But that thinking has changed, in large part because the money supply has become increasingly difficult to measure. In addition to the uncertainty as to which of the above series constitutes the most relevant measure, the emergence of electronic money, or e-money, increasingly complicates the issue. The extent to which it does so is indicated in Figure 1. In 1995, as shown in the figure, more money changed hands electronically than by check, and by check than in the form of cash. Yet cash transactions far outnumbered check transactions, which in turn outnumbered purchases made with electronic money.
International transactions follow a similar pattern.
Indeed, the second generation of technology is already in place, as dedicated phone lines and hardwired telecommunications links have been replaced by faster satellite and fiber-optic systems. It is here that Solomon's concept of virtual money becomes illuminating. Nobody knows, at any given time, how many such opportunities exist, how large they are, or what fraction of them will ever be exploited. Traditionally, the right to create money has been reserved by law unto banks. But at present, any number of nonbank institutions have the opportunity to create money, and nobody seems to know how many of them realize their opportunities.