The future of money and the money supply
In this article, the authors sought to determine what the future of money will be compared to the money supply currently in circulation, but also to the digital system that will be introduced in the economy. The preference for money, especially for fiat money, starting in 2000 and accentuated from 2...
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2023-06-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1657.pdf
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| _version_ | 1797794129969676288 |
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| author | Constantin ANGHELACHE Mădălina-Gabriela ANGHEL Ștefan Virgil IACOB Dana Luiza GRIGORESCU |
| author_facet | Constantin ANGHELACHE Mădălina-Gabriela ANGHEL Ștefan Virgil IACOB Dana Luiza GRIGORESCU |
| author_sort | Constantin ANGHELACHE |
| collection | DOAJ |
| description | In this article, the authors sought to determine what the future of money will be compared
to the money supply currently in circulation, but also to the digital system that will be introduced in
the economy. The preference for money, especially for fiat money, starting in 2000 and accentuated
from 2002, reaching by the end of 2021 a market capitalization of cryptocurrencies that is, from
known data, 1.4 trillion euros. Total market capitalization slowed in the latter peak of 2018, with
activity outstripping the euro position in the traditional foreign exchange market.
Volatility is an important driver of price. Given the absence of a sovereign guarantee, the bank is
willing to engage in more speculative activity. This implies that the introduction of backup
generation would reduce volatility. Furthermore, a regulatory system aimed at protecting the
currency and preventing speculative attacks would increase the reliability and efficiency of this
alternative money.
Given the cross-border nature and use of cryptocurrency, the regulatory architecture would require
international coordination, both in terms of compliance and oversight duties as advocated by the
International Monetary Fund.
In international specialized studies, a number of benefits that Block-chain technology brings are
considered. Most prominent is its decentralized nature which makes it less prone to corruption and
more sustainable. Another important benefit is that Block-chain transactions are less expensive and
faster than those normally transacted in fiat currencies (current currencies).
There are recent developments in Block-chain that indicate that it can play a very important role in
future payment systems. One of the last major benefits of blockchain is that payments are validated.
Bitcoin and other digital currencies may change the function of money, however. From a
macroeconomic point of view cryptocurrencies represent a risk for monetary and financial stability.
From a microeconomic perspective, they involve a risk for investors who could risk all their money,
namely, due to extremely fast exchanges from day to day, digital instruments devalue or become less
valuable. Stablecoins can be seen as an intermediate solution between privately issued
cryptocurrencies and central bank digital currency.
Given the volatility of cryptocurrencies, as well as the rest of CPTC, stablecoins have come to the
fore as a potential third title that aspires to bring stability to the volatile cryptocurrency market.
Money plays a fundamental role in the money supply. Before discussing the evolution of money and
the role of digitization of cash and cryptocurrencies, we must first go back to the basics and define
money in terms of its role and functions in an economy.
The very large literature offers a number of aspects but nevertheless there is common ground that
economic schools would agree on and that is the function of money in modern economies. In this
sense, it is understood that money can change its form and transactional nature without
fundamentally changing its function or role in the economy.
There is broad agreement that the functions of money can be divided into three layers, primary,
secondary and tertiary, where each layer reflects the descending degree of direct functionality, but
also the increasing degree of generality and transactionality of the role it plays. Primary functions
refer to them as a medium of exchange and measure of value. Secondary functions reflect their role
in the standard store of value for payments. The tertiary layer reflects its contingent functions such
as credit base, liquidity of national wealth, distribution of income and measure or maximization of
utility. The most common function attributed to money is that of money as a medium of exchange
because it facilitates the trading of goods and services between various people.
Based on the study of a wide bibliography, the authors concluded that money also serves as a
common measure of value. The values of various commodities are expressed in terms of money. This
is, as a number of economists call it, the accepted and standardized universe.
Keynesian economists have established that the function of money as a store of value is one of the
most important. In this sense, money becomes an asset and thus currency, or cash, becomes the most
liquid form of asset, i.e. money can be very cheap and immediately exchanged for goods and
services, and their value is established at least for at least a short period of time. The money can be
viewed and considered, by standardization, a deferred payment. This is the basis of credit trading.
