Tag Archives: base money

ifo Schnelldienst 16/2018, August 23, 2018. PDF.

ifo Schnelldienst 16/2018, August 23, 2018. PDF.

Kontantupproret (“cash rebellion”) in Sweden—not everybody is pleased with the prospect of a cashless society. David Crouch reports in The Guardian.

NZZ, August 17, 2017. HTML, PDF. The Vollgeld initiative may point to a problem but it does not propose a viable solution. Even with Vollgeld, the time consistency friction with its Too-Big-To-Fail implication would persist. A more flexible, liberal approach appears more promising. It would give the general public a choice between holding deposits and reserves. Financial institutions and central banks around the world are pushing in that direction.

The Swiss National Bank held its annual general meeting of shareholders (web TV). In response to one of the questions posed by shareholders Thomas Jordan suggested (2:58–2:59) that possibly a digital Swiss Franc might be introduced sometime in the future.

In another excellent post on Moneyness, J P Koning likens the monetary system to the plot in the movie Inception, featuring a dream piled on a dream piled on a dream piled on a dream. Koning explains that [l]ike Inception, our monetary system is a layer upon a layer upon a layer. Anyone who withdraws cash at an ATM is ‘kicking’ back into the underlying central bank layer from the banking layer; depositing cash is like sedating oneself back into the overlying banking layer. Monetary...

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 stabilize the credit cycle; and would redistribute seignorage to the central bank. But...

Since the financial crisis central banks in developed nations increased their balance sheets. The leading one was the American Federal Reserve that increased the monetary base (M0, often called “narrow money”), followed by the Bank of Japan and recently the ECB. In most cases the extension of narrow money did neither have an effect on banks’ money supply, the so called “broad money” (M1-M3), nor on price inflation. For the Swiss, however, the rising money supply concerned both narrow and...