Paper Money with an Expiration Date

Paper Money with an Expiration Date(npr.org)

17 points by jcarpio 5 years ago | 26 comments

antasvara 5 years ago |

What concerns me about his idea is that businesses would be less incentivized to take payments if your money was closer to expiration. This could lead to situations where my dollar is worth significantly less near expiration than someone else's dollar that just got stamped. In this respect, businesses get screwed because the money that they just accepted is slowly deflating in value.

Expiring money basically incentivizes short term thinking over long term goals. Businesses won't save for improvements, retirement won't exist, etc.

kn100 5 years ago | |

I have not thought about this too much but what if the expiry date resets when it changes hands and there is some tx fee to discourage passing money around unnecessarily?

goldcd 5 years ago | | |

I quite like that idea.

If you receive a dollar and pay tax on it due to the work you undertook to receive it, it gets 'refreshed' and increases in value.

If you get a 'stale dollar' (e.g. gifted from a parent) it depreciates until you use it constructively.

If you're an advocate of "trickle-down" economics, you should be lapping this us, as it's rewarding people for what you believe already happens.

Of course a much simpler approach would be to simply flip the outrageously stupid system most of us have, where income from passive investments is taxed at a lower rate than income from providing work.

ornornor 5 years ago | | |

Isn’t this essentially what interest rates are for?

elindbe2 5 years ago | |

Stated more generally, it breaks the concept of fungibility. One unit of currency would no longer be interchangable with another unit of currency. This makes it harder to use because now each bill has to be inspected before acceptance.

bsanr2 5 years ago | |

I think this is negated by the fact that the expiration date resets when the money is exchanged hands.

burlesona 5 years ago | |

I think you’re right... it seems to me like this would only work if it was accompanied by a law along the lines of this money having some final redemption value, or some venues that were required to accept it.

For example if this “stamped money” expired at the end of the year, everyone is required to accept it until then, and for six months afterward it can be redeemed at a bank for fifty cents on the dollar... then instead of people refusing to take it you’d have a big flurry of holiday shopping but increasing prices for stamped money at the end as its value neared the drop off. You would also have some people probably try to gamble on acquiring a lot of that money at a discount before its expiration thinking they could flip it in time or acquire it for less than its redemption value from people who just wanted to unload it.

It’s an interesting thought experiment.

But I think in today’s world of mostly electronic money, something like this would be much harder to pull off. It would presumably only apply to cash - since the entire banking system would have to revise itself to track expiring dollars separately - and I think rather than seeing a lot of adoption you’d be more likely to see many businesses suddenly stop accepting cash entirely.

ISL 5 years ago |

That system is essentially what we have now, but less subtle. A 2% inflation target means that the purchasing-power of held currency is halved in 36 years.

unchocked 5 years ago | |

Yes, it's essentially the same as inflation. Although this scheme does open the possibility of having some lesser dollar that's statutorily inflated while perhaps the greater dollar retains its value. That might make it possible to throw a massive slug of stimulus into the economy without increasing the money supply.

toomuchtodo 5 years ago | | |

I would think the "easier" way of doing this is Federal Reserve dollars, issued (in Fed issued deposit accounts) at the start of a calendar period with the explicit and clear understanding to accountholders that these funds evaporate at the end of the calendar period (EBT/food stamps come to mind; depending on the state, your EBT/food stamps funds expire after about a year if unused).

I'm unsure how you get around folks who will launder this money into assets to counter the inflationary mechanism, unless you're means testing in some capacity, or you just don't care about the cohort who does this (which is a reasonable approach imho).

cortesoft 5 years ago |

So what is to stop someone from depositing the near expiration date money into a bank and then withdrawing it right away?

Thervicarl 5 years ago | |

In France, when people deposit more than 10k€, the bank has to notify Tracfin, the service of the French Ministry of Finances that fights money laundering. And you have to be able to explain where the money is coming from.

Most of the time, people with large amounts of cash are workers (skilled construction workers...) that are able to get a significant part of their income in cash and do income tax avoidance. Or criminals (drug dealers...).

Having to deposit their hidden savings all-at-once is not good news for them. This is basically what happened when France switched to the Euro.

cortesoft 5 years ago | | |

Sure, but if this scheme was implemented, then the people depositing and withdrawing their money are going to be people who would normally keep their money in banks and are NOT trying to launder or avoid taxes.

If they have to explain where the money came from, they can just say “it is the cash I withdrew a few months ago, here is the transaction number”

bsanr2 5 years ago | |

The banks charge a fee for deposits that reset the expiration.

WarOnPrivacy 5 years ago |

Isn't most wealth hoarded in non-currency investments? How might this effect those?

tharne 5 years ago | |

yup, this type of "expiring money" would just lead people to store wealth elsewhere. You could argue that this has already happened with long term low interest rates. I think a big part of the continued stock market and real estate bubbles is that interest rates are so low that there's a real disincentive to store cash in the bank, so folks put their wealth into houses and stocks.

Also, since when did "saving" become "hoarding"? Saving is a very important part personal financial wellness and business investment. Our goal should not be incentivizing people to spend money as quickly as they make it.

WarOnPrivacy 5 years ago | | |

> Our goal should not be incentivizing people to spend money as quickly as they make it.

I think wise societal goals would be those that clearly and consistently lead to increased funds for people in non-upper classes.

WarOnPrivacy 5 years ago | | |

>when did "saving" become "hoarding"?

The systemic vaulting of fungibles (in the amount of scores of multiples beyond reasonable needs) may result in the same outcomes as hoarding does.

JohnDeHope 5 years ago |

If people know when the money will expire, they'll accept it at a lower and lower value as it approaches its expiration. Money that will expire tomorrow will be worthless. I think a better way would be to continually reduce all (digital) accounts by some rate. Say you want 1% depreciation per year. At the end of the year, every bank account balance is multiplied by x0.99. The "money" evaporates equally for everyone at the same time. In any case though, while technocrats might like the sound of all of this, the plebs (aka those of us without political power) are likely to be less enthusiastic.

dnautics 5 years ago | |

They probably won't notice, since that's what happens now. Not even smart people with econ phds notice.

But whether or not anyone notices, the math is simple: it will be very bad for lower income levels. If you have 1% depreciation over a year, and you are spending 90% of your money on day to day expenses, the relative loss in margin of survival is far worse than if you are spending 20% on day to day expenses.

burlesona 5 years ago |

The fed has recently said they aren’t going to try and prevent inflation any longer - they think that acting aggressively to prevent inflation before it hits has actually hurt the economy. So, perhaps there is something to this logic.

But I will say, in many ways we have the opposite problem right now. Too much money chasing too few good opportunities for a return has led to things like SoftBank, WeWork and many others.

bsanr2 5 years ago | |

The most obvious answer would be to give money to people who need it to make rent, go back to school, buy porn, etc. Compared to the complete collapse of the economy, pretty much any stimulative use is preferable.