Abstract
Since the outbreak of the latest financial crisis central banks in several countries have decided to apply non-conventional monetary policy measures. Other monetary authorities behaved more conventionally but conducted a very loose monetary policy anyway. The goal of the paper is to discuss threats and possible consequences of treating the money instrumentally (monetary easing, government financing by the central bank). The authorities tend to arbitrary reinforce just one function of money, a medium of exchange, in order to artificially increase the sales and production of goods and services while neglecting other major function: a store of value. Fast growing money aggregates, awareness that there is no limit for money creation, and ideas such as “helicopter money” stimulate the attempts to storage the wealth in different form, e.g. cryptocurrency. The remarks were formulated from the conventional and Islamic finance perspective. Statistical data come from the euro area, Poland, and Iran, where banking system is fully Islamic.
Highlights
Money is probably the most important market phenomenon
Its issuance is controlled by the state, either directly or indirectly
The Case Against Helicopter Money interestingly the highest increase in nominal terms (Iran) was almost exactly reduced by inflation, but at the same time still large increase in the Eurozone and Poland did not result in general increase of prices to the similar extent
Summary
Money is probably the most important market phenomenon. Historically established as commodity money, it has contemporary no physical (intrinsic) value but is rather declared by a government as a legal tender, which has to be accepted for payments of all debts, private and public. Since the outbreak of the latest financial crisis, central banks in several countries have decided to apply non-conventional monetary policy measures. They comprise nowadays at least four elements [Pattipeilohy et al, 2013, p. The goal of the paper is to discuss threats and possible consequences of treating money instrumentally, pointing at first two elements only (quantitative and qualitative easing, government financing), and leaving interest rates aside. Tab. 1 presents the data for the European Central Bank (consolidated), National Bank of Poland, and Central Bank of Iran
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