Electronic Money Flows

Transcription

1 Electronic Money Flows

2 Electronic Money Flows The Molding of a New Financial Order edited by Elinor Harris Solomon The George Washington University ~. " Springer Science+Business Media, LLC

3 Ubrary of Congress Cataloglng-in-Publication Dala Electronic money flows: the molding of a new financial order/edited by Elinor Harris Solomon. p. cm. Includes bibliographical references and index. ISBN DOI / Electronic funds transfers. I. Solomon, Elinor Harris. HG1710.E '02!1--i1c20 ISBN (ebook) CIP 1991 byspringerscience+business Media NewYork Originally published by Kluwer Academic Publishers, New York in 1991 Softcover reprint of the hardcover 1st edition 1991 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photocopying, recording, or otherwise, without the prior written permission ofthe publisher,springer Science+Business Media, LLC.

4 This book is dedicated with great respect and gratitude to Dr. Gottfried Haberler, one of the most influential economists of the 20th century. Dr. Haberler's writings and guidance for 60 years have profoundly influenced both economic thought and the direction of contemporary public policy. Prominent among Dr. Haberler's many fundamental contributions has been his definitive analysis of the nature of dynamic processes and innovation, with which this book is concerned. E.H.S.

5 Contents Contributing Authors Preface ix xi Introduction I Electronic Money and Payments 11 1 Today's Money: Image and Reality 15 Elinor Harris Solomon 2 Money in the Third Millenium 49 Linda K.S. Moore II Money Flows: Stability and Financial Cycles 73 3 What Happened to the Business Cycle? 81 Gottfried Haberler 4 Money Stability and Control: The Perverse Effects of Feedback Loops 89 Thomas H. Solomon and Elinor H. Solomon vii

6 VlIl CONTENTS III The seamless Global Mesh Globalization of Payment Network and Risks 115 Yoshiharu Oritani 6 Trends in Global Securities Markets 127 Thomas D. Simpson IV Money and Society: Technology and the World Ahead Information Services. Demographics, and Some of the Dynamics of Change 149 Kenneth Robinson 8 Conflicts: Banks, Consumers, and the Law 157 Elinor Harris Solomon 9 The Less-Cash/Less-Check Society: Banking in the Information Age 187 C. Dianne Martin and Fred Weingarten Index 217

7 Contributing Authors Gottfried Haberler Resident Scholar at American Enterprise Institute and Professor of Economics and Galen L. Stone Professor of International Trade Emeritus, Harvard University 1150 Seventeenth Street, NW. Washington, D.C C. Dianne Martin Professor, School of Engineering and Applied Science Department of Electrical Engineering and Computer Science The George Washington University Washington, D.C Linda K.S. Moore President, L.K.S. Moore & Co., Inc. Electronic Banking International P.O. Box 1889 Venice, CA Yoshiharu Oritani Manager Research Division II Institute for Monetary and Economic Studies The Bank of Japan Tokyo, , CPO Box 203, Japan Kenneth Robinson, Esq. Senior Legal Adviser to the Chairman Federal Communications Commission 1919 M Street, NW. Washington, D.C lx

8 x CONTRIBUTING AUTHORS Thomas D. Simpson Associate Director Division of Research and Statistics Board of Governors of the Federal Reserve System Washington, D.C Elinor Harris Solomon Professor of Economics The Department of Economics The George Washington University Washington, D.C Thomas H. Solomon Post Doctoral Fellow Center for Research in Nonlinear Dynamics Department of Physics University of Texas at Austin Austin, TX Fred W. Weingarten Executive Director Computing Research Association 1625 Massachusetts Ave., N. W. (#110) Washington, D.C

