If you were to drag a $100 bill through Harvard Yard, there's no telling what fool thing you can get a Harvard professor to sign onto, even if it hurts themselves. Drag enough of them through Harvard Yard and you can probably even get a former president of the university to demand that all $100 bills be eliminated from existence.

Others have gone far beyond that proposal, demanding that physical currency be eliminated altogether, and even taking action to realize their dream of a cashless society.

We have one argument against these proposals to eliminate physical currency as a legitimate form of payments in everyday transactions.

Because of the glare on the glass in the image, here's the text of the photo that was snapped within the past few weeks:

Credit and Debit is currently down at the moment. We can only accept cash payments at this time.

Thanks,

Circle K Staff

Inside, we witnessed customers who missed the sign posted on the outside door be turned away, their purchases of chilled containers of carbonated beverages defeated by a credit and debit transaction processing system that just wasn't connecting to the network. Which frankly, is something that many of us will directly observe several times a year without taking much notice, on account of our seeing it happen often enough that it's not some rare phenomenon.

And so, with a single sheet of paper taped to a glass door, the staff at just one Circle K has demonstrated a critical failure of any plan to eliminate physical currency from the economy.

With physical currency, it is possible to continue engaging in trade and commerce during any of the following scenarios that would quickly and easily bring electronic commerce through credit and debit charges to a halt:

• Power outages, including those that last for days on account of things like severe weather and other disasters, whether man-made or natural.
• Network outages caused by hackers or glitchy software upgrades or broken cables
• Poorly considered economic policies, such as negative interest rates, where storing one's wealth outside of banks becomes necessary to preserve its value, which large denomination bills can facilitate.

Eliminating physical currency then would increase the vulnerability of a nation's economy to damage from such calamities because it removes a key redundancy by which which economic activity may otherwise continue in the face of such obstacles. A nation that adopted such a policy would effectively be harming its own national security.

Now, here's the fun part. Former U.S. Treasury Secretary and Harvard President Larry Summers cited the popularity of large denomination bills among regular criminals in his argument for why he believes the $100 bill should be removed from circulation.

But the whole Panama Papers scandal that just erupted onto the world stage reveals that almost all of the money involved in the shady dealings that took place over years wasn't in the form of $100 bills. Instead, the billions that were being unlawfully funneled into the shell accounts of the crooked and corrupt were moved almost entirely electronically through established financial institutions. Apparently, the really big criminals are really big into the modern convenience of electronic commerce!

That's why we're going to suggest a smarter alternative - one that even a former Harvard President should consider signing onto, because not many criminals would consider dragging anything so valuable through Harvard Yard.

Then again, this is Harvard we're talking about. For regular people, it probably wouldn't be a bad idea to keep some cash around that could be considered to be part of one's disaster preparedness kit.

Labels: business, crime, currency exchange, economics, trade

- posted by Ironman at 5:02 AM | Permalink | Home |

Greg Mankiw's advertisement for his economics texts today provides a neat springboard to do one of our favorite things with his Principles of Economics: to compare its relative prices in different markets!

When we did this exercise back in December 2006, we found that UK-based buyers of Mankiw's 4th edition of his Principles of Economics text had a 4% discount compared to their US-based counterparts.

Shortly thereafter, we found that the comparative discount that UK buyers of Mankiw's text could obtain through purchasing it through the US-based Amazon.com disappeared, as the US price increased to eliminate the difference between the US price and the price available through the UK-based Amazon.co.uk.

This makes sense in economic theory, as the lower price of an identical product in a different market represented an arbitrage opportunity for UK buyers of Mankiw's book. The US price moved to a new equilibrium that effectively eliminated the difference in prices between the two markets, leading to the efficient result of one price for identical products, much as happens with the price of other commodities, such as oil.

So, let's now check in on today's state of affairs. First, we'll look at a screen shot of Mankiw's book on Amazon.co.uk:

Using XE.com's Universal Currency Converter, we find that the equivalent of Mankiw's 75.00 GBP price in the UK is 149.65 USD:

Now, let's look at today's price of Mankiw's text on US-based Amazon.com:

Here, we find that Mankiw's book is selling at 134.23 USD. Converting that price from USD to GBP:

At 67.28 GBP, UK-based buyers of Mankiw's book through the US-based Amazon.com would realize a savings of 10.72 GBP, or rather, 14.3% off the book's base price in the UK. What's more, even factoring in international shipping costs (approximately 6.98 GBP) and the 1.99 GBP sourcing fee, UK buyers would still come out ahead!

