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 […]
John Cochrane argues in favor of a “New Structure for U. S. Federal Debt.” His main proposal is to introduce “[f]ixed-value, floating-rate debt” a form of “Treasury Electronic Money, or reserves for all.” See my NZZ article, Vox column, blog post.
ifo Schnelldienst 13/2015, July 16, 2015. PDF. Reprint of article published in the NZZ.
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 […]
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.
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 […]
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 […]
In the first and third of his Munich Lectures in Economics (and in an earlier oped in the FT), Kenneth Rogoff argued in favour of phasing out cash, at least high denominations and in some developed economies, see my post. Rogoff emphasised two beneficial consequences. First, the abolition of the zero lower bound on nominal interest rates and thus, the relaxation […]
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.
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 […]
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 […]
In a Federal Reserve Bank of New York staff report, Rodney Garratt, Antoine Martin, James McAndrews and Ed Nosal argue in favor of “Segregated Balance Accounts” (SBAs): SBAs are accounts that a bank or depository institution (DI) could establish at its Federal Reserve Bank using funds borrowed from a lender. … the funds deposited in an SBA would be fully segregated […]
In a CEPR discussion paper, Cedric Tille argues that Switzerland’s international linkages have been transformed over the last decade. Abstract: Over the last decade, the economic linkages between Switzerland and the rest of the world have been transformed. First, merchanting and the chemical industry account for an increasing share of international trade, with chemicals exports […]
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 […]
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 […]
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 […]
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; […]
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, […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
Narrow banking proposals are fashionable. Here is a selective list of contributions to the debate: Cantillon (1755) and Mises (1912) argue that money creation leads to distortions. The 100% reserve proposal by Irving Fisher and his colleagues in the 1930s is reviewed by William Allen in the article “Irving Fisher and the 100 Percent Reserve Proposal” (Journal […]