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Bob Meyer

Beyond The Limits Of Cash or Credit

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The Future As Seen By Central Banker From England

�There is no reason products and services could not be swapped directly by consumers and producers through a system of direct exchange -- essentially a massive barter economy. All it requires is some commonly used unit of account (trade dollars) and adequate computing power to make sure all transactions could be settled immediately. People would pay each other electronically, without the payment being routed through anything that we would currently recognize as a bank. Central banks in their present form, would no longer exist -- nor would money.�

-- Mervyn King, Deputy Governor,
Bank of England

Mr. King made the above comments at a conference of international bankers in Jackson Hole, Wyoming, August 1999. The meeting was sponsored by the Federal Reserve Bank of Kansas City, Missouri. (As reported in BarterNews Issue #50.)

Ruminating on the potential impact of electronic commerce on the future stability and structure of the global financial system, his conclusion was as startling as it was original. �The successors to Bill Gates,� he predicted, �will put the successors to Alan Greenspan out of business.�

In short, the pace at which the electronic economy is developing is making many traditional jobs, corporations, and institutions a speed few people could have imagined. And there is little reason to assume central banks are immune to the process.

King said the internet poses challenges to many institutions, but the thing it does most radically is change the way goods and services are exchanged. Companies such as eBay or have devised new and different ways of delivering products to consumers.

However, the ultimate means of exchanging goods is through the mechanism of money itself, and it is money that will soon be challenged by the Internet.

Already the trend is for decreasing the number of different types of money in the world...Europe is abolishing some currencies. While in South American countries they are discussing doing the same by adopting the dollar as their currency.

The idea of national currencies is fading faster than anyone imagined, which is one reason currencies are quickly consolidating into larger and larger blocks.

The World Wide Web means that people shop across borders...not only when they travel, but every day. That is encouraging consumers to think in terms of several different currencies simultaneously, and it will create a demand for a more global currency than anything that presently exists.

It also creates space for new currencies to emerge. There have already been proposals for different types of electronic money.

And there is no reason anyone working online should not be paid in an electronic currency, which might then be accepted in exchange for goods or services...or converted back into dollars, euros or yen.

The electronic economy will consequently create a demand for a more global currency than anything that exists now. Most likely it will be one of the existing big currencies such as the dollar or euro (probably the dollar) than any new currency.

The crucial question is: How quickly will electronic commerce revolutionize the role of money?