Electronic Money

Paper Summary:

The writer notes that in his enlightening article regarding electronic money, "Money in an Electronic World", Bernd Kempa argues that electronic funds are not likely to replace traditional money any time soon but that the role of the central bank in determining a country's monetary policy may be affected. The writer points out that the Kempa voices these concerns in closing his research in which he successfully illustrates the development of electronic funds and cash. The writer discusses that companies such as eBay and Amazon.com have turned the retail industry upside down and these two companies alone handle billions of dollars annually in electronic funds across international markets without ever handling physical currencies. Yet, the writer maintains that central banks will continue to determine monetary policy because the simple fact is that none of these new economy institutions or the electronic funds that accompany new business models creates money themselves. The writer concludes that they only move currency values that have been created via traditional channels.

Outline:
Author Analysis
Developments in Electronic Money
Conclusion

From the Paper:

"These observations are, while not being indicative of an impending catastrophe, somewhat alarming for economists who might be concerned with monetary policy at the national level. However, by raising such alarms, the author does not adequately support why he believes electronic funds might hold the potential to undermine such national economic and monetary policy when, in fact, all electronic funds originate first with the issuance of funds through traditional channels. No company that regularly operates in the financial markets, private or otherwise, has the ability to generate funds, whether electronic or otherwise, in any manner that supersedes the role or the oversight of the central banking systems."

Sample of Sources Used:

• Kempa, Berndt. "Money in an Electronic World." University of Essen; Germany.
• Bielski, L. "Debit's Growing Popularity." ABA Banking Journal, 98/1(2006): 37.
• Castronova, Edward. "Real Products in Imaginary Worlds." Harvard Business Review, 83/5(2005):20.
• Globerman, S., Roehl, T. W., & Standifird, S. "Globalization and electronic commerce: Inferences from retail brokering." Journal of International Business Studies, 32/4(2001): 749+.
• Guttmann, R. Cybercash: The Coming Era of Electronic Money. New York: Palgrave Macmillan; 2002.

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