Typography

The check used to buy Alaska ( source ) I recently read an FP article about the odd persistence of the cheque as a way to make payments. According to the author, even though cheques are slow and cumbersome, people are willing to live with these drawbacks because they like the ability to write messages in the memo field. Competing electronic payments options (in Canada at least) don't have the ability to write memos.   Why do people still use checks? It's the memo field, apparently: https://t.co/ui0D0oTHEI pic.twitter.com/lkpEr9ZpEk — JP Koning (@jp_koning) June 21, 2017 As someone pointed out to me on Twitter, in the U.S. the cheque's memo field is more than just a place for writing personal reminders. According to the law in certain states , when you disagree with your creditor about how much is owed—say the contractor who is building your deck has spent too much on materials—by writing out a cheque for less than the agreed amount and including "paid in full" in...

No, I'm not talking about sound money in the sense of having a stable value. I'm talking about money that is sound because it can survive natural disasters, human error, terrorist attacks, and invasions. Kermit Schoenholtz & Stephen Cecchetti , Tony Yates , and Michael Bordo & Andrew Levin ( pdf ) have all recently written about the idea of CBDC, or central bank digital currency, a new type of central bank-issued money for use by the public that may eventually displace banknotes and coin. Unlike private cryptocoins such as bitcoin, the value of CBDC would be fixed in nominal terms, so it would be very stable—much like a banknote.* It's interesting to read how these macroeconomists envision the design of a potential CBDC. According to Schoenholtz & Cecchetti, central banks would provide "universal, unlimited access to deposit accounts." For Yates this means offering "existing digital account services to a wider group of entities." As for Lev...

David Birch recently grumbled about people's sloppy use of the term legal tender , and I agree with him. As Birch points out, what many of us don't realize is that shopkeepers have every right to refuse to accept legal tender such as coins and notes. This is because legal tender laws only apply to debts, not to day-to-day transactions. If someone has borrowed some money from you, for instance, then legal tender laws dictate a certain set of media that you cannot refuse to accept to settle that debt. These laws have been designed to protect your debtor from a situation in which you demand payment in a rare medium of exchange, say dinosaur bones, effectively driving them into bankruptcy. Conversely, they also protect you the lender from being paid in an inconvenient settlement medium. In Canada, for instance, a five cent coin is legal tender, but only up to $5. If your debtor wants to pay off a $10,000 debt using a truckload of nickels, you can invoke legal tender laws and tell ...

This post is about the dismantling of the rupee-zone between 1947-49, an historical event that is especially topical in light of two modern monetary projects: Narendra Modi's poorly-executed 2016 demonetization and a potential eurozone breakup. Thanks to a recommendation by Amol Agrawal, who blogs at the excellent Mostly Economics , I've been pecking away at the 900-page history of the Reserve Bank of India, although I have to confess that I've spent most of my time on the chapter on the partition period. For those who don't know, India and Pakistan weren't always independent countries. Up until partition in August 1947, each was part of British India, a British colony. The rupee, which was issued by the Reserve Bank of India (RBI), was the sole medium of exchange in British India. By mid-1949, less than two years after partition, usage of RBI-issued rupees had been successfully limited to the newly-created state of India. As for Pakistan, it had managed to erect i...

I wrote a bunch of posts on bitcoin between 2012-2015, but they tailed off a bit in late 2015 and 2016 as my attention turned to other subjects, namely old fashioned banknotes and cash, a terrifically fertile topic. Because my bitcoin posts tended to get a lot of comments at the time, I thought it would be worthwhile to go back and review some of the predictions I made, both for my sake and that of my readers. My predictions tend to fall into three related buckets. Bitcoins will not become a generally-accepted medium of exchange Even mainstream organizations like the Fed might one day want to adopt bitcoin tech Bitcoin will fall to zero On the first front, I've consistently written that bitcoin won't become a generally-accepted medium of exchange because of its volatility. And this prediction has panned out, so far at least. No, bitcoin has not destroyed VISA, nor has it driven the share prices of remittance providers like Western Union to zero, nor has it been adopted by unban...

Americans and Canadians take for granted that fact that while a multiplicity of dollar brands circulates in our respective nations, a dollar is always equal to a dollar. In the U.S.'s case, whether it be a VISA card, paper money issued by the Federal Reserve, or a deposit created by a either a big bank like Wells Fargo or a tiny one like Wisconsin Bank & Trust, a retailer will (almost always) accept each of these monies at the same rate. Compare this to Zimbabwe where a phenomenon called three-tier pricing has emerged over the last few months. Retailers have begun to charge customers three different prices for goods and services depending on the brand of dollar being used: a paper U.S. dollar price, another in "plastic money" (i.e. local U.S. dollar-denominated bank deposits transferable by debit card), and the last price in terms of relatively new parallel paper money called bond notes . To better illustrate three-tier pricing, here is a photo of a Zimbabwean store...

In campaigning for a departure from the Euro, both France's Marine Le Pen and Italy's Beppe Grillo,  make the process sound easy. But one does not simply walk out of a monetary union. There are all sorts of messy problems to deal with, including harmful bank runs, massive banknote shortages, and long legal battles with investors over wealth confiscation and the redenomination of debts. I recently stumbled on a successful and rarely-discussed exit from a monetary union: Hawaii in 1942. Hawaii's was a different sort of exit than a potential French or Italian euro exit. Whereas the latter are reactions to being straitjacketed in the face of a slow and grinding recovery from financial crisis, Hawaii's exit was executed in anticipation of a potential military invasion. Despite differing motivations, it's worth investigating the Hawaiian episode to see what it takes to pull off a successful exit. To understand the course of events, I drew on several Fed bulletins from 194...