How Might the Invisible Hand Handle Electronic Money?

The purpose of the paper is to consider how the financial system might change from technology that is introducing new forms of electronic money that by-passes banks, current laws and institutional practices. The introductory first Section identifies the illogical and inefficient features of the existing financial system with an overview of alternative possibilities considered later in the paper. The second Section reviews the historical evolution of the existing system to explain its current configuration and identify alternative forms of endemic money that have been overlooked by many scholars. In Section three, alternative types of endemic currencies that successfully competed with legal tender are reviewed and how their competitiveness might change in electronic form. Section four reviews how cell phone technology has introduced cloud banking that by-passes the existing financial system. The concluding Section five identifies how economic and social incentives exist for the invisible hand to favour the adoption of cloud banking. Economic incentives are identified for the invisible hand to favour renewable electricity denominated in Kilo-Watt-Hours (kWh) as an inflation resisting unit of value to create “green dollars”. Social forces arising from the need to reduce pollution and reliance on non-renewable resources provide an addition incentive for the invisible hand to select green dollars as a unit of value. As a currency based on renewable kWh also reduces the need for carbon taxing or trading the potential exists for green dollars to become a new gold standard.