I was there, in Vermont. Marvin is research director of the Richmond Federal Reserve Bank. The basic proposal--to have money lose value while it is in your pocket--is an old one, the idea being to give people an incentive to *spend* and thus to give the Federal Reserve more power to fight recessions in times when ordinary tools of monetary policy have lost their effectiveness. (The context was a discussion of Japan today, where the safe, short-term, nominal interest rate the Bank of Japan directly controls is 0.02% per year, yet borrowers say they feel that money is still "tight" because of large risk premia and because of deflation.)
In the past the consensus has been that the only way to do this is to print each bill's date of issue on its face. But the microchip offers other options...
Needless to say, it is a hopelessly impractical proposal--primarily because if cash is going to lose value in your pocket, Citibank will offer travelers' checks that don't...
Brad DeLong