Tag Archives: Currency board

Views on Libra

Different aspects of the Libra proposal that various authors have emphasized:

  • Jameson Lopp on OneZero: A “database of programmable resources;” Move; “[p]erhaps the network as a whole can switch to proof of stake, but in order for the stablecoin peg/basket to be maintained, some set of entities must keep a bridge open to the traditional financial system. This will be a persistent point of centralized control via the Libra Association”; not a blockchain, the “data structure of the ledger history is a set of signed ledger states”; initially, 1,000 payment transactions per second with a 10-second finality time; technical aspects.
  • Laura Noonan and Nicholas Megaw in the FT: Gaining regulatory approval (in each US state, as well as in many countries) is burdensome even if Carney signals “open mind but not open door”; ING declined to be part of consortium; how can merchants be brought onboard?
  • James Hamilton on Econbrowser: Currency board; currency competition.
  • JP Koning on Moneyness: Competition for national banking systems; new unit of account; global monies (or languages) never worked out.
  • Stephen Williamson on New Monetarism: Narrow bank or mutual fund; why “krypto” or “blockchain?” [T]ere’s never been a successful banking system that didn’t have a strong regulatory hand behind it.
  • Corinne Zellweger-Gutknecht and Dirk Niepelt in NZZ, Jusletter: Role of resellers; regulation in Switzerland.
  • Kari Paul in the Guardian: Astrology.

Zimbabwe’s Monetary Policy

On his blog, JP Koning provides an account of recent monetary policy in Zimbabwe:

  • The country dollarized in 2008.
  • The central bank offered USD deposit accounts for banks, specifically for inter bank payments. But these accounts were not fully backed by USDs, or the central bank rationed access to USDs for other reasons (early 2016).
  • Banks got squeezed, bank customers started a run, and the government imposed withdrawal limits. Retailers started to charge higher prices for “plastic money” (USD denominated bank deposits) than for USD cash.
  • In November 2016, the central bank introduced another parallel currency, “bond notes.” The government promised that bond notes would be fully backed and redeemable in USD cash (via the African Export Import Bank) but it defaulted on that promise too. Redeeming bond notes now is as difficult as cashing in deposits.
  • Bond notes and deposits trade at a discount vis-a-vis USD cash. But the government forbids retailers to charge different prices.
  • Gresham’s law works its way.