Tuesday, February 20, 2007

A whimper, not a bang

The paperless world never arrived in spite of modern electronics. But The Economist ("A cash call" Feb 17) speculates that "Smart cards and mobile phones are quickly emerging as ways to pay with electronic cash."

Email did not end the postal service; it simply made it obsolete. (FedEx and UPS and many others helped, of course.) Might smart cards and mobile phones do the same for central banks? Define M1.

What makes it all so tantalizing is that the email revolution did not require an act of Congress to shut down the USPS. Likewise no act of Congress will shut down the federal banking system. But that is entirely unnecessary. All of my monthly credits and debits could easily be handled by PayPal (and their like) and the various credit card companies. We simply require enough of these so that competition is maintained.

No one knows quite how it will all come to pass but I suspect that it will be with a whimper and not a bang. Just like USPS and email.