Q&A: Is Electronic Money the Mark of the Beast?

Simon: My name is Simon Hauser. I write for a german media outlet (Godmode-Trader.de) and occasionally I address your fascinating thoughts about monetary policy and in particularly e-money.

I appreciate that your “confessions” not only gravitate around the quantifiable sphere, but also around deeper and (by economists) often neglected issues like religion and the like.

To my knowledge the bible is the only sacred book that talks about E-Money - or to be more accurate - the abolishment of cash:

And he causes all, the small and the great, and the rich and the poor, and the free men and the slaves, to be given a mark on their right hand or on their forehead, and he provides that no one will be able to buy or to sell, except the one who has the mark, either the name ofthe beast or the number of his name. (Revelation 13:16)

What is you opinion about the potential dangers emanating from a unholy alliance between E-Money and a „beast“ for the concept of liberty? Wouldn’t E-Money – besides all positive effects it offers – be the ultimate tool of subjugation in the hands of a future system, which might lurk in the fat tail of probability distribution?

Best regards from an avid reader.

Miles: At first I was excited to read in your email that e-money was in the Bible. But as you point out, only as the work of the devil!

As far as liberty goes, it is important that my system is one that keeps paper currency around. It does not try to disadvantage paper currency, only to keep the interest rates on paper currency in line with the interest rates available electronically.  

Also, as a critique of the idea of just abolishing paper money, I always argue that it is hard to stop people from using paper currency completely because for some transactions there is a high demand for secrecy. If a government tried to abolish paper currency completely, people would start using foreign paper currency. A government could effectively tax paper currency to a substantial degree before people switched to a foreign paper currency, but there is a limit. (For the graphs in my Powerpoint file, I took a -20% interest rate on paper currency as my very rough guess for about how low the interest rate on domestic paper currency could be before people switched to using a foreign paper currency–in a context where the government was doing the usual things to discourage people from using foreign paper currency.) I don’t think it is that easy to take away people’s ability to do transactions in secret.

Miles’s Addendum: A famous economist (whose identity I will protect) made to me the following very interesting point: for those who worry about oppression by a future government worse than the government we have now, it is a mistake to put any faith in paper money. It is very easy for a government that sees paper money as subversive to make paper money worthless by issuing huge amounts of it. A technically cutting-edge country willing to annoy foreign countries, can even make foreign paper money worthless by issuing large amounts of high-quality counterfeit bills. Rather than putting faith in paper currency, a much better check on the power of a future government would be for the current government to issue convenient gold and silver coins of specified weight that could be used as money in dire future circumstances. As long as these gold and silver coins were not given a dollar value in non-apocalyptic times, but rather were labeled by weight, and were not used as a unit of account, they would not interfere with monetary policy in pre-apocalyptic dimes. (Their dollar values would fluctuate in value relative to electronic dollars according to supply and demand for gold and silver.) Of course in an apocalyptic situation, these coins would become a unit of account among those fighting the oppressive government–and that is as it should be. 

Notice that having had a gold standard means nothing in an apolacyptic situation because the government can simply go off that gold standard; what is needed in an apocalyptic situation is actual gold coins of known weight, or something else that can easily be used as a commodity currency. Those gold coins or other things that can serve as a standby commodity currency don’t cause any trouble in the non-apocalyptic situation as long as they have a fluctuating price relative to the unit of account in the non-apocalyptic times.