Three days ago, Andrew Haldane of the Bank of England gave a speech where he said, concerning the Zero Lower Bound, or the interest rate at which everyone decides that their money is better off as cash:
A third option is to set an explicit exchange rate between paper currency and electronic (or bank) money. Having paper currency steadily depreciate relative to digital money effectively generates a negative interest rate on currency, provided electronic money is accepted by the public as the unit of account rather than currency.
We had a recent discussion about just such a two tier currency system, the C18th/19th private money issued by employers which could only be spent at the company store and its corresponding lack of value compared to coin of the realm. It just goes to show, you can't keep a really bad idea down; the Speenhamland system, the poll tax, two tier currencies, sooner or later someone will think, why don't we try this one again, this time it will be different, this time it will work.
Debate Magazine
