Why Cities Will Soon Choose Digital Currency Over paper money
In this opinion piece, Bains argues that national currencies don't add the interests of all a country’s urban areas, predicting that soon a city will make the leap to its own, digital, currency.
Over the last 100 years, we've seen all innovation happen in cities. Cities are where people meet and exchange ideas, and opportunities in business emerge.
By 2050, it’s estimated almost 70% of the planet population are going to be living in cities, quite double in 100 years. In absolute numbers, that's a growth of 850 million to six .3 billion urbanites. In 15 years we'll have 41 ‘megacities’ (cities with populations of quite 10 million), a fourfold increase since 1990.
With all the facility of growth and influence emanating from cities and not from farms and villages, our model of ‘one country, one currency’ is outdated.
I predict that within 10 years we'll see the primary city break away the national currency and have its own, digital money.
Old terms not apply
We ask countries as ‘developed’, ’emerging’, ‘developing’, and ‘poor’ nations. this is often wrong.
We would do better to ask places as ‘dynamic’ or ‘passive’ regions. There are many regions within the ‘developed’ world that now appear as if they're a ‘poor’ nation.
An example would be Detroit throughout the 2000s. Elsewhere, London is flourishing and growing while cities within the remainder of the united kingdom are falling behind. And in Italy, for many years , Milan has been growing, but its surrounding region is doing quite the other .
Benefits of an area currency
The one-country, one-currency system may be a relatively new concept. Formed only 300 years ago by English and French banking centralization. Until the turn of the 20th century, the US itself had different banknotes that were sold at premium or discount contingent the reputation of the bank within a neighborhood .
Today’s split over the advantage of the euro as one currency is that the same conflict the US had over 100 years ago when it took a central route.
It is sensible now, though, that every city should follow its own business needs. Forcing two or more cities to share a currency sends false signals, because it strengthens one but weakens the opposite .
The concept of getting to a city-based currency was mentioned by Canadian economist Jacobs within the 1970s. consistent with Jacobs, when a rustic covers a huge region, you get bad signals – the increase of 1 super city, which the national currency most benefits, and lots of passive cities that fail to develop.
The argument goes like this:
With falling exports, a city needs a declining currency working like an automatic tariff and automatic export subsidy
Once exports do well, it needs a rising currency to earn the utmost variety and quantity of imports it can buy
Exports may change because the town must start producing new products to exchange earlier imports.
City currencies function an honest feedback system because they trigger the proper response. check out city states like Singapore and Hong Kong . Both can plan policies efficiently in response to how their currencies are performing.
Back to Detroit: its economy was almost solely hooked in to the automotive industry. because it did not compete with other markets and exports dropped, it never received the first signal to form changes.
The US dollar was strong, leading to Detroiters continually purchasing imported goods that Walmart brought in from China. City officials, paid in dollars, never felt the necessity to form overt changes until it had been too late.
If Detroit had had its own currency, city officials would have be paid therein and, because the currency declined, imported goods would have seemed increasingly expensive. Politicians would therefore have received a sign that they needed to maneuver faraway from auto manufacturing and develop new strengths.
The role technology will play
Blockchain and digital currencies make now the proper time for a city to adopt its own currency. this is often where bitcoin got it both right and wrong. The ‘wrong’ is its followers’ aim for it to be a replacement global currency.
But bitcoin’s methodologies are often implemented. For a replacement currency to be adopted quickly it needs the subsequent characteristics:
Cheap: fiat currency in note and coin form is dear to supply , manage and distribute. A digital currency removes all those costs and may easily be distributed.
Secure: as long as it's digital, cryptographic and supported mathematics , the prospect of forgery or distrust is eliminated
Safe: a digital currency are often backed by external assets like gold, treasury bills, exchange or equities, a bit like current money assets are
Usable: as places like Stockholm are going purely digital, a digital city currency might be massively adopted.
Which city are going to be first?
I predict the Scottish city of Glasgow will become the primary major city to issue its own currency. It’s one among the cities that has did not enjoy British pound, while London has done so greatly. Glasgow came on the brink of a recession in 2015, it's lower labour growth in comparison to its southern counterparts, and unemployment has reached its widest gap compared to England in 12 years.
Further, Brexit poses a true threat to Scotland’s future growth with the potential for a loss of trade, inward investment and finance worsening an already weak growth in productivity. Demand for Scotland’s products was already declining and Brexit makes things worse. In 2015 there was an 11% drop by exports compared to 2.7% for the united kingdom as an entire . And guess what? Imports are rising.
But the town has the proper foundation to adopt its own ‘Glasgow Pound’:
It has the regional size and population where it can make a difference versus smaller cities like Dundee
It has a robust record of academia, government and business working together. In recent years, all three came together to secure a £1.13bn city deal. this is often the type of unity which will be needed to push a city currency
It has a thriving financial base, moving to 74th within the world for financial centers. This isn’t an excellent number, but it demonstrates it's a base and an informed population to form the new system work.