Keynotes and talks

Credit creation, asset prices and banking crises: What’s the link?

A recent Parliamentary Treasury Committee Inquiry considered three issues that are significant for economic policy: What determines the aggregate level of household net saving and the saving ratio in the macro-economy? Can policy affect the aggregate level of household saving?Household indebtedness and consumer credit and incomesIs the overall level of UK household debt and consumer credit sustainable? These are important questions for economic policy in general, since it would be agreed across political parties that whatever the government does should at least not harm, and preferably enhance, private sector financial resilience. Many factors impact upon this objective. To avoid the

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Does a Central Bank Digital Currency (CBDC) threaten the existence of commercial banks?

We study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the pre-crisis United States, we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise

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Banks are not intermediaries of loanable funds – and why this matters

In the loanable funds model that dominates the literature, banks are nonfinancial warehouses that receive physical commodity deposits from savers before lending the commodities to borrowers. In the financing model of this paper, banks are financial institutions whose loans create ledger-entry deposits that are essential in commodities exchange among nonbanks. This model predicts larger and faster changes in bank lending and greater real effects of financial shocks. Aggregate bank balance sheets exhibit very high volatility, as predicted by financing models. Alternative explanations of volatility in physical savings, net securities purchases or asset valuations have very little support in the data.

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Design principles for a Central Bank Digital Currency

Die Finanzkrise 2008 ist auch zehn Jahre danach nicht behoben, nur aufgeschoben. Die Rettungspolitik im Interesse von Banken, Finanzvermögen und überschuldeten Staaten hat eine Zombifizierung von Teilen des Banken- und Finanzsektors mit sich gebracht. Die grundlegende Ursache der Probleme liegt im bestehenden Geldsystem: dem staatlich gestützten Giralgeldregime der Banken. Das Buch analysiert die Entwicklung dieses instabilen Hybridsystems, speziell auch die im Laufe der Zeit verloren gegangene monetäre Souveränität der Staaten, verursacht durch den weitgehenden Kontrollverlust der staatlichen Zentralbanken bei gesteigerter Systemdominanz der Banken. Die Zentralbanken handeln nur noch als Erfüllungshelfer der Banken, im Krisenmodus noch ausgeprägter als im Normalbetrieb. Das

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Central bank accounts for all? – Insights into the Riksbank e-krona project

The Riksbank has provided the general public with money for 350 years, but as the use of cash is continuing to decline in Sweden, we need to think in new ways. In the future, cash may be used to such a limited extent that it is difficult to pay with it. In response to this, the Riksbank started a project in the spring of 2017 to examine the scope for the Riksbank to issue a central bank digital currency (CBDC), a so-called “e-krona”. An e-krona could ensure that the general public will still have access to a state-guaranteed means of

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CBDC in line with the Vollgeld approach?

Abstract: The prospect of central banks issuing digital currency (CBDC) immediately rais- es the question of how this new form of money should co-exist and interact with existing forms of money. This paper evaluates three different scenarios for the implementation of CBDC in terms of their monetary policy implications. In the ‘money user scenario’ CBDC co-exists with both cash and commercial bank de- posits. In the ‘money manager scenario’ cash is abolished and CBDC co-exists only with commercial bank deposits. And in the ‘money maker scenario’ commer- cial bank deposits are abolished and CBDC co-exist only with cash. The evalua-

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Seigniorage in the 21st century: profits from money creation

Abstract: This paper develops a new theory of seigniorage suited to modern economies where the majority of money is created not by the state or central bank but by commercial banks and other monetary financial institutions via their lending activity. We identify four different forms of seigniorage that take account of the modern institutional separation between the state, the central bank, commercial banks and the non-bank private sector in terms of their identities as ‘money creators’ and ‘money users’. The new typology differentiates between seigniorage profits arising from interest rate spreads on stocks of created money and profits arising from

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Brave New Money

PayPal, WeChat, Amazon Go – A totalitarian world currency in the making Introduction and overview The future of payments has arrived in early 2018, when the first Amazon Go store opened its gates for the general public in Seattle. If you shop there, you will not have to queue at the cash register. There is none, thanks to – as Amazon calls it – the most modern shopping technology. You just download an app and sign on before entering the store. Then you freely take everything you want from the shelves and put it into your shopping bag – or

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Zero energy consensus mechanism and redundancy-free blockchain trees

Consensus mechanisms validate and authenticate the transactions of a distributed ledger without the need to trust or rely on a central authority. They are the centerpiece of any cryptocurrency. Current consensus mechanisms, such as the Proof-of-Work in Bitcoin, consume unimaginable amounts of electricity. If VISA were to use this technology, world power consumption would double. On top of that, every so-called full client has to store the entire blockcain, which also leads to unimaginable data traffic, resource consumption and redundancy. In this presentation, I will introduce a consensus mechanism that not only requires no energy but also no other resources

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