Money is the basis of the distribution of production in consumption among the various factors, but
primarily the basis of the distribution of production for investment and consumption.
The role of money does not seem to be changed with the introduction of virtual money, it still
performs the same fundamental functions and remains closely linked to the market for goods and
services. The forces that determine the equilibrium level of money and employment continue if the
bringing together of these forces in a single or virtual market does not fundamentally alter their
functions.
Macroeconomic aggregates in the euro area play an essential role. Since 1970, these aggregates
have also referred to nominal money in the usual way, but also to the possibility of narrowing the
sphere of liquid money, simultaneously with the appearance of other forms of money.
According to the official statistics of the Central European Bank, monetary aggregates are M1, i.e.
the sum of currencies in circulation plus demand deposits; M2, which is equal to M1 plus term
deposits with a maturity of up to 2 years, plus repayable deposits of up to 3 years; and M3, which
is equal to M2 plus repurchase agreements, plus shares of money market funds, plus debt securities
with maturities of up to 2 years. While the share of M2 in M3 has decreased over time, in parallel
the share of M1 has increased since the beginning of 2000, aspects presented graphically for easier
understanding.
In the study carried out, the authors used a series of existing data at the World Bank, the
International Monetary Fund, a series of other sources as well as the materials of some specialists
in the field, which were mentioned in the Literature Review.
The growth rates of the structure of monetary aggregates represent a precise trend of the
perpetuation of cryptocurrencies, the emergence of digital currencies and the system of
macroeconomic monetary aggregates.
Internationally, it can be seen that in 2020-2021 the cryptocurrency market followed the same
course as the euro currency. At the same time, as the total market capitalization increases it has
slowed down somewhat, and after 2018 the course has resumed further.
In the study carried out we used existing data at the European Union, data published by specialists
and we used the logic, interpretation, association and interpretation of macroeconomic monetary
aggregates, to achieve our proposed objective regarding the future of money and the money supply. |
| first_indexed | 2024-03-13T02:58:20Z |
| format | Article |
| id | doaj.art-26f1acc0debb462a9bd4001304d466e4 |
| institution | Directory Open Access Journal |
| issn | 1841-8678 1844-0029 |
| language | English |
| last_indexed | 2024-03-13T02:58:20Z |
| publishDate | 2023-06-01 |
| publisher | General Association of Economists from Romania |
| record_format | Article |
| series | Theoretical and Applied Economics |
| spelling | doaj.art-26f1acc0debb462a9bd4001304d466e42023-06-27T21:08:24ZengGeneral Association of Economists from RomaniaTheoretical and Applied Economics1841-86781844-00292023-06-01XXX252218418678The future of money and the money supplyConstantin ANGHELACHE0Mădălina-Gabriela ANGHEL1Ștefan Virgil IACOB2Dana Luiza GRIGORESCU3 Bucharest University of Economic Studies, Romania "Artifex" University of Bucharest, Romania Petroleum-Gas University of Ploiesti, Romania Bucharest University of Economic Studies, Romania In this article, the authors sought to determine what the future of money will be compared to the money supply currently in circulation, but also to the digital system that will be introduced in the economy. The preference for money, especially for fiat money, starting in 2000 and accentuated from 2002, reaching by the end of 2021 a market capitalization of cryptocurrencies that is, from known data, 1.4 trillion euros. Total market capitalization slowed in the latter peak of 2018, with activity outstripping the euro position in the traditional foreign exchange market. Volatility is an important driver of price. Given the absence of a sovereign guarantee, the bank is willing to engage in more speculative activity. This implies that the introduction of backup generation would reduce volatility. Furthermore, a regulatory system aimed at protecting the currency and preventing speculative attacks would increase the reliability and efficiency of this alternative money. Given the cross-border nature and use of cryptocurrency, the regulatory architecture would require international coordination, both in terms of compliance and oversight duties as advocated by the International Monetary Fund. In international specialized studies, a number of benefits that Block-chain technology brings are considered. Most prominent is its decentralized nature which makes it less prone to corruption and more sustainable. Another important benefit is that Block-chain transactions are less expensive and faster than those normally transacted in fiat currencies (current currencies). There are recent developments in Block-chain that indicate that it can play a very important role in future payment systems. One of the last major benefits of blockchain is that payments are validated. Bitcoin and other digital currencies may change the function of money, however. From a macroeconomic point of view cryptocurrencies represent a