Estonian Economist Suggests Abandoning Cash 454
J-Georg writes "Raul Eamets, professor of macroeconomics at the University of Tartu, proposed today during his TEDx talk that Estonia should stop using cash at all when adopting the Euro as the national currency (Estonian original). He also pointed out that abandoning cash would not be only important for the Estonian economy as a whole but also is a real challenge for both IT and banking sectors and would also improve Estonia's image as an IT-tiger."
Re:Abandon all your cash (Score:2, Insightful)
If you are the only one with cash and everybody has abandoned it, it would be useless (except to burn it and keep yourself warm may be).
no thanks (Score:5, Insightful)
So I won't be able to give $20 to a friend without: 1) being tracked; and 2) giving a cut to some payment processor like PayPal? I'd rather use cash.
Re:no thanks (Score:5, Insightful)
So I won't be able to give $20 to a friend without: 1) being tracked; and 2) giving a cut to some payment processor like PayPal? I'd rather use cash.
But that's the whole reason for governments wanting to eliminate cash: it means every transaction will be taxed and no transaction will be possible without their permission.
Well, except that everyone will start using US dollars or whatever for their free market transactions.
Re:no thanks (Score:4, Insightful)
Without cash... (Score:5, Insightful)
Sounds great... (Score:5, Insightful)
Ironic (Score:3, Insightful)
This comes out at the same time as I have stopped using credit/debit cards. I've started paying for everything with cash ( minus my web purchases... ). The government's ability to track non-cash transactions has improved to the point where I would rather have my privacy and take my chances with the possibility of theft.
how will people pay for dope, sex, gambling (Score:1, Insightful)
illegal goods, illegal help, kickbacks, etc. It sounds like this economics professor thinks the answer is, they can't, and therefore all this crime and shady stuff will go away.
Nice try. Economists tend not to live in the real world. You would've thought that Estonians would remember an infatuation authorities had with the ideas of this guy Karl Marx...
Re:how will people pay for dope, sex, gambling (Score:1, Insightful)
It would go to gold or precious metals. You can't make gold or platinum, and the ecosystem around those metals is millenia old.
Of course governments will make owning gold bouillon illegal. This means that the transactions will go on, but more hidden.
Re:Might I suggest an alternative currency (Score:4, Insightful)
You clearly have not read The Hitchhiker's Guide to the Galaxy series. (I believe it was Restaurant.) If you had, you would know that the early Earth colonists' solution to this particular inflationary dilemma was to burn down all the trees. Problem solved.
I suggest you bow your head and accept that you have been judged on your geekdom, and found lacking. You may recover some lost face by immediately purchasing or borrowing a copy of The Ultimate Hitchhiker's Guide [amazon.com].
Re:no thanks (Score:4, Insightful)
Or Euros because the currency in question is the Euro, and it's already printed and minted in Europe where this is taking place.
Re:how will people pay for dope, sex, gambling (Score:2, Insightful)
illegal goods, illegal help, kickbacks, etc. It sounds like this economics professor thinks the answer is, they can't, and therefore all this crime and shady stuff will go away.
That's where the black market forms and uses:
1.Another country's currency.
2. Barter
Re:Ironic (Score:3, Insightful)
"... take my chances with the possibility of theft."
Compare the chance of a mugging and the average amount of cash in your wallet you would lose
Compare the chance of a mugging and the average amount the crook could charge to your card(s) before you can report it. Maybe you will be able to halt the credit card theft at the regulatory limit of $50, but with debit cards you might not be so lucky.
Now compare the chance of online fraud ("identity theft") or skimmers at an ATM (or other non-intrusive theft) and the potential loss of thousands of dollars along with the value of your time in correcting the fraud
I think carrying lots of cash is less risky than using debit or credit cards for transactions.
Re:no thanks (Score:4, Insightful)
if this were done in the US for example, you'd probably have people starving to death because they have bad credit
Heard of debit cards? They're very common over here in Europe and go directly against your bank account. As long as you are using an online terminal, like pretty much every grocery store has, then the card will only work if you have money. The only people taking something on credit would be private transactions or backup solutions if the terminals are offline, everyone who regularly handles money today would get one if they don't already. What I don't like around here is that they're using the "by volume" argument to say removing cash is not a problem, which is ridiculous. It's no secret that I do groceries and pay for utilities and insurance and so on, but maybe I don't want that medical specialist or strip club or whatever on there even if they make up 1% of the volume. Same with my location, I'm often at home or at work so by duration I mostly don't care if everyone knows where I am. Again, it's the exceptions that matter.
Re:Abandon all your cash (Score:5, Insightful)
Oh sure. Like most any man on the street he happens to have the time, income to support himself, money to start the project, PHDs in encryption, economics, programming and good expieriance at international diplomacy to implement this himself and not be a lazy ass.
