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Siegel money deck

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This is for a talkI give on the future of money. It's not really meant to make sense by itself. It's for people who have taken the class.

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Siegel money deck

  1. 1. The Story of Money: Past, Present, and Future - David Siegel
  2. 2. The Goal of Monetary Policy
  3. 3. To maximize sustainable economic growth The Goal of Monetary Policy
  4. 4. What is money? Unit of account Unit of exchange Store of value Money
  5. 5. Keynesianism Macro-Economics Monetarism Market Monetarism New Keynesianism Real Business Cycle Theory Austrians!
  6. 6. Macro-Economics Austrians Commodity money (gold) is “sound money.” Models are meaningless. Get the government out of the money business.
  7. 7. Macro-Economics Keynesianism Use interest rates and fiscal policy to counteract shocks
  8. 8. Macro-Economics Monetarism More money in circulation Prices rise Remove money from circulation Prices fall
  9. 9. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  10. 10. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  11. 11. World War 1 - most countries abandon the gold standard to finance war by printing paper money. Gold
  12. 12. Interwar: Many countries adopt a gold-reserve currency. Central banks buy gold. Gold
  13. 13. Market crash: Austrian, German, British bank runs, crisis of confidence. Output drops. Gold
  14. 14. Great Depression: gold hoarding; banks fail in US; worldwide deflation. Deflation
  15. 15. Brittleness
  16. 16. Brittleness I do believe that if today all the legal obstacles were removed which prevent such an issue of private money under distinct names, in the first instance indeed, as all of you would expect, people would from their own experience be led to rush for the only thing they know and understand, and start using gold. But this very fact would after a while make it very doubtful whether gold was for the purpose of money really a good standard. It would turn out to be a very good investment, for the reason that because of the increased demand for gold the value of gold would go up; but that very fact would make it very unsuitable as money. - F. A. Hayek
  17. 17. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  18. 18. Fiat Bretton Woods: World currencies backed by gold; fixed exchange rates.
  19. 19. Inflation
  20. 20. Inflation Inflation
  21. 21. Unemployment Unemployment
  22. 22. 3% GDP growth Problem: Dual mandate 2% Inflation
  23. 23. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  24. 24. Wage Stickiness The factory story Psychological expectations of rising income
  25. 25. Price Stickiness Price variability Menu costs Contractual obligations Other psychological factors
  26. 26. Stickiness A world without stickiness
  27. 27. No Stickiness A world without stickiness No stickiness = No inflation needed! No elastic money needed!
  28. 28. How to Think of Stickiness 1. Normal (always sticky) 2. Shock 3. Sticky reactions (not Austrians) 4. Elastic money supply to the rescue!
  29. 29. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  30. 30. Reserve wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet CBDC
  31. 31. Issues Narrow money Public blockchains
  32. 32. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  33. 33. Citizen mining
  34. 34. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  35. 35. 3% GDP growth Problem: Dual mandate 2% Inflation
  36. 36. 3%2% NGDP 5% Solution: NGDP level targeting
  37. 37. Nominal GDP Quantity Year 1 Price $1 100 GDP = $100
  38. 38. Nominal GDP Quantity Year 1 Price $1.10 130 Nominal GDP = $143
  39. 39. Nominal GDP Quantity Year 1 Price $1.10 130 Real GDP = $130
  40. 40. Nominal GDP Quantity Year 1 Price $1.10 130 Nominal GDP = $143
  41. 41. Growth Inflation NGDP target = 5% }3% 2% NGDP level targeting
  42. 42. }Growth Inflation 4% 1% NGDP target = 5% NGDP level targeting
  43. 43. }Growth Inflation 1% 4% NGDP target = 5% NGDP level targeting
  44. 44. Demand shock Immediate injection of money will boost demand NGDP level targeting NGDP
  45. 45. Too much growth Immediate removal of money will reduce demand NGDP level targeting NGDP
  46. 46. Growth Inflation NGDP target = 5% }3% 2% NGDP level targeting
  47. 47. }Growth Inflation 4% 1% NGDP target = 5% NGDP level targeting
  48. 48. }Growth Inflation 1% 4% NGDP target = 5% NGDP level targeting
  49. 49. Demand shock Immediate injection of money will boost demand NGDP level targeting NGDP
  50. 50. Too much growth or supply shock Immediate removal of money will reduce demand NGDP level targeting NGDP
  51. 51. Money Monetary policy Reserves NGDP level targeting
  52. 52. Real-time NGDP estimate NGDP level targeting 1.
  53. 53. A mechanism for automatically putting money into circulation and taking money out of circulation according to the NGDP estimate. Central Bank Digital Currency NGDP level targeting Monetary Policy Smart Contracts + 2.
  54. 54. Fed wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Central Bank Digital Currency
  55. 55. Reserve wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank wallet Bank walletSmart contracts NGDP prediction NGDP level targeting - autopilot
  56. 56. 1: Gold 2: Fiat 3: Stickiness 4: CBDC 5: Citizen mining 6: NGDPLT 7: Competition
  57. 57. Currency competition Reserve Money supply
  58. 58. Currency competition
  59. 59. Currency competition $ £ € ¥ Crypto Crypto Crypto ₱ Crypto Crypto
  60. 60. We need digital money We can program our monetary policy to be instantly responsive to demand We need many of these We need elastic money Market monetarism
  61. 61. To maximize sustainable economic growth The Goal of Monetary Policy

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