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Sun, Jan 13 2013 16:22:08

Twitter Round Table on Our Disastrous Policy of Pegging Paper Currency at Par

  1. tomashirstmoney
    Tomas Hirst@tomashirstmoney
    .@Frances_Coppola I had a short Q&A with @mileskimball on the subject of electronic money in November actually: fundweb.co.uk/fund-strategy/…
    Sun, Jan 13 2013 04:12:23
  2. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney I like his thinking on electronic money, but I don't agree with him about negative rates @mileskimball
    Sun, Jan 13 2013 04:27:57
  3. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney I don't think he's correct. Neg nom int rate means erosion of principal - effectively a safe deposit charge @mileskimball
    Sun, Jan 13 2013 04:36:28
  4. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney there is no way someone depositing money at neg nom rate shd expect return of all their principal. @mileskimball
    Sun, Jan 13 2013 04:37:22
  5. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney Same thing. If nominal rates (not yields) below zero they are charged for lending. They do not get all their money back.
    Sun, Jan 13 2013 04:46:30
  6. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney He is right re need to discourage hoarding & encourage productive investment. Fiscal policy has a role to play imho
    Sun, Jan 13 2013 04:48:17
  7. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @tomashirstmoney negative nominal rates are effectively a tax. We cd ACTUALLY tax "safe" assets to discourage their use (Pigouvian taxation)
    Sun, Jan 13 2013 04:50:46
  8. mileskimball
    Miles Kimball@mileskimball
    .@Frances_Coppola @tomashirstmoney Savers wouldn't like it, but negative nominal rates a temporary means to get the economy moving again.
    Sun, Jan 13 2013 05:44:26
  9. mileskimball
    Miles Kimball@mileskimball
    .@Frances_Coppola @tomashirstmoney Negative nominal interest rates are not a tax because borrowers get the benefit, not the government.
    Sun, Jan 13 2013 05:47:14
  10. mileskimball
    Miles Kimball@mileskimball
    In the absence of electronic money, currency is like a government guarantee of at least a zero interest rate--it is like milk price supports
    Sun, Jan 13 2013 05:51:01
  11. mileskimball
    Miles Kimball@mileskimball
    We need electronic money to get the government out of the business of guaranteeing people at least a zero interest rate.
    Sun, Jan 13 2013 05:52:03
  12. mileskimball
    Miles Kimball@mileskimball
    Electronic money allows normal supply and demand to determine interest rates, rather than currency.
    Sun, Jan 13 2013 05:54:16
  13. mileskimball
    Miles Kimball@mileskimball
    Our current economic problems come from the fact that our paper currency policy contradicts what central banks are trying to do.
    Sun, Jan 13 2013 05:56:36
  14. mileskimball
    Miles Kimball@mileskimball
    Electronic money makes it possible to align paper currency policies with central bank policies.
    Sun, Jan 13 2013 05:57:19
  15. mileskimball
    Miles Kimball@mileskimball
    Paper currency policy is a choice of governments. Currently our paper currency policy (guaranteeing par for paper currency) is disastrous.
    Sun, Jan 13 2013 05:59:08
  16. mileskimball
    Miles Kimball@mileskimball
    .@JPSargeant78 In my proposal, paper currency is still an option, earning, say a -4% rate of return.
    Sun, Jan 13 2013 06:00:38
  17. JPSargeant78
    John Sargeant@JPSargeant78
    @mileskimball so the big question is under your proposal would 100% of people have access to electronic money 100% of the time? Safeguards
    Sun, Jan 13 2013 06:02:53
  18. mileskimball
    Miles Kimball@mileskimball
    When I recommend "electronic money," I'm recommending Robert Eisler's idea of paper currency that sometimes depreciates relative to e-money
    Sun, Jan 13 2013 06:03:09
  19. drbekafigo
    marija bekafigo@drbekafigo
    @mileskimball do you literally mean getting rid of physical dollars and cents?
    Sun, Jan 13 2013 06:04:15
  20. mileskimball
    Miles Kimball@mileskimball
    .@JPSargeant78 Currency would still be an option. Nor is currency really disadvantaged since bank accounts also earn a negative return.
    Sun, Jan 13 2013 06:06:10
  21. mileskimball
    Miles Kimball@mileskimball
    .@drbekafigo Not at all. Paper currency would continue in use as now, but it would gradually depreciate in value relative to e-dollars.
    Sun, Jan 13 2013 06:07:04
  22. mileskimball
    Miles Kimball@mileskimball
    I collect some links on electronic money here: blog.supplysideliberal.com/post/402094895… Under the Eisler approach, paper money continues to be used!
    Sun, Jan 13 2013 06:08:44
  23. mileskimball
    Miles Kimball@mileskimball
    The mistake is not in *having* paper currency, it is in insisting that coins and paper currency *always* trade at par with electronic money.
    Sun, Jan 13 2013 06:10:39
  24. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @mileskimball @tomashirstmoney They are not a tax in the sense of income to the government, but they behave like a tax on savings +
    Sun, Jan 13 2013 06:10:47
  25. Frances_Coppola
    Frances Coppola@Frances_Coppola
    @mileskimball @tomashirstmoney Borrowers don't necessarily get the benefit, either. Banks may widen spreads instead.
    Sun, Jan 13 2013 06:11:28

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Miles Kimball

Professor of Economics and Survey Research at the University of Michigan

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