Electronic money payments in the Middle East

This week’s The Economist has an article about the introduction of electronic payment systems in the Middle East.

This sounds like a major change in the type of money being used  – a transition from cash to a more intangible type of money.

It illustrates that money should be considered purchasing power rather than a commodity.

I wonder what percent of the money supply in Middle East countries is cash and what percent is bank deposits?  To what extent is fractional reserve money being used?

For their sake I hope the transition does not include increasing fractional reserve money because that is a Ponzi scheme.  As fractional reserve money is based on loans if all debt plus interest had to be repaid at once there would not be enough money.  This type of money works only so long as there is continued economic growth and a continuously increasing supply of new money via new loans.

(The author of this comment has a web log on economics at https://economics102.wordpress.com/)

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2 Responses

  1. Reblogged this on Standard Climate.

  2. A large and growing proportion of money transfers inthe Middle East, especially now as the US is trying to impose sanctions on Iran, are not banking transfers. And yes, these transfers proceed electronically.

    It goes by many names, but is the ‘sherif’ transfers between individuals. And it is big time. Much bigger now than the Gulf banks.

    And yes, despite not being banks, these sherif bankers do create money. Through the normal process described called disintermediation. And yes, even though many of the sherifs are Muslim, they make a profit from their loans without charging interest. The so called hallal business loans.

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