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"divorcing payments from private bank deposits and even putting an end to banks’ ability to create money." Are there economists that support the idea of stoppi

"divorcing payments from private bank deposits and even putting an end to banks’ ability to create money." Are there economists that support the idea of stopping the creation of new money? I assumed this was an underlying requirement of a health currency? New value is created every day by thousands of different sources, and the currency needs to be able to expand at the same rate.

irln 10y ago
> I assumed this was an underlying requirement of a health currency? You've just identified the most difficult problem facing the financial world today: how to expand the money supply at a rate that's fair to all market participants. market participants === us
questionx 10y ago
Most of the forces driving new money creation doesn't seem to be about new value. The new money created benefits investment schemes for the privileged and to sustain Keynesian policies by the government. Neither are inherently necessary for a growing economy. And there are other alternative ideas that are reasonable tools to expand the money supply if needed.
dnautics 10y ago
> New value is created every day by thousands of different sources, and the currency needs to be able to expand at the same rate. Why does the currency need to expand at the same rate? You could also have the real value of the currency appreciate. Before you say, 'that's deflationary' - many countries had large swaths of time when their currency was deflationary with little or no ill effect to the population, and increasing standards of living.
- gnopgnip 10y ago
  Deflationary currency discourages spending, increases the value of debt, causes people to hoard cash, and potentially causes wage unemployment.
  - tapp 10y ago
    What is the difference between "hoarding cash" and "saving" besides the fact that one sounds evil and the other virtuous? (I don't intend that as a rhetorical question - I'm sincerely asking.)
    - wmf 10y ago
      "Saving" usually refers to investments which are then loaned out to increase the velocity of money while "hoarding" does not.
    - lmm 10y ago
      Saving (as distinct from investment in productive things) is also bad for the economy. A small amount of buffer may smooth the working of the economy, but stored cash/assets are dead weight - it's better if people are spending immediately, keeping the cash circulating into productive things.
      - irln 10y ago
        > but stored cash/assets are dead weight Curious, are US treasuries or interest in a savings account considered "dead weight" in your definition?
        lmm 10y ago
        Not completely dead but close to it. To the extent that they provide funding for government infrastructure, business loans and the like, they're productive. But AIUI that link is pretty thin these days.
        irln 10y ago
        If investing in Treasuries and Savings accounts are considered hoarding or "dead money" that's +/-$13T to $19T depending upon how you look at it for Treasuries [1] and $8.6T for savings [2]. [1] http://treasurydirect.gov/NP/debt/current http://treasurydirect.gov/NP/debt/current [2] https://fred.stlouisfed.org/series/WSAVNS https://fred.stlouisfed.org/series/WSAVNS
- forgetsusername 10y ago
  >Why does the currency need to expand at the same rate? Because the demand for money and credit ebbs and flows. Why would you curb the supply? It's literally paper and bits. Do you think there should be the same amount of money in a world of 100 people as there is in a world of 100 million?
zanny 10y ago
> New value is created every day Not necessarily, and you may be conflating demand for a currency (which controls its valuation and exchange rate) with economic productivity in an economy. Its not so much, I imagine, about stopping the creation of money - the economic fundamentals behind why inflation is good are obvious. The promise of digital currencies going forward is the hopeful removal of human irrationality from the process. Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable.
- seanalltogether 10y ago
  > Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? I would prefer that people not have to create their own promissory notes during economic booms because it's impossible to create a legitimate loan due to the current monetary supply. You're begging for a black market currency at that point.
- JumpCrisscross 10y ago
  > or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity We have not yet found a consistent set of rules for setting monetary policy that work across the board. The problem is compounded for dual-mandate central banks such as the Federal Reserve. Even measuring inflation is a manual process - how would you code basket selection into your currency?
- lmm 10y ago
  > Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable. At the moment I'd rather have a (democratically accountable) human in the loop. I don't have anything like the level of confidence in economic theory to trust any argument that 1% is the "right" level of inflation for all time. If there are unforseen shifts in the economy and we end up thinking that (say) 10% inflation is the best thing to do at the moment, I'd rather we had the capability to do that.
paavokoya 10y ago
>New value is created every day by thousands of different sources Value/resources are also lost and/or used up. Inflation is only necessary for an expanding human population.

