1. Evaluate whether alternative currencies can be considered money and what issues they present
2. Explain the importance of the Internet in stimulating the use of electronic or "cyber" money and of the transformation of money into new forms

THE BOTTOM INFO WILL HELP

New forms of "near money"

With the advent of electronic money that can be carried on a magnetic strip, new types of near money have emerged and become popular. People used to collect stamps issued by gas stations. The oil companies provided them as a value-add to try to encourage customer loyalty. When you had enough stamps you could exchange them for any of a number of products. (A transistor radio, for instance.) Some people still collect Canadian Tire Money, which functions in the same way and has a kind of near-money function.

The Air Miles card promises you an increase in wealth of a certain kind every time you use it. Air Miles aren't exactly money, obviously, as they can't fulfill the three functions that money has. But they can be exchanged for goods and services just like money, and they do provide a certain kind of unit of account and a store of value. So far they are not a medium of exchange: I can't trade 40,000 of my Air Miles with you for 25,000 of your Aeroplan points, for instance. Inflation has hit even this type of value store as a given flight or reward item almost certainly costs more points this year than last year.

The Liberty Dollar

There have been a number of attempts to establish alternate currency systems over the years. Typically these are intended for use by people entering into a voluntary private barter system with one another.

A recent example that enjoyed some popularity is, or was, the Liberty Dollar issued in the United States. It received a certain amount of use in the northeastern and Midwest states. Originally issued as a protest against the involvement of the federal government in the U.S. monetary system, it was part of a push for the (re-)privatization of money and the abolition of the Federal Reserve, thought to be current and now based on reserves that are more mental than metal. The power in the alternative Liberty currency is that it is not fiat currency; it is actually backed by silver and gold and can be redeemed for such by its holder at anytime.

The currency proved controversial and did indeed provoke the US government. In May 2011, Liberty Dollar founder Bernard von NotHaus was found guilty of essentially "counterfeiting," coining his own money, which is technically illegal in the United States. Watch the following video interview with von NotHaus to learn more and answer these questions:

Electronic money

The first virtual money took the form of cheques (ironically, since paper money had itself evolved from the earlier use of cheques and bills of exchange). Virtual money took another step into the future in the 1960s with the American Express traveler's cheque. The cheques were issued in a variety of currencies and a variety of denominations, and they could be exchanged in foreign banks for the currency in question or simply spent like money in many establishments (especially hotels, restaurants, and other tourist spots). The cheques were backed up and verified by an international electronic network that opened the possibility for the more elaborate computer-based systems of exchange we have today.

In the 1970s governments began to give their employees the option of receiving their pay electronically in the form of direct deposits into their bank accounts. As trust of the electronic systems grew and direct deposit became common practice in the corporate world, people embraced the convenience of telephone banking as well. Many transactions, such as bill payments and money transfers, could now be accomplished without either cash or cheques. By the late 90s, Internet banking made it possible to do online most things you could do with cash - and many things that you couldn't.

Trust plays a major role in the acceptance of new types of money. Cultural factors also seem to be significant. Germans prefer to pay with debit cards, for instance, the Japanese still tend to prefer cash, and Americans and Canadians love to use credit cards.

The birth of the ATM (Automated Teller Machine) was a huge revolution in how people used money. Before there were cash machines, people typically took the amount of money they thought they would need out of the bank once a week or at periodic intervals. If they found they were in need of additional funds and the bank was closed, they would have to try to find someone willing to cash or accept their personal cheque. (Cheques were accepted much more widely than they are today.)

The debit card came much later than the credit card, though it seems an obvious thing today. Today's smart cards, each equipped with a computer chip, offer access to multiple accounts, credit institutions and more. There is no need to carry bulky money, which can be lost or stolen and has no obvious connection with whoever has it. You can choose whether to pay directly out of a bank account or put something on your Visa. Eventually, smart cards or something like them are expected to eliminate the need for paper money and coins.

The challenge and opportunity is for companies to come up with forms of money that are easier and safer for both consumers and merchants. Though some people are still reluctant to trust anything but cash, most people are won over by the convenience and comparative security of electronic money. It's true that this newmoney has become a target for organized crime networks, and the new "industry" of identity theft has left many people nervous, but on the whole the advantages seem to outweigh the risks for most people. The need for security has become the greatest issue surrounding "e-money." Backup, redundancy, encryption are the new frontiers, often driven above all by the financial sector.

The new world order

So just what is electronic money? Is it something that we can touch or hold? Is it merely a record of the sum of "real" money that exists in an individual's account. Is it a series of magnetic patterns that sit on a storage device some place?

What are the challenges? Apart from security, there are new challenges for government agencies, who find it increasingly difficult to follow the trails money leaves as it moves almost at the speed of light across largely invisible or encrypted networks that cross national boundaries with ease. Taxation becomes a challenge, and indeed many financial structures that are based on an internally-consistent national economy are proving outdated or in need of revamping.

Some of the greatest clashes in history have had to do with who issues or controls the money. Who will become the dominant player in the future? Coins replaced primitive proto-money, banks and paper money superseded coins, electronic money is making paper money a thing of the past. Who will ensure the money of the electronic age? As citizens continue to lose faith in the value of many national currencies, will private currencies such as the Liberty Dollar backed by silver or gold become a new standard? Will new currencies be controlled by the government or large corporations?

We've seen new forms of money become dominant, while not entirely replacing the previous forms. Will paper money remain a viable alternative into the future? Will virtual money regulated by the computers of banks, governments or corporations be the only form allowed for legitimate transactions, and will paper money, as in some science fiction novels, be used only in the underworld, as an alternative currency, like the US dollar was used in Bolivian drug lords during the economic crisis of the 80s. Or, as certain more pessimistic science fiction stories have pictured it, will the wealth of the future be measured once more in real material goods - food and fresh water being the scarce commodities we value more than gold?

Amazon Go is a very interesting step forward on the path to becoming a cashless society. Watch the following promotional video to learn more about how it works.