Wrapping one’s head around the difference between official versus private money is a lot harder than understanding the distinction between physical and electronic money — but it is also essential for making informed judgments about financial and monetary policy, reads an article in the Financial Times, 1st February 2016.
This article written by Martin Sandbu introduces the brand new report from Positive Money Digital Cash: Why central banks should start issuing digital currency. Here’s a short extract:
Well done, therefore, to Positive Money, which has just published a report arguing how and why official digital currency should be introduced in the UK. The thoughtful and thorough report qualifies as essential reading.
The general idea is for the Bank of England (or other central banks; the ideas are general) to offer deposit accounts directly to the public, or alternatively, for private banks to offer accounts fully backed by central bank reserves. The authors go through the mechanics of how this would work, and address the main objections.
Those people who have a premium subscription to the Financial Times may read the whole article here.