The future of money?

Andrew Pegler – 27 May 2011

… could be far less about dollars and dinars and more about thin air.

Peer-to-peer networks are a great way to share things without exchanging cash. Right now hundreds of peer-to-peer marketplaces across the globe use new technologies to barter, swap, share and donate stuff as part of a flourishing trend called collaborative consumption. A handful of start-ups, driven by online gaming technology, are fighting to own a virtual currency to facilitate these exchanges. (Porn, gambling and real estate have driven most of the big online leaps.) These start-ups want to do to money what file sharing did to music. One is Bitcoin, a peer-to-peer currency not issued by a central bank. It’s available from Bitcoin or the Mt Gox currency exchange and tradable across an anonymous peer-to-peer network. A secure computer program ensures no one can create new Bitcoins out of thin air or spend one twice. Right now there is about US$50 million worth of Bitcoins in circulation.

Libertarians, privacy nuts and money launderers love virtual currencies because they’re completely anonymous; they leave no tracks. But central governments aren’t so happy because aside from money laundering, virtual currencies pose a genuine threat to the stability, accountability and traceability of the global financial system. But what’s a central bank going to do? Shut down one virtual currency and another will pop up next week. The Napster phenomenon.

Since peer-to-peer networks are entirely unregulated, electronic and uninsured critics point to the trust issue. They mightn’t like ’em but people trust a bank. ON the other hand while that means something for now I do recall thinking trust would be the big issue at the start of online shopping.

And in other news… Comm Bank just surveyed 600 exporters with $5-$500 million in revenue and the consensus was that the little dollar that could may keep on coulding up to $US1.16. Interestingly the exporters surveyed reckoned 91 cents was the point at which they became uncompetitive. The Aussie dollar last traded at 91 cents in September 2010 – 16 cents below today’s figure. My ongoing concern is Dutch disease.