"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
- After Ferguson: Stop deferring to the cops
- 43 TV shows to watch in 2014
- How to adopt the perfect rescue dog
- Why the poor can't catch a break on Thanksgiving
- How to be the most productive person in your office — and still get home by 5:30 p.m.
- The hilarious hypocrisy of Republicans complaining about the imperial presidency
- In Ferguson, Michael Brown lost his life — and America's police lost the benefit of the doubt
- The lessons of Japan's latest recession
- Is it now OK to have sex with animals?
- The real story behind Deliver Us From Evil
Subscribe to the Week