Wednesday, May 2, 2012

Time to rethink currency

There have been many movements in the past to redo the US currency. The most popular is to rid the nation of our pennies on the basis that it costs more than 2.4 cents to produce a penny. According to this article that looks at Canada’s recent obsolescence of their penny, nickels are an even worse deal, costing almost twelve cents each.

The last time this argument came up, there was a letter to the editor asking for us to get rid of the 1/10 cent first. As in: the 9/10 of a cent added to the more than $4 we pay per gallon of gas. This sleight of hand made sense (pun intended) when the price of gas was less than ten cents each but nowadays it should be dispensed with. Especially when the price boards are going to need to add another digit to the beginning of the price. (Are you ready for $10 a gallon gas in a few years?)

Chipotle currently rounds to the nearest nickle in all their purchases. People complain that they are being cheated but forget that the sales tax is already being rounded to the nearet penny.

While I agree with this policy, I think it’s time to look at the idea of currency holistically. Do we need it at all? In the era of credit cards, checks, wire transfers and automatic payments, how much do we need cash at all? An older NY Times op ed pointed to the fact that the 500 Euro bill was routinely nicknamed the ‘Bin Laden' due to its prevalence in financing illegal activities including terrorism.

Can you imagine drug smuggling without $100 bills? Prostitution without $20’s? Counterfeiting with no larger bill than a $1? How much more tax revenue with the government generate with restaurants and handymen being paid by credit cards and checks?

Hold on! You say. What about those cute kids with their lemonade stands? Why should I have to use a credit card when I’m just buying a slice of pizza? You could resolve this by only having $1 and 10 cent coins.

Eventually everyone can take credit cards. It’s possible already for anyone with a smart phone.

Parking meters are already being converted to take cards and phones.

In Kenya, a mobile banking system known as M-Pesa allows six million people to execute small payments using SMS messages.

So what about it? Get rid of all cash except the dollar and the dime. Everything costs a multiple of 10c in every store and taxes are rounded up or down to the nearest 10c. Get rid of all paper money. Use your computer to transfer money around. Let’s look at the benefits:
·         No more counterfeiting
·         No more money laundering
·         More tax revenue generated so tax rates may actually come down
·         Easier to spot drug smuggling and other crimes that require large sums of cash
·         No more pockets full of change, wallets full of bills

This same theory works in every country. Who needs Euro and Yen when you have other means to move money around. We can finally stop that group of  Neopolitan counterfeiters who have been active since World War II.
I’m sure the crooks will find ways to get around these restrictions but let’s stop making it easy on them. Who’s with me?

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