[Guest post] Free Money

Is there anybody that still thinks pennies are a good idea?

A cup of coffee at a nearby WaWa is a buck and fourty-six cents. To avoid walking out with four useless disks of copper, I pay them with a credit card, shafting the WaWa corporation with a transaction fee of several cents and profiting a frequent flier mile. I have a hypothesis that the WaWa corporation is a money laundering operation for the mob, their stores hand out so much unnecessary coinage.

If anybody needs evidence that our government is incapable of cutting useless expenditures, they need look no further than the coin mints. Pennies and nickels cost about twice their face value to make, yet congress has repeatedly sidelined legislation that would reform currency.

Before I go on, I'd like to know how many of your right-wing extremist readers of the WyBlog are with me on this? Are any of you conservatives out there clinging to your guns, religion, and pennies? I'd like to know what possible argument you could have against rounding prices the nearest nickel, at least. Do you all have old houses with screw-plug fuses replaced with pennies? Too cheap to play nickel-ante poker? Fans of Abraham Lincoln? Does drill baby drill extend to dig baby dig for copper and zinc?

If conservatives could say yes to anything, maybe they could assent to eliminating costly pennies. Then again, I expect I'll soon lose any bi-partisan support should I suggest eliminating nickels, dimes, quarters, and paper money as well. Nevertheless I say: get rid of it all. Physical currency is increasingly expensive to manufacture as more and more "high tech" features are needed to discourage counterfeiting. Maybe North Korea prints more US hundred dollar bills than the US Treasury. And who among us hasn't wasted precious minutes of our lives waiting on line behind some old biddy as her palsied hands tediously extract penny after penny from her coin purse.

Please calm down. Before you all freak out and tell me why you love the Benjamins -- why paper money is the salt of the financial earth -- and that I'm a lunatic for suggesting we eliminate it, please give me a chance to explain. To begin with, I am not suggesting we eliminate cash. Cash is fundamental to commerce. In fact, I think the more we all use cash for transactions, the more fault tolerant our economy becomes. Nor am I suggesting a gold standard or auditing the Fed. Please try to pay attention.

What I'm suggesting is that the government stop minting physical currency; the government should promote the use of electronic cash instead. Traditionally minted paper and metal currency needs to go the way of wampum and buffalo hides. The direct benefit will be billions saved in minting costs and lower currency friction. Freed from the difficulties associated with credit cards, affordable "micropayments" in electronic commerce can become possible.

When I say electronic cash, or ecash, I'm not talking about credit cards, debit cards, cell phone payments, EZPass, or any scheme where there is no value intrinsic to the medium of exchange. These things are not ecash. There's no value inside a credit card. A credit card merely stands as thin proof that you might someday pay for the good or service rendered with "real" money. Similarly, debit cards don't have value in themselves, but simply provide a convenient means for accessing value stored elsewhere. None of these systems are anonymous. There is a central authority that knows the identities of all the parties involved in every transaction, and makes sure "real" money is ponied up where necessary. None of these systems provide final payment. They are revocable. Sales are not final; buyers can renege on purchases, possibly months later.

What I mean by ecash is a system like Bitcoin. Operating without any central authority, Bitcoin uses peer-to-peer technology to enables near-instant, irrevocable, near-anonymous cash-like payments to anyone. Value is stored as information and any transactions are audited collectively by the network. There is no "central bank" regulating Bitcoin. There is no corporate overlord or government sovereign to provide a magic fiat to make Bitcoin work. Bitcoin works because it's based on mathematics. But Bitcoin is not an academic future possibility; it exists today. Millions of Bitcoins are in circulation. There are markets established for converting between Bitcoin and major world government currencies.

Ecash has many advantages over physical cash. It can't be counterfeited, and it can be transmitted at the speed of light rather than the speed of a Brink's truck. On the other hand, an ecash system like Bitcoin shares some disadvantages of paper currency. If you are careless, ecash can be lost or stolen. Then again, unlike the paper currency stuffed in your mattress, ecash savings can't burn up in a fire (assuming you have your ecoins saved in the cloud or on offsite backup), and modern cryptographic algorithms that protect your coins are stronger than any vault. From the point of view of government and society, a possible disadvantage shared between ecash and paper currency might be the difficulty in taxing ecash. Law enforcement may have difficulty tracking ecash transactions by criminals. Yet these disadvantages are nothing new. Governments have tolerated these problems with cash for millenia. And remember: physical cash is the preferred medium of exchange for bribes to politicians and government officials.

Although the Bitcoin economy exists today and continues to grow, I'm not necessarily suggesting the US government adopt Bitcoin as a replacement for pennies. I merely point at Bitcoin by way of proof that such a system can work. You could trade Bitcoins for products and services right now, assuming you had any coins. But wait! The WyBlog can set you up with free money. Do you want to try ecash first hand? Well then here you go: the first 10 individuals to post a comment here that includes a Bitcoin payment address will receive one free bitcoin. You heard that right. Free money from the WyBlog. Last I checked, 1.00 BTC was worth about six bucks. Enough for coffee and a breakfast sandwich at WaWa. Keep the change.

Posted at 15:00 by Nadz   [/guest/nadz]   Comments | Perm Link |
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