"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
- Russia is stealthily threatening America with nuclear war
- 6 things the happiest families all have in common
- The science of sex: 4 harsh truths about dating and mating
- 13 Urban Outfitters controversies
- 43 TV shows to watch in 2014
- Is 'feminism' just another word for 'liberalism'?
- What political elites don't understand about Scotland's push for independence
- Obama knows he can't really 'defeat' ISIS. Americans need to wake up to that reality, too.
- The U.S. dollar has been strengthening for 3 straight years! (That's not good news.)
- Can we lead spiritually fulfilling lives without religion?
Subscribe to the Week