Legal Seminar, Denver, CO
Safety/Soundness • Fiat currencies present benefits for government finance, but they also present challenges for regulation. – Stores of cash outside the banking system circumvent intermediaries that governments tend to trust. – In the US, about 7 percent of GDP may be stored in cash. Most of this is in $100 bills. (2013 data from Rogoff – about $4k/everyone in the US). Higher rates in E.U. – Privacy protections from stored cash make it attractive for consumers – but criminal activity may go undetected. – Large denomination bills may present biggest practical threat due to size/volume considerations.
Safety/Soundness • Deposits implicate intermediaries and concerns about their behavior (a topic thoroughly familiar to this group). – For insightful discussion of bank regulation on a comparative basis, see Calomiris and Haber, Fragile by Design (2014). • Electronic payments are potentially moving cash out of circulation and into a regulated system (but not always). • Risks tend to be technological, rather than physical – Cash is immune from cyber threats. – Cash is immune from downed power lines, cables in natural emergencies – But we must get to our cash stores – ATMs are also on networks
Made with FlippingBook - Online magazine maker