Bert Ely

Fundamentally, electronic money is no different than all other forms of money that exist today. Consequently, the monetary policy implications of electronic money are nil. Hopefully, though, debating the implications of electronic money will spark an overdue recasting of monetary theory that will reflect present-day monetary realities rather than increasingly detrimental fictions. The new monetary theory should trigger the abandonment of interventionist monetary policy as we now know it because that theory will provide the basis for relying entirely on market forces to produce non-inflationary economic growth and financial stability.

Economists generally accept the notion that competition in supplying virtually any good or service will lead to superior results in terms of improved quality and lower prices. Agreement about the benefits of competition has not been as universal, however, when the "good" being supplied is "money." Even among economists debates have raged about whether economic systems in which currencies compete would lead to superior performance or to overissue and runaway inflation. So that there is no "false advertising," I am of the school that believes that users of money would (actually already do) benefit from competition among suppliers of money.

Innovation is normal when it comes to the subject of money. For centuries, the fundamental forces of technological change and market competition have been changing both the forms in which money is held and the methods by which its ownership is transferred. Looking ahead over the next century, there is no reason to expect anything different. It is not possible to predict how fast things will change, or exactly what forms monetary innovations will take. Rather than predict, we want to share some of our uncertainty about the implications for the central bank of some potential changes in monetary mechanisms.

Economists, and central bankers especially, are inclined to treat financial innovations as something that makes managing the money stock more difficult, thus increasing the need for monetary discretion. Financial innovations, the argument goes, tend to lead to unpredictable changes in the "money multiplier" or in the demand for particular monetary aggregates or both. Consequently, the more innovations that occur, the less merit there is in monetarist arguments for binding the hands of monetary authorities, making them obey strict rules, and monetary base growth rules in particular. The emergence of new electronic means of payment, or "e-money," is only the latest private financial-market wrinkle to excite the anxieties of central bankers while giving them grounds for asserting their right to improvise.

R. Alton Gilbert

New payment methods which have been the focus of press coverage are stored value cards and electronic payments for households, including payment methods with information transmitted over the Internet. Stories about these payment arrangements tend to focus on the technology--how systems work or might work in the future. Details of the technology are important for government efforts to prosecute illegal activities and to limit tax evasion. Development of these new payment arrangements raises this question: Will they undermine the efforts of the government in law enforcement that rely on banks reporting large deposits or withdrawals of currency and maintaining records of wire transfers of funds?

Almost 40 years ago, Ayn Rand, in her novel Atlas Shrugged, posed the question "what would happen if the men of the mind--the producers and creators of wealth--went on strike?" Her allegory about the coordinated withdrawal of the industrialists and the collapse of civilization served as a dramatic backdrop for the elucidation of her moral philosophy. That philosophy, rooted in laissez-faire capitalism, posed two questions relevant to the topic of this conference: What creates the value of money and who stands sovereign in a struggle between individuals who use their productive powers to create wealth and governments who wield coercive force to redistribute it?

Moving money at the speed of light to any place in the world anonymously over the Internet will soon be as easy as a few keystrokes on your business or home computer. Such anonymous monetary movements substantially increase the potential that the size of the identifiable tax base will be diminished. Government tax authorities are both challenged and threatened by this new technology. As expected, there are some at the Treasury and Justice Departments in the United States who are proposing regulations, essentially requiring every American business and individual to report every item of income or expenditure worldwide, through electronic means, to the government. Not even the Nazis or communists were able to achieve this level of proposed intrusiveness. Fortunately, many in the new Congress are set to oppose this latest attempt to deny us any remnant of financial privacy.

Richard Rahn

When hearing or reading excited discussions of "the new payment technologies" and "digital money" it is well to maintain some historical perspective. What exactly is new, and what difference will it make? Is the coming change in the payments system revolutionary, or better understood as evolutionary? Will changes in the way money is paid from one party to another bring about changes in the character of money itself?

Rosalind Fisher

While there has been much recent press attention to "electronic money" and the role of a host of new entrants into the business, I am proud to say that Visa and, most importantly, its member financial institutions, are playing--and must continue to play--a central role in the introduction and use of those electronic consumer payment services. I say "central role" for two different but equally compelling reasons...

The Electronic Monetary System (EMS) is a highly versatile and highly secure payment system that creates, secures, and exchanges electronic notes in multiple currencies. EMS is a serious attempt to build a comprehensive electronic money system that reflects the interests of the regulatory authorities, the banking system as it exists today, and the rapid manner in which technology will continue to change. The system is the first to support, in a secure fashion, electronic cash payments for both retail and wholesale customers.