The2ndAmendment
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Ban cash end boom and bust - Telegraph
Ban cash end boom and bust - Telegraph
The move could be a key moment in the advent of “cashless societies”. And once all money exists only in bank accounts – monitored, or even directly controlled by the government – the authorities will be able to encourage us to spend more when the economy slows, or spend less when it is overheating.
Having everyone’s account at a single, central institution allows the authorities to either encourage or discourage people to spend. To boost spending, the bank imposes a negative interest rate on the money in everyone’s account – in effect, a tax on saving.
Faced with seeing their money slowly confiscated, people are more likely to spend it on goods and services. When this change in behaviour takes place across the country, the economy gets a significant fillip.
The recipient of cash responds in the same way, and also spends. Money circulates more quickly – or, as economists say, the “velocity of money” increases.
What about the opposite situation – when the economy is overheating? The central bank or government will certainly drop any negative interest on credit balances, but it could go further and impose a tax on transactions.
So whenever you use the money in your account to buy something, you pay a small penalty. That makes people less inclined to spend and more inclined to save, so reducing economic activity.
Such an approach would be a far more effective way to damp an overheated economy than today’s blunt tool of a rise in the central bank’s official interest rate.