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Tuesday, November 26, 2002

Signs of the Coming Apocalypse-McDonalds is about to accept credit card payments, as it is planning to roll out systems in a quarter of its stores by next summer. Right now, about the only places that don't take credit cards are fast food joints and vending machines; cross the first off the list. This is moving us a notch further towards a cashless society and it has some implications for the banking sector and for monetary policy. We're slowly moving to a system where people won't need to carry cash for the vast majority of transactions. It will likely decrease M1 (for it will decrease the transactional demand for currency) and increase M2, as people put some of that old walking-around money into interest-bearing accounts. It will decrease the demand for ATMs and make banks a notch more profitable, as more transactions will go on-line.

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