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1. Monetary Effects of Global Stablecoins

Author:
Dong He
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The globalized economy now moves at the speed of electrons — and the future of money is inexorably going digital, too. New forms of digital money, such as central bank digital currencies (CBDCs) and so‐​called global stablecoins, are shaping the future of money and payments. CBDCs are a digital form of fiat currency issued by a central bank. Some central banks started exploring CBDCs a few years ago, and those explorations have gathered momentum since Facebook and its partners announced their intention to launch the Libra stablecoin in June 2019. Because the stablecoins issued by large technological companies or platforms (Big Techs) have the potential to be adopted by businesses and households everywhere, they are called “global stablecoins,” or GSCs, in shorthand.
Topic:
Geopolitics, Global Political Economy, Money, Currency, and Trade
Political Geography:
Global Focus

2. Some Thoughts on Central Bank Digital Currency

Author:
David Andolfatto
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The literature examining the question of central bank digital currency (CBDC) has grown immensely in a very short time. Much progress has been made since I first learned of the idea in a blogpost authored by J. P. Koning in 2014. That modest article soon led me to openly speculate on the merits of a central bank cryptocurrency in a talk I delivered at the International Workshop on P2P Financial Systems in Frankfurt (Andolfatto 2015). My audience, which consisted mainly of entrepreneurs, seemed to receive my talk with a polite mixture of bemusement and anxiety. Surely, I couldn’t be serious? To be honest, I’m not sure that I was. But then the threat of Facebook’s Libra came along, and central bankers around the world suddenly began to take the idea very seriously indeed.
Topic:
Finance, Social Media, Central Bank, Currency, and Digital Currency
Political Geography:
Global Focus

3. The Covid‐​19 Coin Shortage: Causes, Responses, and Lessons

Author:
Nicholas Anthony
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Covid‐​19 altered almost every facet of the human experience in 2020. For those who were lucky, living rooms became offices, cocktail hours went virtual, and spare time was spent exploring new passions. But others suffered: hundreds of thousands of people died, millions became unemployed, and even more were left uncertain about their future. All the while, smaller inconveniences multiplied. Of these, the most unexpected was a serious coin shortage in the summer of 2020.
Topic:
Currency, COVID-19, Cash, and Shortage
Political Geography:
Global Focus

4. Covid Cash

Author:
Kenneth Rogoff and Jessica Scazzero
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The advent of the Covid‐​19 pandemic has witnessed a strong uptick in paper currency demand across advanced economies, even as contactless methods surged ahead of cash in payments. This article explores these two contrasting phenomena, which are in fact continuations of much longer‐​term trends. The use of cash, while still important for small in‐​person transactions, has been declining as a share of overall consumer payments for decades, thanks to a steady stream of innovations including credit cards, debit cards, electronic transfers, and smartphone payment apps. For example, in the United States, paper currency accounted for 26 percent of the number of consumer payments in 2019 but only 6 percent in value terms, down from 40 percent and 14 percent, respectively, in 2012. Meanwhile, U.S. dollars in circulation have increased from $1.1 trillion in January 2012 to $1.8 trillion in January 2020, exploding to $2.1 trillion in December 2020. The same pattern remains if one excludes foreign holdings (50–60 percent of the total) and is found in most other advanced economies as well. Some argue that soaring currency demand contests the view that the world is headed to a cashless future, or even a “less‐​cash” society (see Bech et al. 2018; BIS 2020).
Topic:
Currency, COVID-19, Digitization, and Cash
Political Geography:
Global Focus

5. Money, Stability, and Free Societies

Author:
Steve H. Hanke
Publication Date:
06-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Monetary instability poses a threat to free societies. Indeed, currency instability, banking crises, soaring inflation, sovereign debt defaults, and economic booms and busts all have a common source: monetary instability. Furthermore, all these ills induced by monetary instability bring with them calls for policy changes, many of which threaten free societies. One who understood this simple fact was Karl Schiller, who was the German Finance Minister from 1966 until 1972. Schiller’s mantra was clear and uncompromising: “Stability is not everything, but without stability, everything is nothing” (Marsh 1992: 30). Well, Schiller’s mantra is my mantra. I offer three regime changes that would enhance the stability in what Jacques de Larosière (2014) has asserted is an international monetary “anti-system.” First, the U.S. dollar and the euro should be formally, loosely linked together. Second, most central banks in developing countries should be mothballed and replaced by currency boards. Third, private currency boards should be permitted to enter the international monetary sphere.
Topic:
Debt, Foreign Exchange, Monetary Policy, Developing World, Inflation, and Currency
Political Geography:
Europe, United States of America, and European Union

6. The 1948 German Currency and Economic Reform: Lessons for European Monetary Policy

Author:
Gunther Schnabl
Publication Date:
10-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Twenty years after the introduction of the euro, the European Monetary Union (EMU) is at its crossroads. Following the outbreak of the European financial and debt crisis in 2008, the European Central Bank (ECB) took comprehensive measures to stabilize the common currency. Interest rates were cut to and below zero and several asset purchase programs have inflated the ECB balance sheet (Riet 2018). Within the European System of Central Banks, large imbalances have emerged via the TARGET2 payments system, which can be seen as quasi-unconditional credit in favor of the southern euro area countries (Sinn 2018). While the ECB terminated its asset purchase program at the end of 2018 and is expected to increase interest rates in late 2019, financial instability is reemerging. Growing uncertainty about the fiscal discipline of the Italian government has triggered a significant increase in risk premiums on Italian government bonds. In particular, in Italy and Greece, but also in Germany, bad loans and assets remain stuck in the banking systems. In the face of the upcoming downswing, European banks do not seem ready for new financial turmoil. In this fragile environment, the future path of the EMU is uncertain. To enhance the stability of the EMU, a group of German and French economists has called for a common euro area budget, for a strengthening of the European Stability Mechanism as lender of last resort for euro area countries and banks, as well as for a common European deposit insurance scheme (Bénassy-Quéré et al. 2018). In response, 154 German economists have warned against transforming the EMU into what they call a “liablity union,” which systematically undermines market principles and wealth (Mayer et al. 2018). In 2018, a French-German initative to introduce a common euro area budget faced strong opposition from a group of northern European countries as well as from Italy, symbolizing the political deadlock concerning reforms of the EMU. This article explains the different views on the institutional setting of monetary policymaking in Europe from a historical perspective. It begins with a description of the economic and monetary order in postwar Germany. It then discusses the positive implications for the European integration process and the economic consequences of the transformation of postwar German monetary order. The final section offers some economic policy recommendations.
Topic:
Economics, History, Monetary Policy, Reform, European Union, Banks, and Currency
Political Geography:
Europe and Germany