Monetary Theory in the Digital Age

F10　—　An Adjacent Field of Study

We re-examine the question of what credit is, through the lens of two thousand seven hundred years of history. From the memory of an island that had finance in an age without coins, to the numbers on a screen.

Supervised by: Mitsuru Hayama　／　Reading time (main text): About 7 min (3,412 characters of text at 500 chars/min; exercises and readings not included)　／　Beyond the text: 6 exercises · 4 readings · 1 references

What this course teaches you to do

• Be able to cite the historical precedent of a 'cashless economy' (11th-century Japan) and describe its similarities and differences with the present.
• Be able to explain with concrete examples that the three functions of money (unit of account, medium of exchange, store of value) can be separated.
• Be able to position Bitcoin and the digital Yuan within the theoretical framework of F1 and F9.
• Be able to discuss digitalization by distinguishing between the 'disappearance of physical form' and the 'persistence of credit'.

Lessons (6)

1. The Island That Abandoned Coins — The First Cashless SocietyAn age without coins was not an age without finance. The disappearance of cash and the disappearance of credit are two different things.
2. Money Loses Its Form — Confirming Our Current PositionDeposits are already numbers on a computer. Digitalisation is not the future, but a present we are late to acknowledge.
3. The Inventor of Banknotes Moves Ahead Again — QR and the Digital YuanA thousand years since the jiaozi. The country that first changed the form of money is again the first to move to the next form, with the added issue of a state ledger.
4. The challenge of stateless currency — How to measure BitcoinThe price of a currency not belonging to a state continues to be quoted in dollars. The three functions separate.
5. Becoming Paper Overnight — An Experiment in DemonetizationOver eighty percent of the money in circulation became paper overnight. The less physical its form, the heavier the dependence on trust.
6. The Toolbox — What History Can Offer the Digital AgeThree guidelines and two theoretical lines. Instead of prophecies, take home the tools for judgment.

Readings (4)

• The country that threw away its coinage　Japan　the 11th–12th centuries　The Heian Capital
  Section 1. The first cashless era—a time without coins was not a time without finance
• The digital shore　United States　2009　Upon the internet
  Section 4. The challenge of stateless currency and the persistence of the dollar as a yardstick
• China　Overview: 2,700 years of the world　the present　Toward the First Nation to Abandon Paper Money
  Section 3. The inventor of the banknote is the first to abandon it—a thousand years since the Jiaozi
• India　Overview: 2,700 years of the world　AD 2016　Demonetisation
  Section 5. Eighty percent becomes paper overnight—an experiment in currency as credit itself

Assessment

6 exercises in this course (4 check, 1 compare, 1 written). Progress is recorded by self-assessment.

References

• BIS Innovation Hub work on central bank digital currency (CBDC) — Bank for International Settlements　A proof-of-concept project for a central bank digital currency. A primary record of design issues and national trials.

Only works and primary sources whose existence has been verified are listed.