The Boundary Of Money: Today'S Monetary System, Banking System And Debt System

Recently, with the doubt that the US dollar remains a hard currency, digital currency has become a hot topic again. A professional who turned from a Wall Street investment bank to a financial technology industry wrote a book "money without borders". It discussed risk-free assets from the perspective of blockchain and money banking theory, and on this basis, he conceived a decentralized currency - "money without" that transcended time and space and could be used as a means of stabilizing value storage Boundaries) is also insightful in criticizing the "house of cards" composed of the current monetary system, banking system and debt system, especially for examining the unlimited issuance of US dollar debt under the impact of the current epidemic.

In fact, money is only a theoretical concept of monetary finance. In real life, the form of money has been changing. At present, it has been stable in the stage of taking national credit currency as currency, that is, legal currency. The reason for this is that money appeared before the formation of a country. At the beginning, it only served as a general equivalent, and assumed the functions of value measurement, circulation and storage. After the emergence of the state, a country's currency is actually supported by the government's right to tax the people. The state provides public goods and services accordingly, and the legal currency has more stable credit because of its compulsion. This credit is based on the fact that in the long run, the state can pay any debt with taxes. If we do not consider this factor when we discuss the modern currency, it can only be a simple concept of money in economic theory, which has little connection with our actual life, in other words, it will not really become currency.

Now let's put aside the social and political factors and look at the author's idea from the perspective of economics. The weakness of "unbounded currency" lies in the requirement of pegging risk-free assets and providing "zero real interest rate" according to Friedman's law. But in fact, as long as there are commodity transactions, there can be no risk-free assets. If the monetary credit process maintains zero real interest rate, there will not be enough economic incentives to provide such services. And we can't use decentralization to explain this situation, otherwise we will fall into the trap of nested logic. The author said that the currency has no intrinsic value, just because the central authority claims that it has value, this view is also one-sided and wrong. At present, no institution or individual can obtain the right to tax, which is not only based on oral declaration.

Blockchain technology does have great advantages. We can use it to create trust. By binding with assets with potential economic value and limited supply, it will be more competitive than our paper money. But I am afraid this can only be used in digital currency through the central bank. At present, there are two main technical routes for central banks to consider.

One is based on blockchain technology and bound with valuable assets, such as Venezuelan petrocurrency. The other is a digital currency that draws on and adopts some blockchain technologies. This is the design of the people's Bank of China DCEP. The reason why the latter does not fully adopt blockchain technology is related to the fact that such technology has not yet solved some bottleneck problems, such as limited processing speed and capacity. At the same time, in terms of decentralization, there is a gap that cannot be shortened in the short term with the existing central bank commercial bank customer system.

The author is engaged in the financial capital market, and tracks the application technology and progress of fintech, and thinks that the development of digital legal currency of the central bank may be promoted step by step. Digital legal currency is obviously the infrastructure of digital economy. From a strategic point of view, the earlier a country can import digital legal currency, the more obvious its boosting effect on economy. At the same time, due to the formation of a network structure connecting the central bank, commercial banks and individuals, the digital legal currency has formed a reliable and efficient distributed database. From the creation, issuance, circulation and recovery of money, as well as the mutual lending, payment, settlement and clearing between commercial banks, these are all within the scope of the central bank's supervision. The central bank can extract and analyze the data in time By analyzing the short-term effect of monetary policy regulation, and timely plugging the loopholes of policy arbitrage such as capital idling and shadow banking, the governance of the whole monetary and financial system will be greatly improved and the stability will be enhanced, so that the regulation of monetary policy and the supervision of financial system will reach a new higher level.

The use of digital currency will also bring greater convenience to commercial banks and customers. The loan and deposit, payment, clearing and settlement of commercial banks, as well as some intermediary business between banks, can be provided more efficiently. Using digital wallet, customers can quickly and safely complete the operation on mobile terminals such as mobile phones, without waiting in line at the outlets. It can be expected that the digital currency will profoundly change the social and economic pattern. Unlike the current situation in which the third-party payment is widely used, we will enter a new monetary and financial era from the top to the bottom.

From the perspective of the International Monetary Fund, the International Monetary Fund should play a similar role in the future. The internationalization of RMB we are talking about should also be positioned from the perspective of digital RMB system. For economists, we need to consider whether the existing monetary banking theory is still applicable. Maybe we need to establish the theory of digital money bank to guide the practice of Finance and capital market in the era of digital economy.