Saturday , February 17 2018
Home / JP Koning: Moneyness
The author Jp Koning
Jp Koning
Working in the bowels of the finance industry. Blogging about monetary phenomena is my side gig.

JP Koning: Moneyness

Moneyness is an economics blog by JP Koning about economics, money and finance. He adds an unique perspective to money-related issues, and explains everything very clearly, this combination sets him apart.

The big ol’ €500

Production of the European Central Bank's €500 notes is scheduled to come to an end later this year. But a chart of the quantity of €500 banknotes in circulation (see below) reveals something odd. The supply of €500s began to plummet way back in early 2016, long before note production was supposed to be halted. What gives?It was back on May 4, 2016 that the ECB officially announced that it would stop printing and issuing the €500 note, one of the world's most valuable banknotes ranked by...

Read More »

Paying interest on cash

Freigeld, or stamp scrip, is designed to pay negative interest, but it can be re-purposed to pay positive interest. Remember when global interest rates were plunging to zero and all everyone wanted to talk about was how to set a negative interest rate on cash? Now that interest rates around the world are rising again, here's that same idea in reverse: what about finally paying positive interest rates on cash? I'm going to explore three ways of doing this. As for why we'd want to pay interest...

Read More »

Floors v corridors

David Beckworth argues that the U.S. Federal Reserve should stop running a floor system and adopt a corridor system, say like the one that the Bank of Canada currently runs. In this post I'll argue that the Bank of Canada (and other central banks) should drop their corridors in favour of a floor—not the sort of messy floor that the Fed operates mind you, but a nice clean floor.Floors and corridors are two different ways that a central banker can provide central banking services. Central...

Read More »

XRP and bitcoin as bridge currencies

Eshima Ohashi Bridge, JapanThe value of all outstanding XRPs recently surpassed that of bitcoin, hitting $300 billion or so last month. XRPs are a cryptocurrency issued by Ripple, a company that is trying to shake up the business of cross border payments. Ripple has a number of strategies for doing this, but the one that has caught people's imagination—especially as the price of XRPs rocket higher—is to have banks and other financial institutions use XRP as a 'bridging asset' for moving...

Read More »

Money as a generally-accepted medium for short selling

Jim Chanos, famous short seller. We are all Jim Chanos.Most people find the idea of short-selling to be incomprehensible. Buy a stock and hold it, that's what one does. To the majority of us it's just down-right odd to do the reverse, borrow stock in order to sell.At the same time, pretty much everyone in the world is a short seller, even if we don't realize it. The credit card debt we wrack up, the lines of credit, the pay day loans, the mortgages—they're all examples of us going short. We...

Read More »

Electronic money will only save central banks from subjugation if it is anonymous

50 SEK banknote issued by the Riksbank in 1960 "Do we need an eKrona?" asks Stefan Ingves, the Governor of the Riksbank, Sweden's central bank. The Riksbank is probably the central bank that has advanced the furthest in discussions surrounding the introduction of a central bank-issued digital currency (CBDC)—a new form of risk-free digital money for use by the public. Canada, New Zealand, Australia, the ECB, and China are also dissecting the idea, with more central banks to come in...

Read More »

Store of value

LSD tabs like these ones have an incredibly high value-to-weight ratioWhen bitcoin first appeared, it was supposed to be used to buy stuff online. In his 2008 whitepaper, Satoshi Nakamoto even referred to his creation as an electronic cash system. But the stuff never caught on as a medium-of-exchange: it was too volatile, fees were too high, and scaling problems resulted in sluggish speeds. Despite losing its motivating purpose, bitcoin's price kept rising. The bitcoin cognoscenti began to...

Read More »

Central banks shouldn’t ignore their duty to provide anonymity

Cross section of a banknote with a cotton paper core surrounded by two layers of polymer [Source]   Central bankers are at their most comfortable when engaging in technical debates over the finer points of monetary policy. But over the next few years they may be forced out of their comfort zone into a thorny philosophical debate over anonymity and financial censorship. They are poorly equipped for such a debate. When central bankers monopolized the issuance of banknotes in the 1800s and...

Read More »

Zimbabwe and hyperbitcoinization

Art by Daniel Krawisz The narrative that drives any speculative market needs constant fuel in order to attract new buyers. Bitcoin is no exception, which is why recent events in Zimbabwe have been recruited—albeit sloppily—by the bitcoin press to provide more fuel.The facts of the matter are this: if you head over to Golix, Zimbabwe's only bitcoin exchange, you'll see that bitcoin last traded at $13,800 whereas its price on an American exchange like GDAX is $8260. That's a difference of...

Read More »

The bootstrapping of Thorne, Magic Money, and Cyberbucks: three pre-Bitcoin monetary experiments

Bitcoin boasts many technical achievements, but none is more interesting to me than they way it was successfully bootstrapped. How did a small group of cypherpunks—activists interested in widespread use of cryptography and digital currency—manage to get an intrinsically valueless token to have a consistently positive price? Hal Finney, a cryptographer and early adopter of bitcoin, put it this way in 2009: "One immediate problem with any new currency is how to value it. Even ignoring the...

Read More »