*This is a cross-post from my old blog*
Greg Mankiw’s recent post is a very interesting one, in which he advocates a system of lottery so that the Fed would have a way to set interest rate (effectively) below zero, and incentivize spending.
“Reduce the return to holding money below zero. Imagine that the Fed were to announce that, one year from today, it would pick a digit from 0 to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.”
And apparently another economics professor informed him of the use of stamp scrip before I could, but I sent him an e-mail anyway…because the link that he posted, sadly, ignores the social impact that different types of money has.