Past Event

"Virtual Gold: Exploring the possibilities of a cryptographic monetary standard" Alistair Milne, Loughborough University

This talk considers the implications of adopting a publically controlled cryptographic currency as the  base money use for settlement of payments. This is a potentially substantive change to existing monetary arrangements both because such as base money can be freely transferable amongst households, firms and financial institutions and because as a digital money, the rate of return on this money can always be kept below money market rates for overnight lending. These two technical features appears to provide important new tools for both regulatory and macroeconomic policy. At the microeconomic level free access to base money can support both more effective banking competition (by removing the banking sector monopoly on access to central bank reserves) and the orderly resolution of failing banks (allowing rapid transfer of accounts between institutions). At the macroeconomic level, the opportunity to keep money market interest rates below rates of return on base money provides a solution to the the 'zero lower bound' or Keynsian liquidity trap that limits conventional monetary policy (and overcomes a major flaw in the Adair Turner proposals for helicopter money). Implications for monetary theory and macroeconomic modelling are also discussed (a) linking this idea to the Austrian monetary tradition of Von Mises and Hayek, with the possibility that an independently governed stock of cryptographic base money might be an appropriate monetary standard free of political interference; and (b) contrasting with the new-Keynsian model or Stanford view of monetary policy of Woodford and Taylor which may be fundamentally flawed because it does not take account of either the transactions demand for money or the macroeconomic impact of debt stocks.


01 February 2016 13:00 - 15:00


INET Oxford

Eagle House, Walton Well Road, Oxford, OX2 6ED