| Large parts of the world today suffer from a severe | | | | company is happy, the tariffs go down for all the |
| liquidity crisis. The famed globalization of the capital | | | | users. Prepayment does have a contracting effect on |
| markets seems to confine itself, ever more, to the | | | | the demand and usage of electricity - but this is |
| richer parts, the more liquid exchanges, the more | | | | welcome. It just means that people use electricity |
| affluent geopolitical neighbourhoods. The fad of | | | | more efficiently.A totally different tack is the |
| "emerging economies" has all but died out. Try telling | | | | verification approach. The person making the |
| the Macedonians about global capital markets: last | | | | payment carries with him a card which confirms that |
| year, the whole world invested 8 million USD in their | | | | he is creditworthy and will honour his obligations. |
| poor country. Breadwinners earn 300 DM a month on | | | | Otherwise, the card also serves as an insurance |
| average. Officially, in excess of one third of the | | | | policy: an entity, not connected to the transaction, |
| workforce is unemployed. Small wonder that people | | | | guarantees the payment for a fee. This entity is |
| do not pay their bills, employers do not pay salaries, | | | | financially viable and strong enough to be fully trusted |
| the banking system has a marked tendency to crash | | | | by the recipient of the payment.This market in credit |
| every now and then and the average real default | | | | guarantees is more developed in the USA (where |
| rate is 50%.Illiquidity erodes the trust between the | | | | credit cards have overtaken cash and personal |
| economic players. Such trust is a precondition to the | | | | checks as a mode of payment) than in Western |
| existence of a thriving, modern economy. We all | | | | Europe. But even in Europe there are credit card |
| postpone the gratification of our desires: we save | | | | equivalents which are very widespread: the |
| now and consume later, for instance or we sell goods | | | | Eurocheck card, for instance, is really a credit card, |
| or services and get paid a month later. Such | | | | though it usually comes with physical checks and |
| postponement of gratification is at the heart of the | | | | guarantees only a limited amount. One must |
| economic machine of the new age. It cannot be | | | | differentiate the functions of a debit card (with direct |
| achieved, however, if the players do not trust each | | | | and immediate billing of a bank account following a |
| other to fulfil their promises (to pay, for example). | | | | transaction) from those of a credit card. The latter |
| Alternatively, the state can instate an efficient court | | | | allows for the billing of the account to take place in a |
| system, aided by active law enforcement agencies. | | | | given day during the month following the month in |
| Keeping promises can be imposed to counter the | | | | which the transaction was effected or converts the |
| natural tendency to ignore them.The countries in | | | | payment into a series of instalments (within the |
| transition lack both: liquidity necessary to keep one's | | | | credit limits of the cardholder as approved by his |
| monetary word and the legal system to force him to | | | | bank). But in both cases, the guarantee is there and |
| do so if he reneges. Small wonder that solutions are | | | | is the most predominant feature of the system. Such |
| actively being sought by all involved: the business | | | | cards seem like a perfect solution but they are not: |
| community, the state, the courts and even by | | | | the commissions charged by the card issuers are |
| consumers.In this article, we will describe a few of | | | | outrageous. Between 2 and 10 percent of the |
| the global trends. The trends are global, the reaction | | | | payment made go to the pockets of the card |
| is world-wide because the problem is global. Bouncing | | | | issuers. Cards get stolen, forged, lost, abused by |
| checks have become a household reality in places as | | | | their owners, expire. But with the advent of new |
| rich as Israel, for instance. The mounting crisis in | | | | technologies all these problems should be solved. |
| Southeast Asia foreshadows bankruptcies and | | | | Electronic POS (point of sale) cash registers, |
| delinquencies on a chilling scale.The simplest method is | | | | connected through networks of communication, |
| to revert to a cash economy. Payments are | | | | check the card and verify its data: is it valid, is it |
| accepted only in cash. This, naturally, slows the | | | | presented by the lawful owner, was it stolen or lost, |
| velocity of money-like products and diminishes their | | | | is the purchase within the limits of the approved |
| preponderance, obstructing the expansion of | | | | credit and so on. Then, the billing proceeds |
| economic activity. An even more malignant variant is | | | | automatically. Such devices will virtually eliminate fraud. |
| the barter economy. Goods and services are | | | | The credit card companies will guarantee the |
| swapped on a no-cash basis. It is money that | | | | payments which will be subject to residual |
| generates new value added (by facilitating the | | | | crime.Another fast developing solution is the smart |
| introduction of new technology, to mention but one | | | | card. These are cards similar to phone cards and they |
| function). In the absence of money, the economy | | | | can be charged with money in the bank or through |
| stagnates, degenerates and, finally, collapses because | | | | automatic teller machines. These cards (in wide use in |
| of massive mismatches of supply and demand | | | | Belgium, Austria, Germany and many other countries) |
| aggregates and of the types of goods and services | | | | contain an amount of money which is deducted from |
| on offer and demanded. Still, this system has the | | | | the cardholders account. The account is billed for |
| advantages of keeping the economic patient alive | | | | every recharge. The card is the electronic (and |
| even following a massive liquidity haemorrhage. In the | | | | smart) equivalent of cash and it can be read |
| absence of barter economy, the economy might | | | | (=debited) by special teller machines in numerous |
| have ground to a complete halt and deteriorated to | | | | businesses. When payment is made, the money |
| subsistence agriculture. But barter is like | | | | stored in the card is reduced and the recipient of the |
| chemotherapy: it is good for a limited period of time | | | | payment stores the payment on magnetic media for |
| and the side effects are, at times, worse than the | | | | later delivery to his bank (and crediting of his |
| disease.In many countries (Georgia, to mention one) | | | | account).A more primitive version exists in many |
| defaults are prevented by demanding prepayment | | | | countries in Eastern Europe: depositors receive |
| for projected consumption. Let us take the | | | | checks exactly corresponding to the amount of |
| consumption of electricity as an example: many | | | | money deposited in their account. These checks are |
| heavy users and numerous households do not pay | | | | as safe as the banks that issued them because they |
| their bills at all. To disconnect the electricity is an | | | | are fully convertible to cash. They are, really, paper |
| effective punitive measure but it costs the electricity | | | | "smart cards".Credit cards and (more cheaply) smart |
| company a lot of money. The solution? | | | | cards are a way to restore confidence to a |
| Programmable Electronic Meters. The consumers buys | | | | shattered, illiquid economy. Macedonia should consider |
| a smart card (very similar to phone-cards). The card | | | | them both seriously and encourage them through the |
| allows the buyer to use a certain amount of prepaid | | | | appropriate legislation and assistance of the state. For |
| electricity and is rechargeable. The consumer pays in | | | | Macedonia, the choice is to be liquid or, God forbid, to |
| advance, electricity is not wasted, the electricity | | | | economically self-liquidate. |