"Eliminating paper money could end recessions," says Matthew Yglesias at Slate. For decades, it's been clear that cutting interest rates stimulates the economy by encouraging people to spend rather than save. "But there is a problem with this simple recession-fighting formula. The number zero." The Fed has already slashed interest rates to a record low between 0 and .25 percent. If interest rates go below zero — "in effect a tax on holding cash in the bank" — Americans would pull their cash out of financial institutions "and store it in shoeboxes instead. But what if you couldn't withdraw cash" because there was no cash? Here, an excerpt:
Now we come to the miracle of the cashless society... What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money? Well, then, we would have solved our depression problem. Too much unemployment? Lower interest rates below zero, Americans will start spending and investing again, the economy will grow, and unemployment will go back down to its "natural rate."
Read the entire article at Slate.
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why Mitt Romney is perfectly poised for a comeback in 2016
- 8 secrets to steal from power networkers
- Here's the schedule very successful people follow every day
- Why is the West so afraid of Islam?
- How to make classic pulled pork
- What would a U.S.-Russia war look like?
- The Nazi smart bomb that inspired China's most dangerous weapon
- The best places to find love — and lust — according to science
- Why GOP reformers are bound to fail
- The mystery behind China's aggressive push into space
Subscribe to the Week