Wednesday , November 22 2017
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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.

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...

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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...

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The evolution of the Federal Reserve’s promises as recorded on their banknotes

Since they began to be produced in 1914, Federal Reserve notes have always had a promise or obligation printed on their face. But over time this promise has changed. I thought it would be fun to go through the evolution of the promise as an exercise in understanding how the U.S.'s monetary plumbing has changed.The original 1914 series of Federal Reserve notes had the above stipulation printed on it. It's tough to read, so I've reproduced it in full below: "This note is receivable by all...

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An example of tax-driven money during the greenback era

Cartoon from 1864 poking fun at politicians and greenbacks (source and explanation) During the greenback era, the Union government issued irredeemable paper money to help pay for its war against the Confederates. What many people don't realize is that there were actually two different strains of greenbacks—those printed before March 1862 and those printed after. Although these two strains had only slightly different properties, they were not fungible with each other and would go on to have...

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The ubiquitous Spanish dollar—a photo essay

"The head of a fool on the neck of an ass."That's how Londoners described the strange silver coin pictured above, which first appeared in Britain in 1797. Due to worries that Napoleon was about to invade the British Isles, a run had developed on the Bank of England. In response, Parliament allowed the Bank to refuse to redeem its notes with gold coins, but this had only resulted in an inconvenient shortage of coins. To remedy the shortage, the Bank of England decided to open its vault and...

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The siren call of T+0, or real-time settlement

The NYSE's clearinghouse in 1898, six years after its founding Traditional financial systems often get mocked for being slow. In North America, for instance, securities markets have recently switched from T+3 to T+2 settlement. Before, if you sold a stock the cash would only appear in your account three days after the trade—now settlement been moved to a blazing fast two days. In an age where mail is transmitted in milliseconds, this delay seems terribly old fashioned. Or take automatic...

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Post-demonetization, the role of cash has been diminished

Narendra Modi's demonetization scheme, which involved the sudden cancellation of all ₹1000 and ₹500 rupee notes, was designed to hurt those in the underground economy who had stashed away large amounts of cash. But many smaller cash users got caught up in the blast radius. Has Indian behaviour surrounding cash changed? More specifically, what long-term impact has the painful demonetization process had, if any, on the population's preferences for holding cash?Luckily for us, we have a...

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When a rising stock market is a bad thing

If the world had a single cauldron for mixing various monetary phenomena, it would be Zimbabwe. Over the last two decades, it has experienced pretty much everything that can happen to money, from hyperinflation to deflation, demonetization to remonetization, dollarization and de-dollarization, bank runs, bank walks, and more. Adding to this mix, the Zimbabwe Industrial Index—an indicator of local stock prices—has recently gone parabolic, having more than tripled over the last twelve...

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No rupees left behind

Data on the world's biggest monetary event of the 21st century—Narendra Modi's demonetization—continues to trickle in. The Reserve Bank of India's just published its annual report (pdf) and I'll just say this straight out—I'm genuinely surprised. Out of the ₹15.44 trillion demonetized by Modi, ₹15.28 trillion, or 98.96%, have been returned. My guess would have been that a much smaller proportion of India's monetary stock made it back to the RBI, maybe 92-95%.For those not familiar with...

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You call that counterfeiting? This is counterfeiting!

One of the world's most notorious cases of counterfeiting was the 1925 Portuguese banknote crisis, when Artur Virgilio Alves Reis managed to pass off 200,000 fake five-hundred escudo notes, worth around £56 million in 2016 terms. When the Bank of Portugal discovered the counterfeits in December 1925, it announced an aggressive demonetization of the five-hundred escudo note, giving citizens just twenty days to bring in old notes for redemption. By then, the damage had been done. Reis had...

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