I will participate in a Riksbank panel in early December to discuss CBDC and the e-krona project.
In the Journal of Economic Literature, William Roberds reviews Christine Desan’s “Making Money: Coin, Currency, and the Coming of Capitalism” and he provides his own perspective on European monetary history.
… the transition of the Bank of England’s notes from the status of experimental debt securities (in 1694) to “as good as gold” (1833) required more than a century of legal accommodation and business comfort with their use.
Desan emphasizes England’s traditions of nominalism (as opposed to metallism) and monetary restraint as well as early experiments in monetary substitution in laying the foundations for the Bank of England’s success. Lobbying played its role, too.
Roberds discusses the experience of note issuing institutions in other countries.
At the time of the Bank’s founding, there were about twenty-five publicly owned or sponsored banks operating in Europe. These institutions are largely forgotten today; most were dissolved by the early nineteenth century and only one continues in existence, Sweden’s Riksbank. …
These banks were run by and for the merchant communities in their respective cities [Amsterdam, Genoa, Hamburg, and Venice] … The existence of the early municipal banks depended on a form of nominalism more extreme than what prevailed in contemporary England. Merchants in these “banking cities” were required by law and by custom to settle all bills of exchange (the dominant form of commercial credit) with transfers of money on the ledgers of the local public bank. The practical advantage of such a restriction was that it reduced or eliminated the possibility of settlement in the debased coins … the municipal banks’ ledger money was often seen as more reliable than the typical coin in circulation …
Most of these banks failed after getting involved in speculative episodes, hyperinflation, or political turmoil. The Bank of England was lucky.
In the FT, Richard Milne reports about the Riksbank pondering to issue a digital currency.
There are considerable questions for Sweden’s central bank to answer about how a digital currency would work. Would individuals have an account at the Riksbank? Would transactions be traceable, unlike with cash? Would emoney earn interest?
Ms Skingsley said: “Personally I would like to design it in a way that is most like notes and coins.” That would mean no interest would be paid on it. But she added that the state had no interest in helping illegal activity, suggesting some form of traceability.
The Riksbank would also need to consider financial stability issues such as whether they would or should compete with commercial banks’ deposit base. Ms Skingsley said she was concerned that in times of financial instability citizens could transfer money to a state-backed electronic system, potentially increasing instability.
In the FT, Richard Milne reports about Marvin Goodfriend and Mervin King’s “Review of the Riksbank’s Monetary Policy 2010–2015.” The report criticizes monetary policy decisions after but not before 2011. It recommends a core inflation target, organizational changes and the possibility to suspend the inflation target.