Contribución
El documento proporciona un marco para pintar una imagen coherente de un amplio conjunto de temas que se analizan por separado en economía. El marco abarca dinero, pagos, operaciones monetarias, criptomonedas, neutralidad monetaria, banca libre, inflación y la relación entre la estabilidad monetaria y financiera. El documento destaca el papel de las instituciones de fomento de la confianza, en particular los bancos centrales. Se basa en las lecciones de la historia del dinero, el crédito, los bancos y los bancos centrales.
On money, debt, trust and central banking
BIS Working Papers
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No 763
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11 January 2019
Summary
Focus
The paper discusses the properties of a well functioning monetary system, in both its day-to-day operation and the longer run. It defines a monetary system as money plus the mechanisms for the execution of payments. It draws on theory, history and practical experience.Contribution
The paper provides a framework to paint a coherent picture of a broad set of issues typically analysed separately in economics. The framework covers money, payments, monetary operations, cryptocurrencies, money neutrality, free banking, inflation and the relationship between monetary and financial stability. The paper highlights the role of trust-building institutions, notably central banks. It draws on the lessons of the history of money, credit, banks and central banks.Findings
Treating the issues separately obscures important relationships.
Trust is the foundation of a well functioning monetary system. The
distinction between money and credit, both underpinned by trust, is
overdone. A demand-determined, elastic supply of credit is essential for
the system to operate at all and to set interest rates. But in the
longer run, too elastic a supply can undermine monetary and financial
stability. The notion that the monetary base, rather than the interest
rate, is the system's ultimate anchor is incorrect. For similar reasons,
the same is true of the common view that changes in the monetary base
drive the supply of money. As concepts, monetary and financial stability
are joined at the hip, but the processes underlying them are quite
different. As regards price stability, it is not appropriate to think of
the price level as the inverse of the price of money. The common view
that, in the long run, money affects only prices is highly suspect. When
inflation is low, thinking of it as distinct from relative price
changes muddies the waters. As regards financial stability, the focus
should be on the forces that generate financial booms and busts.
Ensuring lasting monetary and financial stability is the main challenge
ahead. The current monetary system, with prudential regulation and
central banks at its core, is not perfect and must be improved. But it
provides the best basis on which to build further. Cryptocurrencies are
not a viable alternative.
Abstract
This essay examines in detail the properties of a well functioning
monetary system - defined as money plus the mechanisms to execute
payments - in both the short and long run, drawing on both theory and
the lessons from history. It stresses the importance of trust and of the
institutions needed to secure it. Ensuring price and financial
stability is critical to nurturing and maintaining that trust. In the
process, the essay addresses several related questions, such as the
relationship between money and debt, the viability of cryptocurrencies
as money, money neutrality, and the nexus between monetary and financial
stability. While the present monetary system, with central banks and a
prudential apparatus at its core, can and must be improved, it still
provides the best basis to build on.
JEL classification: E00, E30, E40, E50, G21, N20
Keywords: monetary system, money, debt, payments, trust, monetary stability, financial stability, central bank-
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