“Elektronisches Notenbankgeld ja, Vollgeld nein (Reserves for All, But no Sovereign Money),” NZZ, 2016

Neue Zürcher Zeitung, June 16, 2016. PDF, HTML. Ökonomenstimme, June 17, 2016. HTML. Vollgeld seems attractive because it decouples the supply of money from intermediation. By enabling everyone to use legal tender for electronic payments, electronic base money would satisfy a need. Vollgeld would prevent bank runs, at least partly; render deposit insurance unnecessary and reduce moral hazard; could help […]

“Notenbankgeld für Alle? (Reserves for Everyone?),” NZZ, 2015

Neue Zürcher Zeitung, February 20, 2015. PDF, HTML. Ökonomenstimme, February 24, 2015. HTML. Allowing the general public to hold reserves at the central bank could help reduce the risk of bank runs and the negative consequences of deposit insurance. It would end the need to accept bank deposits as means of payment although they are not legal […]

Reserves For Everyone

On a new website, Aleksander Berentsen rejects the Swiss Vollgeld initiative. As an alternative, he suggests the Swiss National Bank should offer transaction accounts for everybody, in line with proposals I have made earlier (see here (2016), here (2015), here (2015)). In the Handelszeitung (here and here), Simon Schmid reports.

Central Bank Reserves: Debt vs. Equity

In jusletter.ch, Corinne Zellweger-Gutknecht argues that the legal status of central bank reserves is more equity- than debt-like—at least as far as the Swiss National Bank (SNB) is concerned. According to Zellweger-Gutknecht, reserves constitute debt only if the SNB is legally obliged to redeem them in exchange for central bank assets. If the SNB purchases dollars against Swiss Francs in an […]

“Reserves For Everyone—Towards a New Monetary Regime?,” VoxEU, 2015

VoxEU, January 21, 2015. HTML. New proposals to phase out cash are set to revive an old debate. Contributions to this debate focus on two related but independent issues: granting the general public access to central bank reserves; and phasing out cash. Abolishing cash is neither necessary nor sufficient. But allowing the public to hold reserves at the central […]

“Blockchain from a Central Bank Perspective”

An excellent conference organized by the Monetary Law Forum Switzerland focused on blockchain use cases from a central bank perspective. Program, links to slides. I discussed the macroeconomic perspective and argued for “reserves for all.” Some related links: Nivaura and Allen & Overy (backing Nivaura). OTC Swiss Blockchain, by Roman Bischoff.

Fintech Regulation in Switzerland: Open Questions

In the NZZ, Jürg Müller reports about the developing regulatory framework for fintechs in Switzerland. A proposal by the federal finance department drew—reasonable—criticism by various lobbies and industry associations, including the CFA Society Switzerland. Die CFA Society Switzerland will das systemrelevante Bankensystem von anderen Finanzdienstleistern trennen. Dafür sei eine präzisere Bankendefinition nötig, als sie heute […]

How Does the Blockchain Transform Central Banking?

The blockchain technology opens up new possibilities for financial market participants. It allows to get rid of middle men and thus, to save cost, speed up clearing and settlement (possibly lowering capital requirements), protect privacy, avoid operational risks and improve the bargaining position of customers. Internet based technologies have rendered it cheap to collect information […]

The SNB’s Currency Interventions

On the FT’s Alphaville blog, Matthew Klein reviews Swiss monetary policy over the last years and its effect on the real economy. He concludes that it seems the SNB’s relentless accumulation of foreign assets has been pointless — at best. More likely, the behaviour qualifies as predatory mercantilism at the expense of the rest of […]

How Problematic Is a Large Central Bank Balance Sheet?

On his blog, John Cochrane reports about a Hoover panel including him, Charles Plosser, and John Taylor. Cochrane focuses on the liability side. He favors a large quantity of (possibly interest bearing) reserves for financial stability reasons. Plosser focuses on the asset side and is worried about credit allocation by the Fed, for political economy […]

Secular Stagnation Skepticism

I was asked to play devil’s advocate in a debate about “secular stagnation.” Here we go: Alvin Hansen, the “American Keynes” predicted the end of US growth in the late 1930s—just before the economy started to boom because of America’s entry into WWII. Soon, nobody talked about “secular stagnation” any more. 75 years later, Larry […]

Banking on the Blockchain

In the NZZ, Axel Lehmann offers his views on the prospects of blockchain technologies in banking. Lehmann is Group Chief Operating Officer of UBS Group AG. New possibilities: Higher efficiency; lower cost; more robustness and simpler processes; real-time clearing; no need for intermediaries; information exchange without risk of interference automated “smart contracts;” automated wealth management; […]

Blockchains in Banking (Commercial and Central)

The Economist reports about initiatives by commercial and central banks that aim at adopting the blockchain technology. For commercial banks, distributed ledgers promise various advantages—but they also cause problems: Instead of having to keep track of their assets in separate databases, as financial firms do now, they can share just one. Trades can be settled almost instantly, […]

I Would Like to Withdraw A Couple Billion Swiss Francs: Legal Aspects

On his blog, Urs Birchler offers different perspectives on the question whether the Swiss National Bank (SNB) is obliged to pay out banks’ reserves in cash. One view: Reserves are legal tender. The SNB therefore is not obliged to exchange reserves against cash. Another view: According to the law, the SNB is required to provide sufficient cash. Moreover, reserves and cash […]

Mervyn King on Narrow Banking and Liquidity Insurance

In the FT, John Plender reviews Mervyn King’s “The End of Alchemy: Money, Banking and the Future of the Global Economy.” King diagnoses two problems underlying the crisis. First, Interest rates today, he says, are too high to permit rapid growth of demand in the short run but too low to be consistent with a […]

Switzerland will Vote on “Vollgeld”

A group of Swiss citizens lobbying for monetary reform has succeeded: after collecting more than 100,000 signatures a referendum will have to be held in the next years. In the ballot, Swiss citizens will vote on no more or less than the future of the monetary system in Switzerland. According to the group’s proposal inside-money creation by banks will eventually […]

Banks Are Not Intermediaries of Loanable Funds

In a recent Vox blog post, Zoltan Jakab and Michael Kumhof argue that macroeconomic models where banks intermediate loanable funds get it seriously wrong. In the intermediation of loanable funds model, bank loans represent the intermediation of real savings, or loanable funds, between non-bank savers and non-bank borrowers … [but in reality] [t]he key function of banks is […]

Removing the Zero Lower Bound on Interest Rates

Imperial College London (the business school’s Brevan Howard Centre), CEPR and the Swiss National Bank organized a conference on this topic in London. Most of the speakers agreed that giving central banks the option to move interest rates much further into negative territory would be valuable; and that deposit rates lower than minus half a percent p.a. are difficult to sustain […]

Sovereign Money in Iceland?

Iceland is considering fundamental monetary reform. A report (PDF) by Frosti Sigurjónsson, Member of Parliament, discusses problems under the current fractional reserve system as well as possible alternatives. The report was commissioned by the prime minister (website of the Prime Minister’s office). The report argues that the Central Bank of Iceland lost control over the money supply. Commercial banks lent pro-cyclically; they effectively forced the Central […]