If you're in the UK, act now while "Madman" Mankiw's screaming buy lasts!

Labels: book, currency exchange, economics

- posted by Ironman at 11:24 AM | Permalink | Home |

With apologies to Homer Simpson, we came across this fun tidbit (via PSD Blog):

• SOMETIMES low tech is much better than no tech. A simple, affordable way to apply crop fertiliser directly to plants looks set to revolutionise the way poor farmers in sub-Saharan Africa grow food. And it all hinges on beer bottle tops.

Beer caps represent a case study in good design - they're attractive, light weight, inexpensive, fun and far more functional than the original designer(s) would ever have expected. So functional, in fact, that we thought it might be useful list a handful of the applications, other than the new agricultural one above, to which we've found this marvelous device put to use:

1. Keeping carbonated beverages in their bottles. Yes, this application is pretty obvious, and sure, screw tops are effective too, but traditional beer caps are less expensive and use much less material. Also, even though they've been around since 1892, there's still a lot of innovation at work!
2. Marketing. Not only can they tell you what's inside a bottle, they can also tell you if you've won a promotional contest!
3. Money. Cameroon is the real leader here, but we're still hoping the U.S. Mint will recognize that the Golden Dollar is a bust and will partner with U.S. breweries for its replacement.
4. Marking trails. We guess we could leave a trail of beer bottles along our path as we mark where we've been when we've ventured into the wooded wilderness, but beer caps are far lighter and the ridges on the edge are ideal for pressing into tree bark without damaging the tree.
5. Refrigerator Magnets. For decorating your refrigerator or just holding up important notes or children's artwork!
6. Jewelry. Or more specifically, earrings. Save hundreds over traditional gold loops and diamond studs!
7. Clothing. If this bicycle innertube/beer cap belt doesn't convince you that recycling is the future of fashion, nothing will. Then again, perhaps a bikini made from beer caps might convince you....
8. Collectables. If this E-bay page is any indication, there's a healthy market for beer caps with the collectable crowd! Speaking of collecting, don't forget to visit the Ultimate Beer Cap page.
9. Catching fish. Beer caps make lures fish can't resist.
10. High-tech entertainment. All you need is a beer cap and a laptop computer. Hours of fun....

Special hat tip to the ReadyMade blog!

Labels: currency exchange, food

- posted by Ironman at 9:31 AM | Permalink | Home |

The U.S. One-Dollar Coin (aka "The Golden Dollar")

The U.S. Treasury has spent many millions of U.S. dollars in developing, manufacturing and promoting the use of coins to replace the one-dollar bill in U.S. currency over the years. Invariably, Americans from nearly all quarters have rejected the Treasury Department's efforts to popularize first the one-dollar coin featuring Susan B. Anthony in 1979 (below, right), and now the so-called "Golden Dollar" which features a likeness of Sacajawea (shown above.)

While the reasons for the failure of one-dollar coinage to gain acceptance by U.S. consumers for common use are predictably complex, a solution for the Treasury Department's dilemma may be at hand. Instead of foisting more coins issued by the U.S. Mint on the American consumer, perhaps they should adopt a new form of currency gaining popularity in Cameroon: the tops of beer bottles. The BBC reports on the trend (via the World Bank's Private Sector Development Blog):

Beer bottle caps are being used as currency in parts of Cameroon, which is in the grips of a promotion frenzy by rival breweries.

Intense competition between beer companies has seen 20 million bottles given away since the start of the year.

The prizes, which are revealed beneath the bottle top, include mobile phones, luxury cars and of course more beer.

With a beer costing $1, some punters are using their winning bottle tops to pay for taxi rides.

The bottle tops are being used for more that payment for transportation, as noted in the BBC article by Martin Etonge, a local journalist based in Cameroon's capital city of Yaounde:

"Taxi drivers are also using the caps in their fishy deals with the traffic police," adds Mr Etonge. "So they can get off by giving one or two caps to the officers."

Success in introducing a new form of currency into circulation is solely determined by the acceptance of the new money by the public. When the U.S. Treasury goes back to the drawing board to design the next one-dollar coin, they should perhaps take a moment to consider whether they ought to be offering another coin in the first place. At the very least, they should explore marketing relationships with Anheuser-Busch, Miller and other U.S. brewers!

Labels: currency exchange, food

- posted by Ironman at 9:30 AM | Permalink | Home |