[laotzu]

Even though the vast majority of monetary transactions are done electrically, it is still at heart a paper-based system built upon the constraints and assumptions of the paper/print medium that has dominated for the past ~500 years.

"It is part of the age-old habit of using new means for old purposes instead of discovering what are the new goals contained in the new means."[1]

I'd imagine the house of cards won't come tumbling down until a viable electric alternative outcompetes the legacy system.

The old goals of the Federal Reserve system are primarily:

1. Maximize employment

2. Stable prices

3. Low interest rates

These goals are no longer applicable in the new electic age of automation and ephemeralization.

[1] Marshall McLuhan, The Medium is the Massage

[joe_the_user]

Retail transactions may be "at heart paper" with those constraints and they may be numerically the majority of transactions however broadly financial transactions involve a greater large amount of funds and so the Fed's policy of money creation has in no way been limited by retail monetary transactions' dependence on paper.

Have you heard of the "helicopter money speech"?[1] It seems required reading for anyone trying to understand modern monetary policy (though it's naturally only the start).

[1] http://www.federalreserve.gov/boarddocs/Speeches/2002/200211...

[laotzu]

Deflation is defined as:

>a decrease in the general price level of goods and services

In the Gutenberg era of paper based processes and hierarchies, as stated in your cited speech, a reduction in the price of goods and services is seen as a bad thing. This is no longer the case. The assumption of scarcity of renewable physiological resources (level 1 of Maslow's hierarchy) is no longer valid:

>In technology's "invisible" world, inventors continually increase the quantity and quality of performed work per each volume or pound of material, erg of energy, and unit of worker and "overhead" time invested in each given increment of attained functional performance. This complex process we call progressive ephemeralization. In 1970, the sum total of increases in overall technological know-how and their comprehensive integration took humanity across the epochal but invisible threshold into a state of technically realizable and economically feasible universal success for all humanity.

-Buckminster Fuller

In the era of electric automation, deflation flips into ephemeralization because everything is increasingly/exponentially produced better, faster, and cheaper. A reduction in the general price level of goods and services is the purpose of automation.

This is why goal #2 of maintaining stable prices is now obsolete and self-defeating. It completely ignores automation and renewable resources.