Cybercash: The Coming Era of Electronic Money

285 Pages·2003·35.082 MB·English

by  Robert Guttmann (auth.)

Cybercash
By the same author:
Reforming Money and Finance: Financial Institutions and Markets in
Flux (Armonk, NY: M.E. Sharpe), 1989
How Credit-Money Shapes the Economy: The United States in a Global
System Flux (Armonk, NY: M.E. Sharpe), 1994
Reforming Money and Finance: Toward a New Monetary Regime, 2nd edn
(Armonk, NY: M.E. Sharpe), 1997
CAS
The Coming Era of Electronic Money
Robert Guttmann
* Q Robert Guttmann 2003
Softcover reprint of the hardcover 1st edition 2003 978-0-333-98730-8
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in accordance with the Copyright, Designs and Patents Act 1988.
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ISBN 978-1-349-43132-8 ISBN 978-1-4039-1450-7 (eBook)
DOI 10.1057/9781403914507
This book is printed on paper suitable fOf recycling and made from fully
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A catalogue record for this book is available from the British library.
Library of Congress Cataloging-in-Publication Data
Guttmann, Robert, 1951-
CYbercash : the coming era of electronic money I by Robert Guttmann.
p.cm.
Includes bibliographical references and in<ie)(.
ISBN 978-1-349-43132-8
1. Electronic funds transfers. I. Title.
HG 1710 .G88 ZOOZ
3ZZ.1' OZ8s-dcZ 1
2002068339
Editing and origination by Aardvark Editorial, Mendham, Suffolk
10987654321
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Transferred to Digital Printing 2011
This book is dedicated, with much love,
to my wife Gina Philogene and our children,
Alexandre and Maxine
CONTE T$
Ust of Figures and Tables IX
Preface X
Acknowledgments xiii
Ust of Abbreviations xiv
Part I Money and the Internet
Chapter I Electronic Money 3
1.1 The Beginnings of Electronic Money 4
1.2 Defining Cybercash 9
1.3 Money as Social Institution 12
1.4 The Dematerialization of Money 17
1.5 The Dual Nature of Money 22
1.6 The Emergence of Cybercash 25
Chapter 2 The Monetary Regime in Transition 26
2.1 Stagflation Crisis 27
2.2 The Deregulation of Paper Money 31
2.3 Securitization of Credit 38
2.4 Computerization of Finance 43
2.5 Online Banking 50
Chapter 3 The Internet Revolution 56
3.1 Birth of the Internet 57
3.2 The Dot-com Crash 65
3.3 Restructuring the Internet 70
3.4 The Internet as Payment Sphere 81
Part II The Complexities of Cybercash 83
Chapter 4 Money as Software 85
4. I The Properties of Cybercash 87
4.2 Privacy Concerns 89
4.3 Safety Concerns 94
4.4 The Control of Cybercash 101
4.5 High-tech Money 106
vii
Contents
viii
Chapter 5 Three Generations of Cybercash 110
5.1 The Birth of Cybercash III
5.2 E-mail Money 119
5.3 Coupon Money 124
5.4 The Maturing of Cybercash 133
Chapter 6 Managing Online Money 144
6.1 The Life Cycle of Cybercash 145
6.2 Digital Seigniorage 151
6.3 Risk Management 156
6.4 External Stabilizers 162
Part III The Internet-based Economy 177
Chapter 7 Virtual Capitalism 179
7.1 The Online Marketplace 180
7.2 Automation of the Production Circuit 186
7.3 Cyberfinance 196
7.4 Intangible Capital and Fictitious Capital 204
Chapter 8 Cyberspace and Public Policy 212
8.1 The Internet as Public Policy Challenge 214
8.2 Information Management 223
8.3 Macroeconomic Policy Implications 227
8.4 Cybercash as Transnational Money 235
Notes 241
Bibliography 256
Index 264
LIST OF FIGURES AND TABLES
Figures
2.1 Income erosion and borrowing binge, 1966-79 28
2.2 Credit crunches of US commercial banking, 1965-81 30
2.3 US real (inflation-adjusted) interest rates, 1977-93 36
2.4 US corporate funding preferences 38
Tables
1.1 Noncash payment types, United States 4
2.1 Total financial assets of US financial institutions (in $bn) 42
5.1 Summary of first-generation cybercash experiments, 1994--96 118
5.2 Summary of second-generation cybercash experiments, 1997-2000 132
5.3 Summary of third-generation cybercash experiments, 2000--02 142
ix
PREFACE
Invitation to a Voyage
Attention readers! This book is important!
Robert Guttmann's Cybercash is important because it deals with an
ensemble of 'major' innovations capable of triggering a powerful wave of
change. These innovations concern money - arguably the institution
through which our social ties manifest themselves in a most consistent and
indispensable fashion. The book thus analyzes innovations which, in all
likelihood, will profoundly affect all aspects of social life.
As the author reminds us, money possesses a 'public' dimension beyond
its private usage by all of us. We value it and use it only because collec
tively we know with certainty that everyone else will consider it as good
as does each one of us. Thus, changing the form of this link by introducing
new intermediaries in acts of exchange means transforming social life
itself. With cybercash - the new type of money that circulates on the
internet in several forms - this is precisely what we get: a revolution in the
support structure of market exchanges and even in the dynamic of the
exchange process itself.
Robert Guttmann deserves to be thanked for having given us this
detailed and precise analysis of the birth of a new type of money - its first
forms, its first uses - and for having accomplished this task in such a
profound, yet thoroughly readable fashion. He dissects with care the new
business models of online firms such as Yahoo!, eBay, or E*Trade, and
elaborates on the reasons why these firms fascinate us as harbingers of the
future. With the same sharp edge he analyzes the failures, the victims of the
e-crash. Under the direction of Robert Guttmann this constantly shifting
and sometimes strange world of the internet is rendered intelligible and
transparent. He presents a radical innovation, in the Schumpeterian sense
of triggering powerful waves of 'creative destruction', as if it were a riddle
in a detective story whose resolution he guides us to step by step.
x