There, Finney cited theories of competitive free banking to describe a scenario in which Bitcoin is the '"high-powered money
' that serves as a reserve currency for banks that issue their own digital cash....
By the way, they also need to have a constant or predictable money multiplier (m), i.e., the ratio of the broad money supply (M) to high-powered money
(H), which is mostly bank reserves under their control.
Under a pure fiat money system, dominated by a hegemon, identification of monetary disorder becomes more hazardous especially where high-powered money
(an alternative term for the monetary base) has become essentially removed from the pivot of the monetary system.
More generally, international liquidity comprises the liabilities of OECD countries' central banks (their "high-powered money
"), those countries' AAA-rated and AA-rated central-government bonds, the debt securities of supranational organisations like the World Bank and regional development banks, and gold in official and private hands.
State money is the high-powered money
that is produced by central banks.
The key monetary framework of EMU-2 would be a "monetary authority separate from government" but "tightly subject to constitutional rules" that would "strictly limit the growth of high-powered money
" to ensure "price level stability over the very long run" but with "considerable scope for price level fluctuations over the short and medium run" (p.
In comparison, for dollars, the Federal Reserve determines the amount of high-powered money
that is produced (currency plus bank reserves), which ultimately determines the total number of dollars in the world.
The first rejects Keynes' theories of liquidity preference, the second reinstates them while for the Circuitists the Central Bank's issue of 'high-powered money
' is the critical mechanism in regulating liquidity (p76).
There are also four identities defining real income, the change in international reserves, the stock of money, and the stock of high-powered money
. Each of these equations is discussed below.
Appendices Table A-1 Measures of Seigniorage Variables Description Monetary Base Reserve money (line 14 in IFS) (or high-powered money
) Seigniorage l: Ratio of the change in high powered money to nominal GDP (Fischer 1982) Seigniorage 2: Ratio of high-powered money
to nominal GDP in current period minus ration of high-powered money
to nominal GDP in last period plus the product of the ratio Of high powered money to nominal GDP in last period times the growth rate of nominal GDP In current period to one plus the growth rate of GDP in current period (Walsh 1998).
The policy framework has changed throughout transition, from broad money targeting (1990-1996) to high-powered money
targeting (1997-2005), and then to inflation targeting (August 2005).
By increasing the stock of high-powered money
, the open-market purchase drives down nominal and real interest rates, and so increases consumption and investment.