Rohan Grey is a legal scholar and the research director of the Digital Fiat Currency Institute. He joins the show today to make the case for digital legal tender. David and Rohan also discuss privacy issues related to digital currency, getting the public onboard with a digital currency proposal, modern monetary theory, and how it is different than mainstream economics....Audio and transcript.
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Macro Musings Podcast: Rohan Grey On Digital Currency, Privacy, And Modern Monetary Theory
David Beckworth interviews Rohan Grey
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Rohan Grey: And Morgan's proposal, which I fully support and agree is very, very important, is to provide central bank accounts for everybody
And for individual citizens those accounts should be FOR FREE up to reasonable limits on account size and transactions per month
and to sort of open up the Fed's balance sheet.
Uh-oh, having the Central Bank buy or lend to anyone but its monetary sovereign is sure to violate equal protection under the law.
Why limited amounts?
Because past a reasonable account limit, legitimate risk-free fiat savings become illegitimate risk-free fiat HOARDING which should be penalized via negative interest on amounts past the limit, i.e. an individual citizen account could be any size but past the account limit one would be charged negative interest.
As for non-individual citizen accounts, these would be charged negative interest starting at $0 to prevent the use of numerous accounts to escape a reasonable negative-interest-free allowance if one were allowed.
As for the transactions per month, these would be FOR FREE up to a limit that no individual citizen should exceed for his/her personal business but which would be too low for one to run much of a business out of his/her personal account.
Rohan Grey: Banks make deposits when they make loans. What deposits are, are a cheap source of liquidity and funding that is generally cheaper than borrowing from the discount window, in addition to all the stigma from the discount window. So, I follow Hyman Minsky in that I think actually greater reliance on the discount window is better for macroprudential stability, and if we're concerned about the funding cost of that I think that's a problem to address directly. I have other thoughts. I don't think that for example interest rates are a good aggregate demand stabilization tool. I would set interest rates at zero permanently, and if we did that then the banking system would have as many funds as they wanted. They wouldn't need deposits as a cheap source of funding 'cause funding would be at zero interest anyway. [bold added]
I guess it never occurred to these guys that by-passing the need for banks to borrow from the general public destroys what would otherwise be an honest loanable funds model. Nor need an honest system have higher interest rates since equal fiat distributions to all citizens and negative interest on large accounts (to encourage lending) should lower them as desired.
Idiotic. Taxes are the regulatory mechanism that should be used to control accumulation (prevent hoarding), not some arbitrary limit on accounts. Arbitrary limits and negative interest are just reasons to stockpile money elsewhere. There should not be any billionaires or centimillionaires.
Eliminate private banks, yes. Including and especially the Federal Reserve.
Arbitrary limits and negative interest are just reasons to stockpile money elsewhere. Noah Way
How when new forms of cash shall allow anonymity but not allow one to escape negative interest?
Nor shall the Central Bank ever be allowed to buy or otherwise support the value of gold or any other private asset but to sell its gold and other private assets so as to cease privileging private interests and let them stand on their own feet, if they can.
So now you are inventing new forms of cash? LOL The farther you push this the loonier it gets.
By all means deprivelege the banks, but don't invent some arbitrary, convoluted system to do it, just nationalize them. Then tax obscene wealth out of existence. Problem solved.
On the subject of digital currency, by some estimates over half of all Bitcoin has been stolen. Aside from that only 10% of US currency actually exists as paper, the rest is digital.
So now you are inventing new forms of cash? Noah Way
The banks have already used cash to escape negative interest. That loop-hole should be closed if we are ever to fully de-privilege the banks.
As for nationalizing the banks, does that solve the problem of the use of the public's credit but for private gain?
What part of "tax obscene wealth out of existence" don't you understand?
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