Should the Federal Reserve Issue a Central Bank Digital Currency?

During Federal Reserve Chairman Jerome Powell’s July 2021 congressional testimony, several elected members encouraged Powell to fast-track the issuance of a Federal Reserve digital currency. Chairman Powell indicated he is not convinced there is a need for a Fed digital currency. But he also indicated that Fed staff are actively studying the issue and that his opinion could change based on their findings and recommendations. In this report, I explain how a new Federal Reserve digital currency would interface with the existing payment system and review the policy issues associated with introducing a Fed digital currency. …

The End of Bretton Woods, Jacques Rueff, and the “Monetary Sin of the West”

August 15, 2021 marks the 50th anniversary of the day President Richard Nixon “closed the gold window,” ending the postwar Bretton Woods international monetary system. It is an appropriate moment to reconsider the internal inconsistencies of the Bretton Woods system. As its contemporary critics understood, Bretton Woods was doomed to fail if it could not be fundamentally reformed. One of its chief contemporary critics was the French economist, Jacques Rueff. …

Central Bank Digital Currency: To What Effect?

Digital currencies are not new to the financial system, but innovations around them are changing how payments are made, what money is, and how banking is conducted globally. Central banks obviously are affected by these changes and they are in the mist of determining where they fit among them; and central bank digital currency (CBDC) is one innovation under study and experimentation.[1] Central banks’ interest in CBDC is in part a defensive reaction to fintech firms’ aggressive efforts to develop private digital money networks. …

Out of the Separation-of-Powers Frying Pan and Into the Nondelegation Fire: How the Court’s Decision in Seila Law Makes CFPB’s Unlawful Structure Even Worse

The U.S. Supreme Court’s June 29, 2020 decision in Seila Law LLC v. Consumer Financial Protection Bureau fixed a glaring constitutional defect in the way Congress structured the Consumer Financial Protection Bureau (CFPB or Bureau). “[D]eviat[ing] from the structure of nearly every other independent administrative agency in our history,” the 111th Congress made the CFPB’s director a solo principal officer whom the president could not remove absent inefficiency, neglect, or malfeasance. The Supreme Court would have none of it. …

Paul Krugman’s Ad Hominem Defense of Central Banking

One of the sorriest aspects of almost all political discussions nowadays is how often they seem to degenerate into rude ad hominem attacks rather than more reasoned arguments over the pros and cons of what public policies might be most conducive to achieving various social and economic goals. …

Gold and Free Banking versus Central Banking

In spite of the officially declared “independence” of the Federal Reserve from the immediate political control of either Congress or the White House, America’s central bank is, nonetheless, a branch of the U.S. government that is responsible for setting monetary policy, overseeing a variety of banking regulations, and influencing market interest rates. As a result, politics is always present when it concerns the Federal Reserve, as witnessed in the nomination of Dr. Judy Shelton to serve on the central bank’s board of governors. …