A Finextra member 20 May, 2009, 23:46 0 likes

You bet they love the seigniorage income that much! Mind you, unless we also see the abolishion of sex, drugs and taxation, I imagine your average citizen would be against killing off physical banknotes too. Have you ever seen the results of tests to investigate banknote contamination by cocaine? To put it into context, last week police in Sydney made random stops of car drivers coming into the city to test them for drugs. 9% tested positive.

A Finextra member 21 May, 2009, 16:01 0 likes

Fundamentally cash is just a medium of exchange and people will start using shells or meteorites if gold is suddenly or mysteriously devalued (very possible) and cash is withdrawn (less likely). Plenty of diamonds available and although they can be manufactured, there is little seignorage in making them at current prices.

Possibly a more realistic goal might be to get a slightly better taxation handle on the electronic money possibilities. The issues of identity and taxation are likely to be more solvable and fruitful for cash strapped governments.

Without taking the incentive out of holding cash, it won't go away, and in many cases cash or cash related events are the incentive for people to work. It would be a vary dangerous move to undermine cash in order to encourage electronic money, at a time when trust is so badly shaken.

As the governments were far behind the real events with the financial crisis, they are likely to be far behind future sentiment events. There will be some level of 'sentimentality' about cash.

The only way cash will be supplanted is by a more convenient, safe and reliable alternative. It would be presumptuous to describe anything extant thus.

The taxation issue is an obvious case of backward thinking anyway - we should be taxed purely on consumption, not effort. Therin lays the solution to global warming, government's needs and perhaps economic and political stability.