Search results

The final stage of the changeover to the euro consisted of the introduction of euro coins and banknotes on 1 January, 2002. The national changeover plans, that provided the scenarios, were based on the exclusive transaction function of money. However, in most European countries high‐denomination banknotes were significantly hoarded and/or used in the underground economy. Since the holders of these banknotes could not convert them anonymously in the two months changeover period, some feared that many banknotes would invade the payment system, leading to a cash‐crash. Nevertheless the changeover process evolved smoothly. As for the future, chances are that some users in the regular sector have permanently changed their payment habits by shifting towards electronic means of payment. In the longer run we believe, however, that the tolerant attitude of the authorities with respect to currency use in the underground sector, will sustain the demand for currency.

Some economists who normally prefer to rely on free market solutions to economic problems often consider money a special good that requires government control to prevent overissue. But free banking advocates take the position that the market can control the supply of money without any government imposed rule. The type of banking system envisioned by the latter school would be one in which banks would be subjected to no restrictions regarding balance sheet choices and would be allowed to charge what they want on loans and pay what the market dictated on any source of funds. Each bank would be free to issue distinctive banknotes as well as deposits redeemable into some reserve asset that banks would hold in accordance with their goal of profit maximization subject to the necessary liquidity cost. There would be no required reserve holding, no minimum amount of capital, nor any restrictions on the type of loans a bank could make, nor where they could establish branch offices. Government's only role would be to enforce contracts and to punish fraud.

It is deservedly recognized that James Steuart advanced a monetary theory in which paper money played an important role. The successful establishment of Scottish banknote circulation and theoretical influences from his fellow countrymen such as John Law can be pointed out as backgrounds for his monetary theory. Little attention has been given however to the point that Steuart deduced theory on banks and banknotes quite differently from his predecessors. It is of great significance that Steuart’s theory on banks and banknotes in his first draft of The Principles of Political Oeconomy was, in the following years, drastically expanded and reconstructed. The theory in his first draft written in 1764 was based on the opinion that banknotes should be issued only on landed securities, in consideration of ideas from the Scottish banking system. He then expanded the theory into a dynamic three-stage banking theory where he concluded that as economies and credit grew, banks should issue notes not only on the basis of landed securities but also by discounting bills and giving public credit. By this expansion, banknotes gained a broad and central role in his monetary theory, and the expansion gave his monetary theory more ingenious evolutionary aspects.

Professor Richard Timberlake (1984) recently suggested that the Federal Reserve System (Fed) was made unnecessary by the clearinghouse loan certificate (CLOC). This paper presents evidence that the Fed was rendered unnecessary by Aldrich‐Vreeland Act Currency (AVAC).

This article studies how the Regenerative Government (1880–1903) in Colombia positioned monetary policy as one of the central subjects in the political arena by the end of the nineteenth century, and how the struggles of this attempt transformed the political economy of the period. In the background of the monetary, debates were some relevant characteristics: the country was facing serious difficulties as a consequence of an uneven integration of sectors to international trade, the de facto bimetallic regime, the formation of conglomerates of regions, and the difficulty of implementing paper money. Facing this situation, the Regenerating Governments found themselves in the need of imposing monetary and credit rules. They attempted to implement the scientific rules prevailing at the time and the possibilities that the national reality allowed them. As a consequence, the interests of the merchant elites and bankers had eroded the existing free banking system. Some bankers took advantage of the situation of the dubious management that the State gave to the monetary issue and succeeded on speculative finance increasing their wealth. Others, on the other hand, tried to strengthen their relations with the State. In this perspective, this article will synthesize the main aspects by agents of the debate between free banking and forced course.

This essay explores the critical vision of Francisco Barrera Lavalle about the Mexico’s Monetary Reform of 1905. In his critique, Barrera inserts an argument about the nature of the balance of payments in the Mexican economy: the disequilibria in Mexico’s trade balance were structurally recurrent given the characteristics of what the country exports: commodities and raw materials. Barrera believed that the authorities made the mistake of overvaluing the peso, assigning it a value higher than what silver currency was worth at the time on international markets. Barrera also dismissed the idea that monetary stability could be achieved by suspending the free coinage of silver currency. Finally, Barrera held that banks should be obligated to pay their banknotes in gold, as they were in Great Britain and in the United States, not in silver coins.

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

The symptoms that precede crises are utterly undistinguishable from the signs of great prosperity; ventures and speculations of all sorts proliferate; the price of products, the value of land and houses rise; the demand for labor increases and wage rates augment, interest on the contrary diminishes. Add to that a gullible public – whose doubts vanish at the sight of the first successful undertaking – and a taste for gambling, which spreads as prices continue to rise and as the hope of becoming rich in a short time takes hold of people's imagination. Finally, increasing luxury leads to excess spending, fueled less by greater income than by the higher value of capital estimated at market prices.

This paper aims to examine the contribution of Ethiopia’s cash economy to financial crimes. It also investigates the regulation of cash in the context of controlling crime stemming from the cash economy.

This study relies on primary data generated from 20 interviewees drawn from the National Bank of Ethiopia, Ethiopian Financial Intelligence Center, selected commercial banks and law enforcement agencies and document review from government reports, media press and statutes, as well as secondary data from online and offline sources.

The cash-intensive nature of Ethiopia’s economy has enabled a significant amount of cash to circulate outside of the formal financial system. This money is partly to blame for the prevalence of criminal activities such as cash hoarding, corruption and illicit financial flows. To address the threat of crime posed by the cash economy, the Ethiopian Government has taken measures such as restricting cash withdrawals from financial institutions, limiting the amount of cash individuals can hold and demonetizing the banknotes. The measures enable the banks to collect the cash circulating outside of the formal financial sector. However, the effect of these measures on reducing future criminality remains uncertain. Improving the financial inclusivity of the country, specifically expanding basic financial products to the rural areas, digitalizing the country’s payment system, raising general financial awareness and establishing a strong financial consumer protection framework would play a critical role in reducing future criminality and transforming the cash-intensive into a cashless economy.

This paper provides a first-of-its-kind analytical perspective on the contribution of Ethiopia’s cash economy to criminal activity and the adequacy of countermeasures so far taken.