-eleven.
To some extent private currencies are happening already, and the Internet has been a big driver of it. Things like PayPal are essentially privately-managed currencies. They are also banks. Microsoft wants to own this business now, so maybe Microsoft will become the big issuer of private currency. Look out Uncle Sam, ten years from now Microsoft will revoke the dollar convertibility of Passport accounts, and henceforth the main U.S. currency will be called Melindas. We'll get emails from Amazon.com offering us Drudge's Last Opus , only 47 Melindas. And they don't take dollars.
It would be a stretch, but eBay could potentially pull off the same thing. Auctions are ferociously efficient marketplaces. Internet auctions have decimated the brokerages that used to move things like machine tools and airplanes around. Why not loans? We're already seeing this.
If this is going to happen, it will. We don't need frantic articles about tearing down the banking system. If some new technology has come along, like the Internet, which renders banks obsolete, then that will happen. Frankly it won't surprise me. Localized brick-and-mortar brokerages for things that are easily assessed for quality, etc. are falling like dominoes before the Internet. It's just a lower-cost technology for doing the same thing.
Of course, once the country is running on Melindas, our friends will be back to wail that Microsoft is not a federal agency, and it has a database system that tracks where every Melinda is at every moment, and Bill Gates has Special Privileges, and he could shut down the country at any moment on a whim.
So they'll want the government to break up Microsoft because it has essentially turned into a privately-held central bank, just like we had before, except that instead of Alan Greenspan we have Steve Ballmer. And then the Microsoft shills will pour in to tell us that Melindas are a superior product, and it's all free enterprise at work, and if the money in your pocket expires every time you buy a new wallet, it's for your own good, to make sure you aren't being robbed.
I don't want to be here for that thread. |