irln 10y ago

> I assumed this was an underlying requirement of a health currency? You've just identified the most difficult problem facing the financial world today: how to expand the money supply at a rate that's fair to all market participants. market participants === us

questionx 10y ago

Most of the forces driving new money creation doesn't seem to be about new value. The new money created benefits investment schemes for the privileged and to sustain Keynesian policies by the government. Neither are inherently necessary for a growing economy. And there are other alternative ideas that are reasonable tools to expand the money supply if needed.

dnautics 10y ago

> New value is created every day by thousands of different sources, and the currency needs to be able to expand at the same rate. Why does the currency need to expand at the same rate? You could also have the real value of the currency appreciate. Before you say, 'that's deflationary' - many countries had large swaths of time when their currency was deflationary with little or no ill effect to the population, and increasing standards of living.

gnopgnip 10y ago
Deflationary currency discourages spending, increases the value of debt, causes people to hoard cash, and potentially causes wage unemployment.
- tapp 10y ago
  What is the difference between "hoarding cash" and "saving" besides the fact that one sounds evil and the other virtuous? (I don't intend that as a rhetorical question - I'm sincerely asking.)
  - wmf 10y ago
    "Saving" usually refers to investments which are then loaned out to increase the velocity of money while "hoarding" does not.
  - lmm 10y ago
    Saving (as distinct from investment in productive things) is also bad for the economy. A small amount of buffer may smooth the working of the economy, but stored cash/assets are dead weight - it's better if people are spending immediately, keeping the cash circulating into productive things.
    - irln 10y ago
      > but stored cash/assets are dead weight Curious, are US treasuries or interest in a savings account considered "dead weight" in your definition?
      - lmm 10y ago
        Not completely dead but close to it. To the extent that they provide funding for government infrastructure, business loans and the like, they're productive. But AIUI that link is pretty thin these days.
        irln 10y ago
        If investing in Treasuries and Savings accounts are considered hoarding or "dead money" that's +/-$13T to $19T depending upon how you look at it for Treasuries [1] and $8.6T for savings [2]. [1] http://treasurydirect.gov/NP/debt/current http://treasurydirect.gov/NP/debt/current [2] https://fred.stlouisfed.org/series/WSAVNS https://fred.stlouisfed.org/series/WSAVNS
forgetsusername 10y ago
>Why does the currency need to expand at the same rate? Because the demand for money and credit ebbs and flows. Why would you curb the supply? It's literally paper and bits. Do you think there should be the same amount of money in a world of 100 people as there is in a world of 100 million?

zanny 10y ago

> New value is created every day Not necessarily, and you may be conflating demand for a currency (which controls its valuation and exchange rate) with economic productivity in an economy. Its not so much, I imagine, about stopping the creation of money - the economic fundamentals behind why inflation is good are obvious. The promise of digital currencies going forward is the hopeful removal of human irrationality from the process. Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable.

seanalltogether 10y ago
> Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? I would prefer that people not have to create their own promissory notes during economic booms because it's impossible to create a legitimate loan due to the current monetary supply. You're begging for a black market currency at that point.
JumpCrisscross 10y ago
> or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity We have not yet found a consistent set of rules for setting monetary policy that work across the board. The problem is compounded for dual-mandate central banks such as the Federal Reserve. Even measuring inflation is a manual process - how would you code basket selection into your currency?
lmm 10y ago
> Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable. At the moment I'd rather have a (democratically accountable) human in the loop. I don't have anything like the level of confidence in economic theory to trust any argument that 1% is the "right" level of inflation for all time. If there are unforseen shifts in the economy and we end up thinking that (say) 10% inflation is the best thing to do at the moment, I'd rather we had the capability to do that.

paavokoya 10y ago

>New value is created every day by thousands of different sources Value/resources are also lost and/or used up. Inflation is only necessary for an expanding human population.