Thoughts at Random

The main idea: two joint cryptocurrencies are programmed such that one can be exchanged for the other as long as their product remains constant, thus tracking the minimal necessary volume of circulation required by a growing economy in a decentralized fashion.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 30.09.2021, and the current version may have been updated several times from its original form. 1 The issue 1.1 The only credible challenger to the current system of a centralised issuer of currency would be a decentralised system under the auspices of cryptocurrency. Alas, most of the time, the designers of these ingenious tools just went with “fixed supply is good enough” and left it at that, making cryptocurrency a great store of value, but a shonky unit of account. And how much worse this issue becomes when the user base is growing faster than the global economy (which of course it does)! 1.2 I’ve earlier e...

The main idea: a Central Bank limiting open market operations to the acquisition and issuance of its own shares would suffer few of the issues that plague the current alternatives.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 06.07.2022, and the current version may have been updated several times from its original form. 1.1 Those of us who prefer monetary matters to be managed by open market operations instead of interest rates are presented with the issue of asset quality. 1.2 Will there be enough assets of good quality to buy to increase monetary supply as much as one may need to? Isn’t buying treasuries just monetizing debt? Even if not, the whole debate around treasuries being money anyway is still live and, worst case scenario, open market operations are just buying money with money. 1.3 Moreover, isn’t buying stocks market intervention? Buying up insane quantities of mortgage-backed securities sure seeme...

The main idea: modeling an inclined line whose angle is the interest rate and whose starting and ending points are monetary circulation volumes now and in the future explains a slew of otherwise peculiar relationships between interest rates and monetary policy.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 09.12.2021, and the current version may have been updated several times from its original form. 0.1 This post is a fluff piece, containing analysis and commentary but no proposed solution to some issue. I try to keep this sort of stuff to a minimum as commentary for commentary’s sake is not the point of this blog.   1. Setting the true risk-free interest rate 1.1 Here’s a thought experiment. Suppose the monetary authority (and it can only be the monetary authority) decides to issue consols, bonds that will pay out a set amount every month forever. It sets the price and – this is crucial – commits to...

The main idea: issue, sell and buy unlimited quantities of consols whilst sterilising all net resulting inflows and outflows for a bare-bones automatic NGDP targeting regime.   0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 21.01.2025 and the current version may have been updated several times from its original form.  1.1 Earlier I have written about a thought experiment used to model the fiat economy. I actually think that model is good enough that the real-world complications and ways in which reality differs from it are minor. 1.2 Minor enough that simplifying reality to fit the model would actually enable us to come up with a decent automatic NGDP targeting regime, absent complicated instruments like futures and whatnot. 1.3 So here it goes. You have a Monetary Authority tasked with three duties: husbanding foreign exchange reserves, bailing out failing banks and issuing and buying back consols, the...

The main idea: bailouts that make creditors whole but wipe shareholders and the firm itself are a great improvement over the current practice.      0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 03.01.2022, and the current version may have been updated several times from its original form.   1.1 When it comes to entities alleged to be “too big to fail” which are nevertheless teetering on the edge of failure, you usually get two options: let them go, or bail them out. But there is a third beyond the two that have been known since Lombard Street. 1.2 OK, say you buy that these are too big to fail. What does the treasury or central bank do whilst still limiting moral hazard and not completely breaking market discipline? 1.3 Step one. Order a stop to all sales or any other activity except as required to service liabilities already incurred. This involves letting go of all staff not required ...

The main idea: money can be placed in three tiers depending on whether it has or lacks neutrality and a responsive supply. 0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 14.01.2025, though it is a much expanded first part of my first post from September 2021. The current version may have been updated several times from its original form.  0.1 This post is a fluff piece, containing analysis and commentary but no proposed solution to some issue. I try to keep this sort of stuff to a minimum as commentary for commentary’s sake is not the point of this blog.  1.1 The economy under the division of labour is a massive and massively complex system with immense degrees of freedom. Only money, an emergent computer of comparable capability, is equal to the task of daily optimising resources such as to fulfill demand to the greatest degree possible. Money alone can run such calculations at any reasonable speed. 1.2 Thes...

The main idea: the volume of play involved in a fair lottery is indicative of either too much or too little money in circulation.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 09.10.2023, and the current version may have been updated several times from its original form.  1.1 If you want to leave money creation to the market, you need to establish some sort of feedback loop whereas people don’t just create money ad infinitum, but grope (in their totality) toward some efficient volume. 1.2 I think I have solved this issue to a satisfactory degree, but for a long time I had been thinking of an alternative design which I could never finalise in theory. Although this has now been overtaken by the coupled currencies design, still worth laying out the main intuition.  1.3 Imagine you offer a lottery of fair odds to all comers, whereas you can invest any amount denominated in the currency being managed and eit...