Better yet: stop using debt as money (Score:4, Insightful)
Few people realize that we use debt as money in our monetary system. All those dollar bills and Euro notes? Those are actually IOUs that have to be repaid with interest to central banks. All those dollars in your bank account? They too are just debt markers that have to be repaid with interest. The problem is that in order to repay the interest, new money has to be created; but the only source of new money is new debt, with more interest, that requires more money with more interest ad infinitum.
The net result is that: 1) if all debts in society were repaid there would be no money and commerce would sieze up; 2) all debts can never be repaid because the principle + interest always exceeds the money supply; 3) the amount of debt is always increasing until there is a crash.
Everyone (except bankers) would be better off if we used debt-free money issued by your government, rather than debt issued from privately controlled central banks.
http://www.youtube.com/watch?v=vVkFb26u9g8
Re:Might I suggest an alternative currency (Score:2, Insightful)
In fact the value of currency is psychological. If one dollar buys one candy bar, why should that change if there are more dollars? Nothing has really changed in terms of the candy bar's production costs. The only reason the price would go up is if the shopkeeper decides I'm going to gouge the buyer because he suddenly has more money. But if the shopkeeper already has enough money to get what he wants, why should he raise prices?
Re:no thanks (Score:5, Insightful)
Please don't use the broken banking system in the US as your reference.
I have no problem doing instant electronic bank transfer of 20 bucks into my friend's bank account at no extra cost to either of us. In fact, we often settle the our lunch bills this way.
Only in America's broken system would you run the risk of losing money by just giving people your account number.
Yes, it made it possible for the govt to find out these records. But you have to fear being taxed only because of America's broken income tax system. Other people in sane countries don't have that problem at all.
Re:Might I suggest an alternative currency (Score:3, Insightful)
it is a natural law of economics. Everything except Imaginary Property has some hard limits built in. When you increase pool of money everybody is willing to pay more in nominal terms to be able to put the hands on desired goods which are not infinite in supply, thus prices are bid-up and new equilibrium is achieved thanks to the supply and demand mechanics. If you are not willing to bid, you will never buy anything with your watered down money. If you are a producer, you are killing your profitability and survivability when prices of everything else rise and yours do not.
Re:Might I suggest an alternative currency (Score:3, Insightful)
OK, fine. Nobody raises prices. Instantly all products sell out, since everybody has enough money to buy everything they need, everything they want, and everything that they feel like buying because its just lying there. Only there isn't enough stuff in the whole world to fill everybody's needs, wants, and whims. So people start fighting over the last few items. Someone offers to pay double, then someone offers to pay double that, etc.
Re:how will people pay for dope, sex, gambling (Score:1, Insightful)
Since the proposal was made in connection with Estonia's transition to the Euro, they could simply use existing Euro notes and coins from other countries. They are all interchangeable, and even if the local stores don't take any cash, it doesn't stop people from carrying cash for non-traceable uses. Estonia is such a small country that they even have a good justification for carrying cash, in case some authority figure has questions: they could be using the cash on trips abroad.
The price of gas (Score:3, Insightful)
Seriously? It ain't that hard to see all around you. The gas station prices their gas something something-point nine. Say it's 2.50 a gallon rounded up, but it's really 2.49.9 - so for every ten gallons you buy, you keep a penny of that 2.50. Whoopee right?
Now you're the government. You tax everyone at 7 percent.A sale of 5.33 now becomes 5.7031 - except it isn't, because registers are set to round up. So it's actually a sale of 5.71. Multiply that by how many Billions of sales in a year? In a year that's probably an extra $15.00 a year from every man woman and child. It may not make the difference between you going broke, but it does add up to those who collect the money.
Re:Better yet: stop using debt as money (Score:4, Insightful)
Wait, what? Why was this marked interesting? That's not how money actually works. Ideally, you borrow from the future (debt) so that your value growth is increased today. Eventually the additional growth increase produces enough value to offset the amount of value you took into the past. A very simple example: A farmer in a poor country spends a day walking to a market to sell his goods. The trip ruins 40% of his goods (say milk). Now he takes a small loan, buys a cart, reduces his trip, and thus only loses 10% of his goods to waste. Say he makes 20% more profit due to demand. That cart increased his effciency enough to pay for itself and then some.
Always increasing debt is when you borrow w/o enough of a increased value growth. You keep hoping that your continued borrowing will provide enough additional growth today to offset the already there debt and this one too. Crashes only happen when there is no one left to believe in your investment. Also, unlike European and American economies, some cultures such as middle eastern, Indian, and the Japanese do belive in over saving. The opposite problem... little investment is like lending to the future, but results in little growth that means more and more inefficiency... stagnation.
Re:Ironic (Score:1, Insightful)
The direct credit card charges are the absolute least bad of identity theft scenarios. It's when they get only your identity, and then use that to do things like take out loans (possibly against YOUR house), or commit a variety of other criminal acts.
You've still got ID in your wallet if you're driving, thus you're still vulnerable to the bad stuff that could take years and lawyers to clear. Mere loss of your credit card only takes a phone call.
