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The savvy investor, meanwhile, will realize that the price of gold is sure to crash when the recession ends and interest rates go back up, which should put a break on hoarding. It would also increase the wealth of everyone who already owns jewelry, expanding their consumption. But this would amount to a price boom, creating mining and exploration jobs. Some people could, it’s true, try to horde gold, diamonds, or other valuable primary commodities. Too much unemployment? Lower interest rates below zero, Americans will start spending and investing again, the economic will grow, and unemployment will go back down to its “ natural rate.” But what if you couldn’t withdraw cash? What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money? Well, then, we would have solved our depression problem. If the rates were driven below zero-in effect a tax on holding cash in the bank-people would just withdraw money and store it in shoeboxes instead. People prefer to keep money in bank accounts because it’s convenient and because you get interest on it. Instead, most of the American money supply consists of bank accounts and other electronic stores of value. At any given time, relatively little paper currency circulates in the United States. Stop for a moment and ask yourself why the interest rate can’t be reduced much below 1 percent. Now we come to the miracle of the cashless society. The first country to impose that ban will find there’s an appealing hidden benefit: Without cash, there’s no need to ever have an extended recession. At that point, cash will be left with its rump use as a medium of exchange for drug dealers, tax evaders, and other shady operators and we can expect countries to start banning it altogether. Meanwhile, the rise of phone-based mobile payments services such as Square and the emergence of a complete mobile banking industry in Africa point to the arrival of the day germ-ridden cash will be as inconvenient for small transactions as it is for large ones.
Mo money mo problems future movie#
Italy wants to cut down on tax evasion, but we should hope that other countries start to realize the enormous economic benefit of ditching cash.Īlready, a movie character depicted as carrying a large quantity of cash can be reliably assumed to be doing something illegal.
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A little-noticed tidbit in the ongoing European budget negotiations is Italy plans to ban the use of cash for transactions over 1,000 euros.