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The Story of
Money: Past,
Present, and
Future
- David Siegel
The Goal of Monetary Policy
To maximize
sustainable
economic
growth
The Goal of Monetary Policy
What is money?
Unit of account
Unit of exchange
Store of value
Money
Keynesianism
Macro-Economics
Monetarism
Market
Monetarism
New
Keynesianism
Real
Business
Cycle Theory
Austrians!
Macro-Economics
Austrians
Commodity money (gold) is
“sound money.”
Models are meaningless.
Get the government out of
the money business.
Macro-Economics
Keynesianism
Use interest rates and fiscal
policy to counteract shocks
Macro-Economics
Monetarism
More money in
circulation
Prices rise
Remove money
from circulation Prices fall
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
World War 1 - most countries
abandon the gold standard to
finance war by printing paper
money.
Gold
Interwar: Many countries adopt a
gold-reserve currency. Central
banks buy gold.
Gold
Market crash: Austrian, German,
British bank runs, crisis of
confidence. Output drops.
Gold
Great Depression: gold hoarding;
banks fail in US; worldwide deflation.
Deflation
Brittleness
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
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
Fiat
Bretton Woods:
World currencies backed by
gold; fixed exchange rates.
Inflation
Inflation
Inflation
Unemployment
Unemployment
3%
GDP growth
Problem: Dual mandate
2%
Inflation
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
Wage Stickiness
The factory story
Psychological expectations of
rising income
Price Stickiness
Price variability
Menu costs
Contractual obligations
Other psychological factors
Stickiness
A world without stickiness
No Stickiness
A world without stickiness
No stickiness =
No inflation needed!
No elastic money needed!
How to Think of Stickiness
1. Normal (always sticky)
2. Shock
3. Sticky reactions (not Austrians)
4. Elastic money supply to the rescue!
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
Reserve
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
CBDC
Issues
Narrow money
Public blockchains
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
Citizen mining
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
3%
GDP growth
Problem: Dual mandate
2%
Inflation
3%2%
NGDP
5%
Solution: NGDP level targeting
Nominal GDP
Quantity
Year 1
Price
$1
100
GDP = $100
Nominal GDP
Quantity
Year 1
Price
$1.10
130
Nominal
GDP = $143
Nominal GDP
Quantity
Year 1
Price
$1.10
130
Real GDP = $130
Nominal GDP
Quantity
Year 1
Price
$1.10
130
Nominal
GDP = $143
Growth
Inflation
NGDP target = 5%
}3%
2%
NGDP level targeting
}Growth
Inflation
4%
1%
NGDP target = 5%
NGDP level targeting
}Growth
Inflation
1%
4%
NGDP target = 5%
NGDP level targeting
Demand shock Immediate injection
of money
will boost demand
NGDP level targeting
NGDP
Too much growth Immediate removal
of money
will reduce demand
NGDP level targeting
NGDP
Growth
Inflation
NGDP target = 5%
}3%
2%
NGDP level targeting
}Growth
Inflation
4%
1%
NGDP target = 5%
NGDP level targeting
}Growth
Inflation
1%
4%
NGDP target = 5%
NGDP level targeting
Demand shock Immediate injection
of money
will boost demand
NGDP level targeting
NGDP
Too much growth
or supply shock
Immediate removal
of money
will reduce demand
NGDP level targeting
NGDP
Money
Monetary
policy
Reserves
NGDP level targeting
Real-time NGDP estimate
NGDP level targeting
1.
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.
Fed
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Central Bank Digital Currency
Reserve
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
wallet
Bank
walletSmart
contracts
NGDP
prediction
NGDP level targeting - autopilot
1: Gold
2: Fiat
3: Stickiness
4: CBDC
5: Citizen mining
6: NGDPLT
7: Competition
Currency competition
Reserve
Money
supply
Currency competition
Currency competition
$ £
€
¥
Crypto
Crypto
Crypto
₱
Crypto
Crypto
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
To maximize
sustainable
economic
growth
The Goal of Monetary Policy

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Siegel money deck