Electronic Money and Its Impact on Central Banking and Monetary Policy

For centuries, banks have relied on fractional reserve banking. This is the method in which only a fraction of a bank’s deposits are actually backed by a reserve of cash-on-hand, available for immediate withdrawal. This procedure allows the bank more capital to lend and at the same time, grows the economy. The reserve amounts are determined by a ratio stipulated by the Federal Reserve. In theory, fractional reserve banking works most of the time. However, in difficult economic times, people have demanded to withdraw

10. What are the effects of electronic transactions and banking upon the industry and/or monetary policy? Have innovations created greater or less efficiency? What has been the role of the Federal Reserve?

The future of payments is current shifting to another path with how technology is changing and is currently modifying how we process our payments and how we store data. It is going away from low-tech and paper based tools, expensive and bulky registers, and physical card swipes. And it is introducing and renovating online commerce and online payment. This is happening due to the decrease of money supply and checks in the current market because people are starting to pay more and more there bills online. As the economy improces and corporations and business gets larger they have started a large-scale implementation of processors in electronic payment technology in their business ands services. Also, credit and debit are growing amongst consumers and it has been the highest that it has even been in history.

The primitive monetary instruments had a profoundly dynamic assistant nature, had no inborn quality. Their operation did not suggest the utilization of any particular item, but rather just the reference to a theoretical money related unit. Regardless of the possibility that the unique money related unit were symbolized by a given particular stock, this stock never took an interest in the operations, since what was implied was to make a conceptual reference to its worth, and not to trade different merchandise for it. Hence, currency was not, subsequently, created by a flash of brilliance, but rather originated from a need, and its development has reflected, at every time, the readiness of man to orchestrate its currency features to the reality of its economy. Perhaps even more importantly, invention of currency was the mother step in a new monetary system that has led to the birth of electronic banking and credit cards. To infer, pretty much as human advancement from viciousness to development has relied on upon the invention of currency, future advancement will rely on another definition and utilization of

For as long as money has existed, governments have sought to control its supply for their own benefit. The ancient Romans, for instance, regularly debased their coins so that, by the end of the 3rd century AD, the actual content of silver had declined to less than 5% purity. The debasement of and inflation of the money supply has historically been a tool of governments to expand their power. In conventional economics, which this paper will assume as a positive background in defending the feasibility of a sound money amendment, the result is a redistribution of real wealth from savers to the government, the banking and finance system, and other

The internet has allowed the money market to operate 24 hours a day. It has been noted however that exchange rate volatility has increased,[v] which makes it more difficult for the government to set monetary policy.

The text "Out of Control", by Kevin Kelly, is an exciting description of the future as seen by the author, a journalist and optimistic technologist. The predictions presented must certainly be taken as entertaining reading that are intended to inspire visions of the future. The predictions of Kelly have already proven to be inaccurate in the four years since publication. The most glaring example of this is electronic commerce. Canada is quickly becoming a leader in electronic commerce, through online banking and direct payment purchases. The coming cashless society presents several opportunities and problems that were not previously available in the paper money world.

According to the most recent Federal Reserve study; most of us haven’t set foot in a banking hall in ages. It is a lost battle to banks that opt to use traditional methods to conduct their banking transactions (Gup 2003). By December of last year, close to half of all smartphone users in the United States had transacted some or all of their banking on their phones and iPhones. In the United Kingdom alone, rates of mobile banking transactions doubled over the course of a single year (Scn Education 2001). A banking business that invests in this type of technology gets assured of increasing their customer base.

Legislative institutions depended with the mission of oversight of the financial framework are ill-suited to address macroeconomic concerns. For instance, Federal Reserve is a reason for more prominent flimsiness and instability than more noteworthy request and certainty. Cutting or bringing interest rates up in with a perspective to pumping a lot of liquidity into the budgetary framework or, in actuality, limiting cash supply keeps market components from setting the right cost of cash and assigning capital proficiently. However, it is not in any case responsible to people in general, as it is chosen in a roundabout way and responsible to open everywhere through a long chain of appointment. Money related markets can

“Banks will no longer be able to loan with reckless abandon, and create money out of thin air; it will be the end of easy credit that ensnares people in the grip of the federal government. Without that centralized authority, the federal government will forfeit its grip over monetary policy. Currency will stand on its own.”

We take the position that digital currencies are a fad. As argument, we try to clarify the definition of currency in general and explain what a "digital currency" really mean. Than we examine the arguments for the digital currencies and at the end we present the evidences of perils of digital currency.

Many financial institutions across the world have adapted to the change towards the cashless society by implementing electronic funds transfer via automated teller machines (ATM’s) and of late, the internet. By having a simple plastic card, society could completely eliminate the need for cash. The benefits range from the end user through to the government and the

Technological advancement has had a gigantic effect in the banking industry. Over the past few decades, the financial services industry has changed considerably with banking transforming from the pen and paper method to the computers and internet method. The pen and paper method took weeks or even months for the transaction to be eventually completed, and then the dramatic introduction of the computer and internet method which changed that time frame to only a matter of seconds to be completed, which reduced the amount of time and labor needed to complete a transaction significantly. Banking is considered one of the most important economic sectors with it being severely influential and responsive to any little change, whether it is domestic or international. Some extreme changes that were brought about by the development of this new technology turned into a globalized nature for the financial services industry. One stroke of a key on a computer could and would change a person 's life extensively or even have a global impact. The new technologies that were created and introduced changed how the consumers managed their money from that time on. Technology has helped to protect peoples’ hard earned money and make it much more impossible for people to be able to write out bad checks or even holding up a bank. The advancement in technology however, also came with some security risks as most things do, that could affect the money that people trusted with the bank and

In Friedman’s monetarist construct of money has two side that is highly active. One of the side is money is being the cause of all failures and asymmetries in the economy (in the short term). The other side is neutral which money is influencing only the price level (in the long term). The nominal quantity of money is determined by its supply. On the other hand, the real volume of the money stock is expressed in the amount of goods and services that can be acquired for a given nominal amount of money and is conditioned by the demand for money, which is directly related to the price level.

The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and