"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 China's Communist Party is headed for collapse
- Why Texas Republicans may want to cool the anti-Obama land-grab talk
- He said he was leaving. She ignored him.
- 31 TV shows to watch in 2014
- Why the poor's investment of choice is so alarming
- How to make perfect fried rice in 6 easy steps
- Why atheism doesn't have the upper hand over religion
- Obama doesn't have a manhood problem — but conservatives certainly do
- Why we need a maximum wage
- Why Mindy Kaling — not Lena Dunham — is the body positive icon of the moment
Subscribe to the Week