Without Cash, We Could Cure Recessions

Moneybox
A blog about business and economics.
Dec. 12 2011 5:20 PM

Less Than Zero

25 years ago, Cobra Commander threatened to bring the American economy to its knees by destroying physical currency and creating a shortage of the medium of exchange. Today, however, we have a fairly robust electronic payments system and could probably get by if the country had no physical currency whatsoever. And as I note in my latest column, one virtue of a cashless economy is that we could always cure recessions with "old fashioned" monetary policy. The so-called zero lower bound is a pure artifact of the existence of physical cash.

The larger point here isn't that we need to scrap cash but that you ought to understand recessions as a product of hiccups in the system of monetary exchange. There are other kinds of economic problems in the world, but a recession is a particular kind of problem. We invented money, because it's very useful -- without it we'd all be much poorer. But money creates problems -- in particular, it makes recessions possible -- and to cure them you need to monkey around with money.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

  Slate Plus
Slate Picks
Dec. 19 2014 4:15 PM What Happened at Slate This Week? Staff writer Lily Hay Newman shares what stories intrigued her at the magazine this week.