this post was submitted on 02 Dec 2024
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Isn't it possible with a VAT-like system, where a collecting agency returns the collected money to the central bank?
This actually doesn't seem too bad. Most points of sale are digital.
Instead of changing it daily, only change it monthly/quarterly/... when the accumulated change is large enough to make a one dollar change on a 100dollar purchase? Isn't the decision to change the interest fork currently only made after gathering macro-economic indicators anyways?
I understand that insantly changing the transaction cost has an even faster reaction. But monthly might be good enough?
Yes, but it would be much more impractical compared to the existing interest rate system, where all the central bank has to do is change the interest rate. What about businesses that sneakily avoid this changing VAT tax? You would need a much stronger tax collection system for this. There are just too many problems associated with this, when compared to the current interest rate system.
What about small businesses operated by old people who aren't well versed with tech? What about furry artists who are getting like 5 dollars for their art? Do they have to incorporate a point of sale system now? Also, another huge disadvantage of a hybrid currency is the inability to calculate the amount of money being actively exchanged at a given unit of time. If all currency were online, you would be able to calculate exactly how much money was exchanged this minute.
Well that's how the current system already works. The central banks are constantly reviewing the economy to make these decisions. It's just that after a decision is made, it takes a lot of time for its effect to actually show in the economy (banks review the central bank's rates, change their own rates, people take more/less loans, deposit the money in some account, money multiplier effect happens accordingly and the amount of money actively being exchanged changes and so on).
The point is, for such long gaps, the current interest rates system just is a lot more practical. However, again, the big ping difference means that economic issues can go unaddressed for longer, causing more damage.
If we had an online only currency, we would have a crazily efficient system where the boom bust cycle for the valuation of our currency would be a lot more muted. However, with hybrid currency, the most efficient way is the interest rate method that we currently use.