part 3, the fed, bitcoins, and inflation
TRANSCRIPT
THE FED, BITCOINS, AND
INFLATION3. GOLD, BITCOINS, AND
INFLATION
Dale R. DeBoer, PhDDepartment of Economics, UCCS
Core functions of money
Medium of exchange
Unit of account
Store of value
Standard of deferred payment
Ideal functions?
Full Employment and Balanced
Growth Act (1978)
Humphrey-Hawkins Act
Monetary requirements
Full employment
Growth
Price stability
How stable should prices be?
Measurement bias
Substitution
Quality
New product
Outlet
Houseman, 2003, “Sources of Bias
and Solutions to Bias in the
Consumer Price Index”
Gold as money
Pro
Con
Hard to grow at the “required” rate
(5%)
Costly to use as money
Still have fractional reserves
Trust still an issue
Bitcoins: a modern alternative
Decentralized virtual currency
No physical existence (sort of)
http://www.coindesk.com/10-physical-
bitcoins-good-bad-ugly/
Bitcoins: a modern alternative
Decentralized virtual currency
No physical existence (sort of)
No central authority (sort of)
Algorithm limits supply to 21 million
Bitcoins: a modern alternative
Decentralized virtual currency
No physical existence (sort of)
No central authority (sort of)
Algorithm limits supply to 21 million
Source: Nakamoto
Institute
Bitcoins: a modern alternative
Decentralized virtual currency
No physical existence (sort of)
No central authority (sort of)
Algorithm limits supply to 21 million
Mt. Gox intermediated 69% of
transactions in 2013
Bitcoin China intermediated 74% of
transactions in 2014
Bitcoins: a modern alternative
Decentralized virtual currency
Disintermediates formal banking
sector
Bitcoins: a modern alternative
Decentralized virtual currency
Disintermediates formal banking
sector
Offers anonymous transactions
Bitcoins: a modern alternative
Decentralized virtual currency
Disintermediates formal banking
sector
Offers anonymous transactions
Eliminates fractional reserve
banking
Bitcoins: a modern alternative
Pros
100% reserve requirement
Eliminates central control
Anonymous
Eliminates “middle-man” costs
Bitcoins: a modern alternative
Pros
Cons
Will not grow as needed
Eliminates lending mechanisms
Eliminates monetary response to
crisis
Open to illegal use
Not well established or accepted