9 Preface Electronic Money Flows describes the far-reaching present changes underway in payments and capital markets. Electronic payment forms are in the process of molding a new financial regime-largely shared and interdependent-throughout the world. Our earlier Electronic Funds Transfers and Payments (Kluwer, 1987) looked at the new money technology in its initial phases of development and in broad focus. Then, as now, the contributors came from many different disciplines. The synthesis of their diverse views laid out the background for the electronic payments revolution to come, and the great benefits but also risks for segmented sectors of society. The old questions have not gone away; new ones have been added to the agenda. For example, what is the nature of money today amidst an array of computer-based options? What money and turnover concepts are appropriate to the electronic age? What are the effects of high-speed money flows on markets, volatility, money control, even the business cycle? Is the financial system more prone to instability but also to faster correction, given the swift movement of money and payments? At the same time, is privacy imperilled by the ubiquitous computer-linked webs that move both information and money? This second book is thus companion to Electronic Funds Transfers and Payments and expands upon it. Contributors discuss the expectations that have and have not come to fruition, together with the new issues ofthe past four years. New theoretical approaches are developed, while the insights and lessons to be gleaned from history are set forth. Explanations for the policy puzzles are posed. Possible policy implications are suggested. Choices and strategies for vendors and users are analyzed within a context of the always present tradeoffs. The benefits to and concerns of the average citizen are addressed. Xl

10 xii PREFACE The Format of the Book Electronic Money Flows focuses on ongoing change in an area already affecting everybody, expert and man-in-the-street alike. It is therefore designed for the ordinary citizen as well as practitioner in the new technology, be he or she banker, attorney, operations specialist, engineer, or student. Since the contributors come from many disciplines, the book's use, we hope, will also be multidisciplinary. It is crafted to cut across a diverse mix of college classes and business occupations: economic, financial, legal, technical, and scientific. Each chapter presents a different set of issues and policy concerns. Each can be read separately, according to interest, or as part of the whole collection of contributed chapters. Each chapter adds further coloration to the more complete story of how the latest economic revolution is affecting the way the economy works and societies interact. Money and payments concepts and some basic elementary monetary theory, appropriate to the electronic age, are set forth in part 1. Payments media choices are presented for the years ahead, with microeconomic theory relevant to the ultimate market selection. Vendor and supplier considerations, too, are evaluated. Part II analyzes stability, business cycle theory and control, and macroeconomic policy choices in systems dominated by electronic payments. Some lessons from the past and theoretical models for the future are set forth. Part III deals with issues of global cooperation and competition in a now seamless 24-hour web of money and capital flows. The nature of electronic networks and the evolving new mechanisms are the focus. Part IV underscores the societal benefits and progress toward the electronic society yet to come as the present young computer-literate among us come ofage. It flags the concerns of society as well, and the adequacy of legal protections underscoring the technology and its rapid current dispersion. Acknowledgments As before, I have been most fortunate in the experience and diversity of the group ofauthors. To all lowe a very special debt. The contributors are actively involved in hands-on issues and in the many unknowns generated by technological change. Each is a leader in the field. Yet each brings a different perspective: business cycle theorist, central banker, attorney, consultant to technology users, academic.

11 PREFACE Xlll This book taps also the skills of contributors from the "hard" sciences, physics, electrical engineering, computer science. One can scarcely make any sense out of present technical developments without such help. In this effort I have been very lucky. A great part of the excitement and fun of this second book, for me, was this interaction with concerned and imaginative experts from the multiple diverse disciplines, who raised important questions and provided fresh perspectives. I especially want to thank Professors Bryan Boulier, Anthony Yezer, and other George Washington University colleagues for their help and support. I appreciate the assistance of many within the Federal Reserve System, especially Jeffrey Marquardt, Edward Ettin, Stephen Rhoades, Donald Savage, David Humphrey, and George Juncker. Attorneys Donald I. Baker and Karen Grimm have tutored me in the legal nuances as well as the complexities of electronic payments in practical application. My George Washington University students have provided insights and encouragement, as have Dr. Eleanor Hadley, Dr. Penelope Hartland Thunberg, and Barbara Johnston and the kind scholars of the American Enterprise Institute. I appreciate the help in many different ways of Jennifer Lin and Eva Skryjova of our Economics Department and Derric Ward of George Washington University's Computer Science Department. Finally, once again I want to acknowledge the patience and invaluable assistance of our editor Zachary Rolnik, of the Kluwer organization, and of my long-suffering husband.