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Abstract
e advent and international proliferation of unconventional monetary policy is the logical consequence of interventionism in the monetary and bankingeld. It was made necessary by central bank policies of managing and constantly lowering the interest rates. Once the zero lower bound is reached, the next logical step for the monetary authorities is to look for ways to continue lowering rates through it. To abolish cash and institute the exclusive use of bank deposits is one enticing proposal to overcome this limitation. us, the potency of monetary policy can be preserved by the new capacity of charging negative nominal interest rates. However, the arguments against cash are not new. We are going to show in this paper that the same arguments that were previously used to impose banknotes are today used to forbid them.
Highlights
We are going to analyze the transformation of the global monetary standard in the last century, from the commodity standard, such as gold or silver, towards the bank deposit standard, i.e., a type of money that is strictly monitored by the monetary authority
We have shown that these proposals are part of a secular dynamic that is ported forward by the inherent contradictions of central banking with at money and fractional reserves
We have shown that the sequential exchange of monetary standards is prompted by crises in monetary policy and the need of authorities of di erent, more potent means to overcome them. e last measures proposed for the downward penetration of the zero lower bound and the introduction of negative nominal “interest” rates constitute a new change of monetary standard, this time from the at paper standard to the at bank deposit standard, a type of electronic money that would increase the control of monetary authorities over private money holdings and over saving, investment, and consumption decisions
Summary
We are going to analyze the transformation of the global monetary standard in the last century, from the commodity standard, such as gold or silver, towards the bank deposit standard, i.e., a type of money that is strictly monitored by the monetary authority. We will show how this transformation is closely related to the evolution of monetary policy. We argue that this dynamic eroded recently the paper money standard and, at the same time, took monetary policy from the use of conventional means to the use of unconventional means. We are going to discuss the new standard that some economists argue is a condition for the return of monetary policy from unconventional to conventional means. E rst section contains a description of the evolution of the interest rates and the zero lower bound problems. E second section addresses the conceptual problems of the negative nominal interest rate. E fourth section comments on the possible outcomes of the negative nominal interest rates policy E rst section contains a description of the evolution of the interest rates and the zero lower bound problems. e second section addresses the conceptual problems of the negative nominal interest rate. e third section focuses on the evolution of the banknote as money substitute and money proper. e fourth section comments on the possible outcomes of the negative nominal interest rates policy
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