Paper Money with an Expiration Date
1–10 of 28 posts
Re: Paper Money with an Expiration Date
#2What concerns me about his idea is that businesses would be less incentivized to take payments if your money was closer to expiration. This could lead to situations where my dollar is worth significantly less near expiration than someone else's dollar that just got stamped. In this respect, businesses get screwed because the money that they just accepted is slowly deflating in value.
Expiring money basically incentivizes short term thinking over long term goals. Businesses won't save for improvements, retirement won't exist, etc.
Re: Paper Money with an Expiration Date
#3That system is essentially what we have now, but less subtle. A 2% inflation target means that the purchasing-power of held currency is halved in 36 years.
Re: Paper Money with an Expiration Date
#4So what is to stop someone from depositing the near expiration date money into a bank and then withdrawing it right away?
Re: Paper Money with an Expiration Date
#5That system is essentially what we have now, but less subtle. A 2% inflation target means that the purchasing-power of held currency is halved in 36 years.
Yes, it's essentially the same as inflation. Although this scheme does open the possibility of having some lesser dollar that's statutorily inflated while perhaps the greater dollar retains its value. That might make it possible to throw a massive slug of stimulus into the economy without increasing the money supply.
Re: Paper Money with an Expiration Date
#6What concerns me about his idea is that businesses would be less incentivized to take payments if your money was closer to expiration. This could lead to situations where my dollar is worth significantly less near expiration than someone else's dollar that just got stamped. In this respect, businesses get screwed because the money that they just accepted is slowly deflating in value. Expiring money basically incentiv…
I have not thought about this too much but what if the expiry date resets when it changes hands and there is some tx fee to discourage passing money around unnecessarily?
Re: Paper Money with an Expiration Date
#7The fed has recently said they aren’t going to try and prevent inflation any longer - they think that acting aggressively to prevent inflation before it hits has actually hurt the economy. So, perhaps there is something to this logic.
But I will say, in many ways we have the opposite problem right now. Too much money chasing too few good opportunities for a return has led to things like SoftBank, WeWork and many others.
Re: Paper Money with an Expiration Date
#8What concerns me about his idea is that businesses would be less incentivized to take payments if your money was closer to expiration. This could lead to situations where my dollar is worth significantly less near expiration than someone else's dollar that just got stamped. In this respect, businesses get screwed because the money that they just accepted is slowly deflating in value. Expiring money basically incentiv…
I think you’re right... it seems to me like this would only work if it was accompanied by a law along the lines of this money having some final redemption value, or some venues that were required to accept it.
For example if this “stamped money” expired at the end of the year, everyone is required to accept it until then, and for six months afterward it can be redeemed at a bank for fifty cents on the dollar... then instead of people refusing to take it you’d have a big flurry of holiday shopping but increasing prices for stamped money at the end as its value neared the drop off. You would also have some people probably try to gamble on acquiring a lot of that money at a discount before its expiration thinking they could flip it in time or acquire it for less than its redemption value from people who just wanted to unload it.
It’s an interesting thought experiment.
But I think in today’s world of mostly electronic money, something like this would be much harder to pull off. It would presumably only apply to cash - since the entire banking system would have to revise itself to track expiring dollars separately - and I think rather than seeing a lot of adoption you’d be more likely to see many businesses suddenly stop accepting cash entirely.
Re: Paper Money with an Expiration Date
#9So what is to stop someone from depositing the near expiration date money into a bank and then withdrawing it right away?
In France, when people deposit more than 10k€, the bank has to notify Tracfin, the service of the French Ministry of Finances that fights money laundering. And you have to be able to explain where the money is coming from.
Most of the time, people with large amounts of cash are workers (skilled construction workers...) that are able to get a significant part of their income in cash and do income tax avoidance. Or criminals (drug dealers...).
Having to deposit their hidden savings all-at-once is not good news for them. This is basically what happened when France switched to the Euro.
Re: Paper Money with an Expiration Date
#10That system is essentially what we have now, but less subtle. A 2% inflation target means that the purchasing-power of held currency is halved in 36 years.
Yes, it's essentially the same as inflation. Although this scheme does open the possibility of having some lesser dollar that's statutorily inflated while perhaps the greater dollar retains its value. That might make it possible to throw a massive slug of stimulus into the economy without increasing the money supply.
I would think the "easier" way of doing this is Federal Reserve dollars, issued (in Fed issued deposit accounts) at the start of a calendar period with the explicit and clear understanding to accountholders that these funds evaporate at the end of the calendar period (EBT/food stamps come to mind; depending on the state, your EBT/food stamps funds expire after about a year if unused).
I'm unsure how you get around folks who will launder this money into assets to counter the inflationary mechanism, unless you're means testing in some capacity, or you just don't care about the cohort who does this (which is a reasonable approach imho).