Scrap cash altogether, says Bank of England’s chief economist
http://www.ft.com/cms/s/0/7967908e-5...06ccb37f2.html
For many, the idea of abandoning a system that has been with us for centuries in favour of a government-backed digital currency will seem a step too far. But Andy Haldane, the radical thinker at the BoE, argues that such a move would give the bank new flexibility in the event of another downturn.
The speech reflects policymakers’ nervousness that they lack reliable tools to boost spending. Other economists have also argued that cash restricts central banks’ ability to stimulate a depressed economy.
The Swiss and Swedish central banks have succeeded in setting negative interest rates. But most policymakers still believe in an “effective” lower band not far below zero. Some central bankers argue that if the lower band were removed, they would be better equipped to confront a slowdown.
Mr Haldane said he felt that the world was slipping into a “third phase” of the economic crisis that started in 2008, and that there could be a need to cut interest rates from their current historic low of 0.5 per cent, “to support UK growth and return inflation to target”.
He proposed a world without cash. “This would preserve the social convention of a state-issued unit of account and medium of exchange, albeit with currency now held in digital rather than physical wallets,” he said.