Re:Better yet: stop using debt as money (Score:3, Insightful)
"Debt free money issued by your government" - what? :) What a laugh.
Gov't is the FIRST DEBTOR. What are you smoking - 'debt free government'?
OMG, what a mind job.
Everybody would be better off if the gov't let go of economy altogether and let the people decide what value is, what money is, forget about central planning - central planning is the reason that there are crashes.
The real money cannot be printed by governments to hide their true spending and debt, the real money will not allow somebody to inflate the monetary supply and take away your money by inflation through taxing your entire net worth.
Real money exists today, just hold that. Real money - gold/silver/some other commodity.
Of-course it's better if money is invested into productive land/productive business, something that generates value, because the true wealth of society is NOT money but production capacity.
The true measure of wealth of society is how much and what the society produces, not what the society consumes.
Consuming is easy, it's trivial, it's a consequence of production, not the other way around. The gov't (US especially) believes that consumption is the true indication of wealth.
Well, wait until you have nothing to consume, because nobody who is producing is giving it to you to consume, then tell me what real wealth is.
Re:Might I suggest an alternative currency (Score:5, Insightful)
The important point that you're missing is that currency behaves just like any other good. The shopkeeper's revenues must compete with all the other dollars in existence for the goods and services the shopkeeper requires (personal and business), just as those goods and services must in turn compete with all other goods and services for the higher-order goods (like raw resources and labor) required to produce them.
If the shopkeeper were to decide not to raise his prices despite the existence of more dollars in circulation, then he would receive the same revenues per candy bar sold and thus be limited to bidding for new ones at the same prices as he used to pay. However, other shopkeepers who did raise their prices can now outbid him, which means he won't be able to get enough new candy bars to replace his old stock; the same amount of dollars won't buy as many as it used to. If all the candy-bar retailers banded together and chose not to raise any of their prices then the same problem would still exist regarding the higher-order goods required to produce the candy bars in the first place. Some of these goods, such as labor, are common to all production, which means that all products compete with one another to some extent—and that injecting money anywhere will affect all prices eventually.
Essentially, in order to prevent a general rise in prices you would have to convince every single holder of dollars, including those who hold the newly-created ones, to act as though the supply hadn't changed. Good luck with that. :)
Re:Abandon all your cash (Score:3, Insightful)
From the computational point of view, unlimited precision is not free (and very prone to problems)
a fair rounding system goes a long way
I want to be able to sell virtual goods at $0.00056
Well, you can do that. Take their CC number but only charge them if they go beyond a certain value. And then account for the rounding and compensate accordingly in subsequent transactions.
(also what's with slashdot not allowing copy-paste on the comments??)
Re:Pie in the sky (Score:2, Insightful)
Advantages of no-cash: [...] All the rich people would have to pay all their taxes.
This would only be the case if all the rich people happened to carry their vast wealth around as cash in order to avoid the tax collector. They don't. They keep it in banks and investments.
Re:Abandon all your cash (Score:4, Insightful)
Your getting close to the real problem of abandoning cash...due to the transaction fee's charged by the banks.
But this is a logical fallacy, right? Your assumption is that electronic transactions cost a minimum amount of money, but cash transactions are free.
But cash transactions do involve work! The bank teller takes money and gives money, all day long. That person gets paid, and all they might do during the day is handle cash. If a teller makes $100/day, and processes 200 transactions a day, each transaction cost the bank $.50.
That entire time, the teller is using computers that interface with backend servers. Each of those machines, and the network routers/switches in between are sucking down electricity. And there are people behind the scenes, making loan deals with the Federal Reserve (in the US). And people who do various paperwork, and people who run collections, people who do technical/customer support, etc., who all work for real money, and whose job is to directly or indirectly support such cash transactions.
In the cash world, the bank "eats" these costs. Obviously, they don't really eat them, they just put them into interest rates. The electronic transaction world really doesn't seem to have any more costs, but banks are requiring transactions fees. In other words, they are trying to recoup their costs up front, something that is impossible to do in the cash world due to tradition.
Moral of the story: There is no such thing as a free lunch. Cash is no better answer than electronic transactions.
Re:Flamebait (Score:3, Insightful)
So what you basically want to say is that it is OK to break international law?
I'm not passing judgment. I'm describing the way the world works.
And this is not a "border change", this is making of a country that never existed in history.
That happens all the time too. That's the history of the world.
I really didn't expect from you guys to feed me some copypasta from Fox News.
What did I copy and paste from Fox News? The only thing I copied was a link to Wikipedia containing a factual list of countries that recognize Kosovo, including the United States and most of the European Union. Yes, plenty of countries don't recognize Kosovo. That's why it's a disputed territory, and certainly not the only one in the world.
Here's another Wikipedia link: International Court of Justice advisory opinion on Kosovo's declaration of independence [wikipedia.org]
"the declaration of independence of the 17th of February 2008 did not violate general international law because international law contains no 'prohibition on declarations of independence'."