Chapter 3: New Uses and Forms of Money, Monetary Velocity, and Wealth Transfers
Page 57 3. New Uses and Forms of Money, Monetary Velocity, and Wealth Transfers Structural changes in the global economy provoke other structural changes, as is true of most evolving systems. In Chapter 1 it was argued that advances in information technology and government deregulation provoked the rapid expansion and globalization of financial markets. Because of their ‘marriage’ with the communications revolution, financial markets have more quickly expanded and became globalized than markets for merchandise and nonfinancial services. Analysts including Peter Drucker were emphasizing as early as the mid1980s that the evolving financial markets had taken on a profitseeking life of their own, quite independently of the markets for merchandise and services (Drucker, 1985–6). For example, by the mid1980s the value of trading on the London Eurodollar market was 25 times the value of world trade in merchandise and services. Eurodollar deposits and trading were nonexistent two decades earlier. The expansion and globalization of finance allowed Eurocurrency, which is currency used outside its home country, to become a dominant new money form in the 1980s. Continuing advances in technology and international payment systems are now allowing even more exotic new money forms. Chapter 1 documents the rise of emoney, virtual money, and other ‘quasimoneys’ that are now being swapped with more traditional ‘real money’ as electronic payment systems expand. The creation and use of these new money forms has allowed an explosion of financial transactions. In the US payments systems alone, the Federal...
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