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Out of Control
Chapter 12: E-MONEY

The consequential effects of digital money upon the hive mind of our network economy are already underway. Five we can expect are:

  • Increased velocity. When money is disembodied-removed from any material basis at all -- it speeds up. It travels farther, faster. Circulating money faster has an effect similar to circulating more money. When satellites went up, enabling near-the-speed-of-light, round-the-clock world stock trade, they expanded the amount of global money by 5 percent. Digital cash used on a large scale will further accelerate money's velocity.

  • Continuity. Money that is composed of gold, precious materials, or paper comes in fixed units that are paid at fixed times. The ATM spits out $20 bills; that's it. You pay the phone company once a month even though you use the phone everyday. This is batch-mode money. Electronic money is continuous-flow. It allows recurring expenses to be paid, in Alvin Toffler's phrase, by "bleeding electronically from one's bank account in tiny droplets, on a minute-by-minute basis." Your e-money account pays for each phone call as soon as you hang up, or -- how about this? -- as you are talking. Payment coincides with use. Together with its higher velocity, continuous electronic money can approach near instantaneity. This puts a crimp on banks which derive a lot of their current profit on the "float" -- which instantaneity erases.

  • Unlimited fungibility. Finally, really plastic money. Once completely disembodied, digitized money escapes from a single transmission form and merrily migrates to whatever medium is handiest. Separate billing fades away. Accounts can be interleaved with the object or service itself. The bill for a video comes incorporated into the video. Invoices reside alongside of bar codes and can be paid with the zap of a laser. Anything that can hold an electronic charge can hold a fiscal charge. Foreign currencies become a matter of changing a symbol. Money is as malleable as digitized information. This makes it all the easier to monetize exchanges and interactions that were never part of an economy before. It opens the floodgates of commerce onto the Net.

  • Accessibility. Until now, sophisticated manipulations of money have been the private domain of professional financial institutions -- a financial priesthood. But just as a million Macs broke the monopoly of the high priests guarding access to mainframe computers, so e-money will break the monopoly of financial Brahmins. Imagine if you could charge (and get) interest on any money due you by dragging an icon over that electronic invoice. Imagine if you could factor in the "interest due" icon and give it variable interest, ballooning as it aged. Or maybe you would charge interest by the minute if you sent a payment in early. Or program your personal computer to differentially pay bills depending on the prime rate -- programmed bill-trading for amateurs. Or perhaps you would engineer your computer to play with exchange rates, paying bills in whatever currency is least valuable at the time. All manner of clever financial instruments will surface once the masses can drink from the same river of electronic money as the pros. To the list of things to hack, we may now add finance. We are headed toward programmed capitalism.

  • Privatization. The ease with which e-money is caught, flung, and shaped makes it ideal for private currencies. The 214 billion yen tied up by Japan's NTT's phone cards is one limited type of private currency. The law of the Net is: he who owns a computer not only owns a printing press, but also a mint, when that computer is linked to e-money. Para-currencies can pop up anywhere there is trust (and fail there, too).

Historically, most modern barter networks rapidly slide into exchanges of real currency; one could expect the same in electronic barter clubs, but the blinding efficiency of an e-money system may not tend that way. The $350 billion tax question is whether para-currency networks would ever rise above unofficial status.

The minting and issuing of currency has been one of the few remaining functions of government that the private sector has not encroached upon. E-money will lower this formidable barrier. By doing so it will provide a powerful tool to private governance systems, such as might be established by renegade ethnic groups, or the "edge cities" proliferating near the world's megacities. The use of institutional electronic money transfers to launder money on a global scale is already out of anyone's control.