Following the latest banking crisis, monetary authorities should seriously consider how modern digital technologies could be used to avert such problems in the future. A central bank digital currency would both eliminate many barriers to financial transactions and end the risk of bank runs once and for all....
Project Syndicate
Jan Eeckhout | Professor of Economics at Universitat Pompeu Fabra
1 comment:
And then loans will be 9% and banks will offer 7% on their 'paid up shares'.
Then the banks will start offering the ability to swap your 'paid up shares' around, possibly creating a centralised clearing house to optimise that transfer, then offer a card to make it easy to pay people in 'paid up shares'.
Then a bank will fail and lots of people with 'paid up shares' will lose out. There will be a political clamour and everybody will agree that 'paid up shares' are really money anyway.
How many more times does the liability side have to evolve into what it does under market competition before economists get the message that the banks are agents of the state who issue the state's money when they make loans?
The 'nobel prize' for bank runs doesn't appear to have advanced knowledge very far.
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