Financial Innovations and Monetary Policy Term Paper

Financial Innovations and Monetary Policy - Term musical composition Exampleon of debit and credit card into the economy was seen as a major tread as this was believed to significantly curb the risks associated with carrying cash and eliminate the losses incurred by investors due to destruction of bills as a result of losing cash or fire epidemic. Use of cash is also deject due to the continual problem of counterfeiting and the often contested argument that it makes it easy for criminals such as prostitutes and drug dealers to conduct business (Mishkin, 2009 Goodhart, 2000). While the prognoses for the eradication of cash return demonstrated to be quite challenging, the hollering in internet shopping has sent a clear signal to futurists that the cashless society is almost fitting an overpowering reality which will present its benefits and drawbacks to consumers and banks, particularly when the whole concept of monetary policies is taken into shape (Goodhart, 2000). Many deve loped economies are presently striving towards an economy where cash will be stripped and e-money, which in its broadest sense is electronic money often exchanged electronically through technical devices including fluid handsets and computers, is also significantly reduced (Goodhart, 2000).A cashless society implies that coins and currency will be absent simply that does not imply a backward emergence towards barter system, but rather a development towards a society with widespread use of EFTS (Electronic Funds Transfer System). In the US, for instance, only 7% of legal proceeding are in cash as over 90% of proceedings are sealed via e-money (Palley, 2011). Apparently, these transactions are low-value transactions involving only small amounts of money. People have accepted EFTS, and it is not surprising that organizations have been forced to use EFTS to remain competitive. However, as the move towards a cashless economy proceeds incrementally, it raises significant issues with attachment to monetary policy, the consumer, and payment system threats.Under the monetary