Monetary Reform in Politics
ECB President M. Draghi rejects digital currency for everyone …
… while conceding advantages of it as well as, implicitely, weaknesses of the present system
J. Fernández, member of the European Parliament for the Spanish Partido Socialista, has sent an inquiry to the European Central Bank (ECB) concerning ‘Directly issuing a digital version of the euro and opening accounts at national central banks’.
M. Draghi responded in a 1 1/2 pages letter.
Draghi did not answer the specific question of whether there are statutory restrictions to digital currency and central bank accounts for everyone.
But in fact he deems digital currency feasible and a contribution to monetary safety. Maybe still more important on his part: Digital currency promises to make monetary policy more effective in that it directly reaches a wider range of economic actors. He thus implicitely admits to the non-safety of bankmoney and weak effectiveness of conventional instruments of present monetary policies,
For the rest, Draghi expresses views, one would prefer not to hear anymore from a central bank president, for example, that banks are supposed to be intermediaries taking up reserves and customer deposits upstream for lending them to customers downstream (rather than recognising commercial banks as the pro-active creators of money they actually are); or, that with digital currency for everyone, central banks would enter into competition with the banks (whereas in actual fact the central bank would be the provider of the account infrastructure and payment system, while the banks would continue to be the system users on behalf of their customers).
Finally, Draghi refers to cash (which is now little more than a systemically irrelevant amount of small change) as a still viable alternative to bankmoney. Until about 60-100 years ago he might have got away with it …
Also see Positive Money Europe > ECB rejects digital euro for wrong reasons
FED refuses cooperation for setting up currency accounts
Since 2013 we have been promoting the idea of introducing accounts for the public use of central bank money-on-account (digital currency). Now an American ex central banker has taken the initiative, but, as the Sep/Oct 2018 IMMR newsletter reports,
The Narrow Bank with secure accounts denied by FED
James McAndrews, a former US Federal Reserve (FED) employee, has founded TNB Bank (TheNarrowBank). The idea behind it: All customer funds are deposited as a reserve directly with the FED. Thus, firstly they are secured against bankruptcy and secondly, the interest on FED bank reserves (1,95%) is currently much higher than market rates. This would allow customers high interest rates despite a risk-free investment of their money. The concept would indirectly allow for safe depositing of money in a style similar to "digital cash" but unfortunately, the banks business model is focusing on big financial institutions (making the playground even more uneven). However, so far the FED refused to grant the TNB bank access to its payment system.
Some articles on the matter:
- Money&Banking: Pitfalls of a Reserves-only Narrow Bank
- Bloomberg: Fed Rejects Bank for Being Too Safe
- Economist: The Fed stalls the creation of a bank with a novel business model
- Cobden Centre: Why the Fed Denied the Narrow Bank
Debate on Monetary Reform at the Dutch Parliament
The Finance Committee of the Dutch Parliament discussed the monetary system and perspectives of monetary reform on Oct 14th, 2015. The meeting took place at the suggestion of the NGO Ons Geld. The video will soon be subtitled in English.
As a result > the Dutch government is now to investigate money creation (PM, 31 March 2016).
discussing sovereign money > Do we need monetary reform? June 2016
Sovereign Money Reform in Iceland
S.Thoroddsen and S.B.Sigurjonsson, KPMG Iceland, have presented a study commissioned by the Icelandic Prime Minister's Office, titled > Money Issuance. Alternative Monetary Systems.
The study was discussed at a high-level conference in Reykjavík on 5 Sep 2016. Here is the > video streaming of the event.
Ben Dyson has written a > brief report for the International Movement for Monetary Reform.
The Icelandic parliament Althingi had taken a step towards sovereign money reform in October 2015, when a resolution was proposed by eleven parliamentarians from five parties represented in the parliament. If the resolution is not voted on before the end of the current legislative term, it will have to be submitted again in the next term
> Parliamentary Resolution on Reforming the Mechanism of Money Creation
Prior to this, a report commissioned by the Committee on Economic Affairs and Trade of the Icelandic Parliament had recommended to introduce a sovereign money system. Here is the > Press Release of the Prime Minister, and the > Report Monetary Reform - a better monetary system for Iceland.
Referendum on Sovereign Money in Switzerland
• Emma Dawnay, campaigner for the Swiss referendum, explains in an > interview with the Cobden Centre why the present money system is in need of overhaul and what sovereign money reform in Switzerland is about.
• English-language media coverage prior to the vote, by Emma Dawney
• Swiss Referendum on Sovereign Money - too radical too soon? Positive Money Europe, 12 Juni 2018.
How to make sense of the No vote?
In contrast to the voting result, the Swiss give rather different opinions in represenative surveys, the last one immediately after the vote: 60% think that all of the money in fact does comes the National Bank, 80% say it definitely ought to be so, while only 10% deem it acceptable that banks create bankmoney of their own as they do. ( Source> ).
• Why the Swiss should vote for 'Vollgeld', by Martin Wolf, Financial Times, June 5, 2018.
• A Vote to Upend Banking as We Kow it, by Brian Blackstone, Wall Street Journal, June 1, 2018.
• Shake your money makers. Reshaping banking, The Economist, Feb 27, 2016.
Monetary reform at the Labour and Conservative Party Conferences 2016> read, view and listen here.
On 20 Nov 2014, the British House of Commons held a backbench business debate on Money Creation & Society, the first such debate after 170 years when the Parliament decided upon the Bank Charter Acts, introducing the Bank of England monopoly on paper money. Today, the challenge is money on account. For viewing the livestream record> this link.