More FedCoin thoughts.
Actually I eerily coincide with Robert on most points, except for monetary policy.
If anything, the more transactions become frictionless, the less any monetary authority will have room for maneuvering. The minute the interest rate is not of my liking (and I like nothing worse than a negative rate) I would jump into bitcoin (or ECBCoin or SwissCoin) and arbitrage out. I have to give it some more thought to the implications.
David Andolfatto, Vice President of the St Louis Fed, published a most interesting post yesterday Fedcoin: On the Desirability of a Government Cryptocurrency. Andolfatto’s post is itself in reference to JP Koning’s Fedcoin piece of last October. Back then, I wrote a bit about that on a private email list that is usually devoted to topics relating to blockchain protocol design. I thought the Fedcoin thought experiment was interesting fodder for our monetary intuitions. Still do. So here it goes.
A central bank backed blockchain payments network for a national currency like the USD is a neat idea. It would, first of all, put digital cash on the map for good. And digital cash that trades at parity with an economy’s well-established unit of account is a far more useful medium of exchange than a volatile cryptocurrency like bitcoin. Andolfatto:
And so, here is where the idea of…
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