In Belarus, the government doesn’t allow trading of its ruble outside a narrow price range, which greatly overvalues the ruble— so there is a price floor on the ruble compared to the euro or dollar. Because of the floor, currency trading had dried up: who would want to sell foreign currencies for grossly overpriced Belarussian rubles??
A friend of one of my students has a website designed to overcome rigidities in this market, sort of a Craigslist for currency. People specify amounts willing to buy or sell, agree to trade at some price and arrange a meeting place (often one of the empty currency-trading booths!). When they meet, trade nominally occurs at the official price floor, making the transaction nominally legal; but the person selling rubles makes side payments to the buyer to lower the price sufficiently so that the trade actually takes place at the equilibrium price.
One more way in which technology helps markets circumvent imperfections and rigidities.
(HT to MK)
Last weekend, I was walking around New York’s Lower East Side when I stumbled upon an interesting restaurant. The counter was serving Thai food, but they didn’t take cash – they only took time.
For a home-cooked lunch (with table service), I was told I’d have to pay with a half-hour of my time. This was an alternative economy staged by artists Julieta Aranda and Anton Vidokle as part of Creative Time’s Living as Form exhibition, part of a larger community movement of time banks going on nationally.
A time bank is not a barter system. Your good (or service) is not directly exchanged for another good or service. There’s a medium of exchange: it’s time, not money.
A reader named Marcus Kalka writes:
I have a weird question, but a good one. With all the talk about the value of the U.S. dollar falling and the U.S. dollar losing its status as the world’s reserve currency, I am curious to know your guys’ thoughts on what possible temporary alternative currency you believe would be the most optimal for us here in America in a hypothetical future doomsday scenario — i.e., what one should stock a lot of in his or her basement in the event of a [heaven forbid] total financial meltdown? Historically, cigarettes, alcohol, candy, and even packs of mackerel have been used as a bartering commodity currency where cash is not as useful or cannot be used. And so, my question for you is this: From an economic standpoint, which item do you think would make the most ideal “doomsday currency” in the U.S. for this time period? Perhaps cigarettes or wine? Gold or silver coins? Cans of tuna? Baseball cards? Bottles of water? Any thoughts? And any ideas on a potential makeshift currency sign?
Tough one. How about … gems (the old standby), cell phones, iPads, SIM cards, incandescent light bulbs, toolboxes, running shoes …
A reader named John Neumann writes:
Guys, I had a thought today as I was walking to work in the sweltering D.C. morning heat: As the U.S. has increasingly become a cashless society with the rise of debit- and credit-card use, has there been a decrease in panhandling, busking, and homelessness? Obviously, fewer people carrying cash or change means panhandlers, buskers, and the homeless will have fewer and fewer people giving them money on the street. Would busking and panhandling become extinct if we do eventually become a completely cashless society? Is that already happening?
Great questions, John!
I don’t know the answers, but I might now seek them out. If we do ever get truly cashless, presumably you could transfer money from your digital wallet to a panhandler’s digital wallet. Might it be hard for a panhandler in possession of a digital wallet to appear needy? Probably not: if they are ubiquitous, the cost of a digital wallet itself would likely be near (or even below?) zero.
John’s questions raise two other thoughts:
+ I wonder if the appeal of going cashless might wane in light of so much high-profile financial hacking going on.
+ If/as we do get more cashless, what are the other unseen ramifications? Personally, I’d be happy to do away with the stuff. It’s dirty, inefficient, and produces a lot of troublesome by-products.
While arcades in the U.S. (and most of the rest of the world) are fading, they’re still strong in Japan. Why? According to Mark Cerny, an arcade gaming expert, it has to do with currency. Read More »
We’ve all done it. You’ve been introduced to someone, but forget his or her name. And so you spend the rest of the conversation studiously avoiding needing to refer to your new friend by name. Well, as far as I can gather, the same thing happened on Wednesday to Treasury Secretary Tim Geithner. He gave a talk at Brookings that was all about China, but if you didn’t know better, you could be forgiven for thinking he had forgotten her name. Read More »