The consumed income tax structure is a (witholding) tax on money balances (earning income ceases to be a taxable event). This increases the incentive to economise on the holding of currency; dated money imposes costs on the underground cash economy.

Robert Leeson
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----- Original Message -----
From: "Pat Gunning" <[log in to unmask]>
To: [log in to unmask]
Sent: Tuesday, 28 September, 2010 10:33:29 AM
Subject: Re: [SHOE] Dated currency

  I wish this thread made sense to me. Perhaps someone can clue me in?

Why on earth would someone want to hold money that is destined to die? 
If I were a speculator in such a system, I would short sell all of the 
nation's money today.  That is, I would borrow money from everyone and 
then use it to buy their durable assets, promising to repay the money 
the instant before it is scheduled to die. At that time, I could buy the 
money back for a song and repay my money debts. Ultimately, I would gain 
a bunch of real assets in exchange for my song.

Anyone who lent me money to buy goods would surely not be a shrewd operator.

Is it not true that money that is due to die tomorrow would, in a world 
of reasonably astute people, die today? How can an item be acceptable in 
exchange by shrewd operators today if they know it will not be accepted 
in exchange tomorrow?


On 9/26/2010 4:23 AM, Robert Leeson wrote:
> Is there any literature on dated currency (currency that has an expiry date as legal tender) as an assault on the underground economy?
>
> Robert Leeson
> [log in to unmask]
>
>


-- 
Pat Gunning
Professor of Economics
Groton, Connecticut
http://www.nomadpress.com/gunning/welcome.htm