How would consumers in America function without paper currency?
Miles Kimball, Professor of Economics at the University of Michigan, advocates the switch from paper to electronic currency.
“The thing you want to do is make it so we can stimulate the economy with monetary policy. A lot of people don’t realize that the reason we’ve had such a long recession is because the Federal Reserve was not able to lower the interest rate because of the way our system uses money. If you tried to make the interest rate negative, which would be what is needed to stimulate the economy, then people would just keep money under the mattress. Because of that, the Federal Reserve is not able to lower the interest rate low enough to get the economy moving.”
The switch to electronic currency, said Kimball, would take the limitation away from the Federal Reserve.
“People may not realize it, but’s it’s not just recessions that are a result of this limitation on what the Fed can do. It’s also inflation.”
The option of government-issued credit cards is another, less-radical proposal, says Kimball.
“The idea is, simply, we could make that a larger amount of money instead of sending people a check. You ask people to pay it back.”
Kimball said there are currently no countries currently making the transition.
However, once one country begins using electronic money as a primary currency, others will soon follow