Now, more than ever, is the time for central banks to launch their own official e-money. We’ve campaigned for this before. But in light of further Bitcoin and altcoin developments, as well as secular stagnation observations by Larry Summers, it’s worth reiterating the argument for an unconventional policy of this sort.
First, it’s important to stress why this wouldn’t in any way be a panicked response to the supposedly destabilising “threat” of Bitcoin.
Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began.
What’s more, the Bitcoin asset bubble is much more likely to be doing the stagnating dollar economy a favour at the moment than a disservice. Read more
If Larry Summers is correct about secular stagnation, the natural interest rate is negative and interest rates at current levels are too high to ensure that planned savings match planned investment in a way that generates full employment.
So what does one do about it?
In an op-ed for the Washington Post earlier this month Larry Summers identified three possible responses. Read more
An interesting thing happened on the way to Sheep Marketplace — the online market for illicit goods which rose to prominence after Silk Road, the dominant site for illicit goods trading, was apprehended by the Feds in October.
The interesting thing is not that after a couple of months in the limelight the site closed down because a hacker allegedly made off with $5m worth of Bitcoins. Nor is it that the Bitcoin community failed to buy the story because they noticed that all withdrawals from the site were being blocked by the site’s operators — promptly branding the entire website a scam from the beginning.
What is interesting are the “capital controls” the community is now effectively enforcing on the Bitcoin wallet address they suspect is responsible for the theft. In fact, an entire community of Bitcoin vigilantes has sprung up on the Reddit website, dedicating themselves to chasing the money across the open peer-based Bitcoin ledger. Read more
A note from ConvergEx this morning considers the impressive seigniorage benefits to the US of the $100 bill, the annual production of which has spiked in recent years. But the C-note is unique for its use as an overseas store of value, including in conflict regions and for dodgy transactions.
We were more interested in what the note had to say about all the other kinds of physical bills, whose combined annual production fell to its lowest level since 1980 in the fiscal year that just ended: Read more
Miles Kimball, economics professor at the University of Michigan who blogs at Confessions of a Supply-Side Liberal, is fast becoming the poster child for the movement to introduce an e-money solution to overcome the ZLB problem.
He’s not the first to have raised or promoted the idea, but he’s doing a very fine job at spreading the word on account of his objective reasoning. Read more
The voices arguing that digital e-money should be added to the central bank/government toolkit are not only rising in number, they’re getting louder as well.
Among the first to argue the point, of course, was Willem Buiter back in 2009, before he took up the position of chief economist at Citi. But there’s also been a strong patter of support from advocates such as Mobino’s Jean-Francois Groff and Slate’s Matt Yglesias (to name a few). Read more
This is a guest post by Jean-François Groff, the CEO of Mobino, a Geneva-based mobile payments company. He is also one of the Web’s pioneers, having contributed to the definition of HTTP and HTML with Tim Berners-Lee at CERN.
Financial inclusion is undoubtedly a hot topic. As digital wireless infrastructure covers the globe, a host of mobile money providers have sprung into action to provide unbanked citizens with convenient ways to move money, turning phones into wallets. But the money in these digital wallets is not really equivalent to cash. The convenience of mobile money comes at a cost, both to the state and to its citizens. Read more