I wonder if the next cycle of nervousness might involve other more novel underlying instruments? We’ve noted before the kerfuffle about virtual currencies in China, for example. These are now far from niche. The “QQ currency” is substantial: while it was created for use on the web, it is being used in other kinds of commerce (which, since I think that stimulating trade is one of the good things that a payment system should do, is probably a good thing overall). The Chinese government had a bit of a crackdown on QQ coins with the predictable (to economists) result: the price of the money went up (in fact it went up by 70% against the Yuan) which clearly indicates that there is a significant unfulfilled consumer demand for the new currency.
Now, QQ may not mean much to consumers in the U.K., but just suppose that eBay or Tesco or Google were to create their own currency for special purposes and then it were to be adopted more widely? I think this might be rather fun. And rather likely, since the marginal cost of the “n+1″th currency in the electronic world is very low. Just because this was tried before and didn’t work — Beenz, Flooz and others — doesn’t mean that what Javelin call the finite-to-universal currency phenomenon couldn’t happen in the future especially given the brand and presence of the big web players. Why would they do this? Well, a few years ago, I contributed to an excellent book by Forum friend David Boyle: The Moneychangers. One of the other chapters is by noted lateral thinker Edward de Bono. It’s called “The IBM Dollar” and is based on a 1994 pamphlet he wrote for the Centre for the Study of Financial Innovation (CSFI) — in fact it was the first CFSI pamphlet I read — and sets out some reasons as to why a company might want to issue its own money. Well worth a read: in fact, I’m going to read it again myself.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]