Published by Princeton University Press, 2017
I’ve just started this book, which I got on Google Books, after ordering a hard copy from Barnes and Noble. It’s ironic that one of my first challenges in deciding to read and review a book that’s in part about the different aspects of electronic versus physical currency, was to decide whether to obtain and read this tome via an electronic, or physical media. Perhaps somewhat appropriately, I opted for both.
Having just read the first chapter, and looked at a summary, I already find myself quite intrigued by the many aspects of currency (and its manipulation) by governments, central banks, the public, and the ‘currency underground’. The author attempts to make a case for the elimination, or at least gradual phasing out, or paper currency in the developed world. And he ties this throughout to the notion of a negative interest rate and the ‘zero bound problem’ which has been faced by central banks.
However, there’s a lot more than that in this very interesting and well-written book, which he intentionally designed to appeal to a much wider audience than just economists or economic policy-makers. Indeed, he goes into the history of currencies and trade, including the basic division of ‘value backed’ currencies (The Gold Standard), versus fiat currencies, their advantages and disadvantages, thole of central banks, electronic versus physical money, virtual money, etc.
This book and the notion behind it of getting rid of $100 bills, as so many of them are used in the underground economy (which escapes government taxation and is evidently often tied to criminal activity and illegal immigration), has a bit of a wider audience than most books of this genre, hence I thought it would be useful to pursue it.
8/13/17 Well, this is going to have to be a ‘review in phases’, as I haven’t had as much time to read as I thought. I’ve finished Chapter 4.
There are some fascinating historical anecdotes in Chapter 2 about Kublai Khan and his use of paper currency w the Mongol Empire in the 13th century, and the American Colonies similar excursions, both leading to over-printing of cash and heavy inflation. I find it very useful that the author tries to tie some of the more abstract economic concepts, such as negative interest rates, in a historical context. For example, he mentions that Khan’s backing his notes by silver worth half their value is actually similar to a central bank implementing negative interest rates.
There are some nice observations about cash in circulation as a percentage of GDP. There are connections between currency outstanding and interest rates, and inflation. As one would think, as inflation goes up, people will hold less cash (because it loses value fast). And it looks like it’s the opposite for interest rates.
Some statistics stand out: 80% of currency is in $100, 8.7% of US consumers don’t have bank accounts, and the average retail transaction is about $7, with cash preferred, although its usage is slowly declining, even among the poor. Also, only about 50% of this cash is in the country.
Dollar Delight 