Question

Imagine you come back to your economics class in the year 2050. How will the textbook describe money and banking? Based on trends you see today, make a prediction for the future of money. Explain why you think this trend will occur and how it will affect the US economy.

Answer 1

Answer: The last three or four decades have seen a remarkable evolution in the institutions that comprise the modern monetary system.The concept of money dates back to the beginning of civilization. The Israeli currency, the shekel, was originally a measure of weight (11 grams) and each shekel coin originally corresponded to that amount of silver. Coins were stamped to certify that they contained the required weight, infusing transactions, even among strangers, with an element of trust. The money has been changing since the time of its evaluation, so it’s not surprising that innovating the concept of money through a digital currency has been a recurring theme in technology circles. Intuitively, it seems that the global financial system should be based on more than the judgments of a small group of central bankers. Yet only recently has digital money actually become possible. The textbooks in the future will describe money and banking as just a supporter of the lifestyle and its important will reduce overtime. The money evolution will reach its best.

Future of money

The future belongs, not to plastic cards, but to mobile phones. In Kenya, hundreds of businesses, including the leading utilities, accept payments through a mobile-based system known as M-Pesa (pesa means “money” in Kiswahili). More than two-thirds of adults use it. “With payment cards, you could pay retailers. With mobile phones, people can pay each other. And that changes everything. Furthermore, the future may see “frictionless” shopping. Hire an Uber car and there is no transaction with the driver. The app already has your credit-card details; when you leave the car, you simply shut the door and then get an e-mail with details of the bill. The same may apply in supermarkets in future. A reader will record the details of your purchases as you leave the shop and charge them to your account. communities rather than countries will be the natural currency issuers in the future. These communities could be based on cities or on affinity groups such as a shared religion or even enthusiasm for a sports team.

Money changes societies, and societies change money. This is how it has always been and will continue to be. When money was “born,” the population of our planet was around 2 million. Today, there are over seven billion of us. The system is under pressure because of an increased demand for money. A massive demand for financing is created because of the current growth, and this growth has created a historical level of economic debt in the world, which in turn causes the increase of inequality.

In Kenya, for instance, microentrepreneurs created a new currency called Banglapesa. These new currencies start out as a kind of money used by people in a group who share commonalities and mutual trust and are not limited by their country’s economic politics and mismanagement. These types of currencies have a significant positive influence in developing countries in particular.

Effect of money on the U.S. economy

1.) America Is Declining in Global Economic Power an will continue to be in future keeping the current trend in mind. shift in global economic power has contributed to American unease. It's behind the attacks on free trade, jobs outsourcing, and currency manipulation. But even if Trump succeeds in passing protectionist policies, these emerging market nations will continue to grow in power. Their people want the same standard of living that America has. Their leaders know they must provide that to stay in power.

2.) Interest Rates Are Rising - The Federal Reserve wants to raise the fed funds rates to its 2 percent goal. That means the cost of loans for everything from furniture to automobiles to mortgages will rise. It also means savers will earn more on their deposits.

3.)Financial Markets Control Prices - Supply and demand are becoming less important in controlling prices. Instead, commodities traders set prices for oil, gas, and food. Foreign exchange traders determine the value of the dollar.  

4.) The Economy Is in the Expansion Phase of the Business Cycle - The phases of the business cycle are like the seasons in the year and they will continue to be such in future as well.

5.)Baby Boomers Aren't Retiring - A recent Prudential survey showed over half of those aged 45-75 were forced to delay retirement because of the recession.