Amazon Introduces New Currency: Should Bezos Replace Bernanke?

Yesterday, Amazon.com announced plans to introduce Amazon Coins—a new way for Kindle users to pay for their purchases—starting in May. Adding its own centralized payment method allows for all currencies to compete for ease of use by customers and developers alike.

Amazon Coins are similar to Nintendo Points and Microsoft Points. But they differ from the in-house currencies of these tech and gaming giants in one big way: convertibility. With Amazon Coins, one Coin is equivalent to one cent.

Longtime customers might be familiar with all of the changes Amazon has made in an effort to make paying for purchases easier. Like most retailers they offer gift cards and PayPal, but they also allow Discover Card users to pay for purchases with their bonus points and have integrated a "Buy now with 1-Click" button to condense the payment process and verify shipping information all on one screen. 

Amazon is promoting this new payment method with freebies:

When Amazon Coins launches in May, we will be giving out tens of millions of dollars worth of Coins to customers to spend on Kindle Fire apps, games, or in-app items.

Which is right in line with Jeff Bezos' vision for Kindle products:

Well, our approach to our hardware Kindle devices, Kindle Fire and our Kindle readers, is to sell the hardware at near break even, and then we have an ongoing relationship with the customer where they buy content from us—digital books, music, movies, TV shows, games, apps. And the reason that we like that approach is because we don't make $100 every time we sell a Kindle Fire HD, since it's near break even. Instead of making a bunch of money, then, we're happy if people keep using our products. We don't have to have you on the upgrade treadmill.

For more Amazon's vision, see Brian Doherty's "Amazon: A Loss for Them is a Profit for You!"

Amazon's goal is to keep customers coming back, while making life easier for app developers and content creators. But introducing a new currency into Amazon's slew of current payment options is also a neat experiment. Bezos is allowing several forms of currency to compete—dollars, points, Coins—with market participants free to determine which is most useful.

Here's something to dream about: What if Jeff Bezos replaced Ben Bernanke chairman of the Federal Reserve? If Amazon is any indication of what his leadership could look like, it's easy to image a world where F.A Hayek's idea of denationalizing money and allowing currencies to compete actually sees the light of day.

Comments

[Aresen]

*makes popcorn*

*Settles in to watch the Amazon vs. Treasury fight*

[DEG]

Bernard von Nothaus redux?

[Episiarch]

Considering how much I love my Amazon Prime and my Kindle Paperwhite, Bezos should be the President of Earth. He couldn't be worse than anything we have now.

"Morbo congratulates our gargantuan cyborg president. May death come quickly to his enemies."

[Metazoan]

Not to mention the awesomeness of AWS and EC2. It's unbelievably awesome to have a cheap, on-demand high performance cluster.

[Pro Libertate]

I've been wondering whether Amazon is, in fact, my favorite company. I think maybe it is.

[Jordan]

You're not alone. Amazon consistently ranks at the top of customer satisfaction surveys.

[Jordan]

One time the morons at USPS lost a PS3 game that I purchased from Amazon. I e-mailed Amazon about it, and they shipped a free replacement same day, no questions asked. Fuckin A.

[Pro Libertate]

I'm a Prime customer and get stuff in two days. Two days.

[Obese American]

They're working on same day delivery in many urban areas. Imagine what that will do for Amazon Grocery and the like. See you brick and mortar.

[Metazoan]

No wonder the crony Rs in PA are trying to tax it... it's unpatriotic to buy from a company that consistently gives good service!

[Pro Libertate]

Heard about that. Though I think the mechanism is basically just hiring stiffs to deliver stuff locally. That could work--what's the USPS, after all?--but it's a little odd at first blush.

[robc]

With Amazon Coins, one Coin is equivalent to one cent.

Pegging to the dollar (or the cent, in this case), defeats the purpose of alternate currencies.

[Aresen]

Not necessarily.

An initial benchmark gives a measure. Once it is clear what the 'currency' will buy, the initial benchmark becomes irrelevant.

[robc]

That is the big question though. Is it merely an "initial benchmark" or a "peg".

[Another David]

There's nothing to indicate that this is an initial benchmark rather than a fixed exchange rate, though.

[Another David]

If 1 coin = 1 cent, how is this not just a different form of gift certificate?

