The president of the St. Louis Federal Reserve, James Bullard, spoke at the opening day of Consensus 2018 in NYC where he had some mixed reviews of cryptocurrencies (his talk begins at minute 55:00 in the video).

His talk combined the history of privately issued money, monetary theory, and debates that exist within the economics of currency. He believes that cryptocurrencies are “creating a drift to non-uniform currency” within the United States and highlights that the “literature says that publicly issued money and the privately issued currency can coexist as an equilibrium”.

He added that non-uniform currencies were historically not popular and eventually replaced, citing pre-civil war era in the United States. He also referenced the current standard of non-uniform international currencies, but added that those currencies typically have relatively high and unpopular volatility.

Bullard added that most modern currencies are backed by the monetary policy of the issuing government, while cryptocurrencies have their “monetary policy” ingrained in their code that is publicly available. He noted that even though many cryptocurrencies have supply limits for a specific coin, there is still the possibility that the coin will “bifurcate, creating two fixed volumes of coins” and indirectly affect the price level in the crypto economy and the “future value of those coins”.

Throughout his speech he highlighted that the chief task of currencies is to facilitate trade that would not have occurred otherwise. He also mentioned that the “core issue behind all currencies” is the “credibility of promises on limits on future issuance.” He summarized the ideas of Milton Friedman and Friedrich Hayek on competing public and private currencies, along with Robert Mundell whom is viewed as the father of the Euro, which is a support for unification of currencies. Read more from…

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