[ChrisO]

Agreed. I'm not really seeing the point of this.

[Also Ran]

I was thinking the same thing. I don't see how it's any different than Paddy's Dollars.

[RG]

Not to worry, some Brit found out that there is such a thing as a free lunch. His brilliant idea? Print money and give it directly to people and governments.

http://blogs.reuters.com/anato.....ry-policy/

[robc]

[insert sld everywhere in this post]

I do think, as stimulus goes, giving every citizen a check is better than the bullshit they have been doing.

[RG]

How the heck can they argue that it won't cause inflation?

The only way that happens is if everyone pays off debts, but then it wouldn't immediately increase consumption.

[robc]

It absolutely causes inflation, unless it somehow kills the velocity of money. In which case it didnt stimulate anything.

Of course, Im measuring inflation in monetary terms, as say, the change in M2.

[RG]

Well, here comes ZH to slap down this silliness.

http://www.acting-man.com/?p=21660

[BakedPenguin]

I'm thinking the policy of paying interest on reserves is how they're killing off velocity - and that it's a deliberate policy to do so, since if they didn't, price inflation would be over 100% since Barry took over.

[RG]

I alos saw that as an additional stealth bailout of the banks.

[Libertarius]

It is grimly ironic that this is the only situation where Bernanke has to think like a private banker, which means: Bernanke knows he has to incentivize the big banks to sit on government debt, which only get "TBTF" because Bernanke needs them more than they need him.

In a gold-based free banking system, the clearing mechanism between banks keeps them from issuing excess notes or debt. The first bank that steps out of line gets whacked, George Selgin likens this to a chain gang. I have come to realize that a centralized banking system is really a frozen banking system, within which there is no exchange mechanism between banks--and this is why the government is able to do things that no private banker in a laissez-faire system would even dream of. You need convertibility to gold and an exchange mechanism, that's it.

But it'll be cool to see how this Amazon deal turns out. If Bezos pegs it to the penny, it's just a gift certificate and he's no better than Bernanke lolz. If he doesn't peg it, then this could get really interesting if it takes off.

[DRM]

Well, the theory of Social Credit (which this seems to be some mutated failing-to-give-credit variation on) was that you create the money to match the increased demand-for-money caused by economic growth, leaving the price level stable (instead of deflationary, which is what happens in a gold standard economy when economic growth outpaces mining of more gold). Then you sent the created money directly to the citizenry (instead of creating money by having the Federal Reserve lend it to banks or using it to buy bonds or whatever).

[Libertarius]

Fallacy from beginning to end.

Deflation cannot occur where inflation has not first occured; it is a matter of causality. Under a gold system, banks cannot issue excess credit without going bust, so there is no excess credit to drive inflation to create the spectre of deflation in the first place.

[Invisible Finger]

It won't CAUSE inflation. It IS inflation!!

[Anonymous Coward]

I do think, as stimulus goes, giving every citizen a check is better than the bullshit they have been doing.

The progtards routinely mock "trickle down economics" and yet it's exactly what they practice (the delusional bit of fiction that stim money will trickle down from union-heavy road projects and green energy boondoggles to everyone else).

[Brandon]

Jesus Christ, the second comment is whining about the wealthy not paying their fair share.

[Aresen]

You have to remember that, for a certain segment of the population, "not paying their fair share" means "they have more left after taxes than I do" and "the wealthy" means "anyone who hasn't pissed away every penny* they ever earned."

*Since Monday, Canadian visitors can substitute the word 'nickel' for 'penny.'

[mr simple]

We don't have a consumption problem.

[Craig K]

If 1 coin = 1 cent, there is no reason to use coins.

[Pro Libertate]

Is it pegged to the cent or just starting off with that? If the latter, behold the new world currency!

[Rasilio]

The bigger question is can you convert it back?

I see nothing in this article about converting coins back into cash which when dealing with these virtual currencies is typically not allowed.

There is also the issue of their use as currency to anyone BUT Amazon and their certified vendors.

If I can't cash out my coins and can't send them to my buddy Bob to pay off my superbowl bet then the "coins" are in no way like money, they are as someone mentioned earlier just another form of gift certificate.

[Pro Libertate]

Don't know, but they have to deal with escheat and other legal issues with something like this.

[Canman]

Could I exchange my mycokerewards points for them?