risk for monetary and financial stability. From a microeconomic perspective, they involve a risk for investors who could risk all their money, namely, due to extremely fast exchanges from day to day, digital instruments devalue or become less valuable. Stablecoins can be seen as an intermediate solution between privately issued cryptocurrencies and central bank digital currency. Given the volatility of cryptocurrencies, as well as the rest of CPTC, stablecoins have come to the fore as a potential third title that aspires to bring stability to the volatile cryptocurrency market. Money plays a fundamental role in the money supply. Before discussing the evolution of money and the role of digitization of cash and cryptocurrencies, we must first go back to the basics and define money in terms of its role and functions in an economy. The very large literature offers a number of aspects but nevertheless there is common ground that economic schools would agree on and that is the function of money in modern economies. In this sense, it is understood that money can change its form and transactional nature without fundamentally changing its function or role in the economy. There is broad agreement that the functions of money can be divided into three layers, primary, secondary and tertiary, where each layer reflects the descending degree of direct functionality, but also the increasing degree of generality and transactionality of the role it plays. Primary functions refer to them as a medium of exchange and measure of value. Secondary functions reflect their role in the standard store of value for payments. The tertiary layer reflects its contingent functions such as credit base, liquidity of national wealth, distribution of income and measure or maximization of utility. The most common function attributed to money is that of money as a medium of exchange because it facilitates the trading of goods and services between various people. Based on the study of a wide bibliography, the authors concluded that money also serves as a common measure of value. The values of various commodities are expressed in terms of money. This is, as a number of economists call it, the accepted and standardized universe. Keynesian economists have established that the function of money as a store of value is one of the most important. In this sense, money becomes an asset and thus currency, or cash, becomes the most liquid form of asset, i.e. money can be very cheap and immediately exchanged for goods and services, and their value is established at least for at least a short period of time. The money can be viewed and considered, by standardization, a deferred payment. This is the basis of credit trading. Money is the basis of the distribution of production in consumption among the various factors, but primarily the basis of the distribution of production for investment and consumption. The role of money does not seem to be changed with the introduction of virtual money, it still performs the same fundamental functions and remains closely linked to the market for goods and services. The forces that determine the equilibrium level of money and employment continue if the bringing together of these forces in a single or virtual market does not fundamentally alter their functions. Macroeconomic aggregates in the euro area play an essential role. Since 1970, these aggregates have also referred to nominal money in the usual way, but also to the possibility of narrowing the sphere of liquid money, simultaneously with the appearance of other forms of money. According to the official statistics of the Central European Bank, monetary aggregates are M1, i.e. the sum of currencies in circulation plus demand deposits; M2, which is equal to M1 plus term deposits with a maturity of up to 2 years, plus repayable deposits of up to 3 years; and M3, which is equal to M2 plus repurchase agreements, plus shares of money market funds, plus debt securities with maturities of up to 2 years. While the share of M2 in M3 has decreased over time, in parallel the share of M1 has increased since the beginning of 2000, aspects presented graphically for easier understanding. In the study carried out, the authors used a series of existing data at the World Bank, the International Monetary Fund, a series of other sources as well as the materials of some specialists in the field, which were mentioned in the Literature Review. The growth rates of the structure of monetary aggregates represent a precise trend of the perpetuation of cryptocurrencies, the emergence of digital currencies and the system of macroeconomic monetary aggregates. Internationally, it can be seen that in 2020-2021 the cryptocurrency market followed the same course as the euro currency. At the same time, as the total market capitalization increases it has slowed down somewhat, and after 2018 the course has resumed further. In the study carried out we used existing data at the European Union, data published by specialists and we used the logic, interpretation, association and interpretation of macroeconomic monetary aggregates, to achieve our proposed objective regarding the future of money and the money supply. http://store.ectap.ro/articole/1657.pdf money supplydigital systemcryptocurrencieseconomyfinancial market |
| spellingShingle | Constantin ANGHELACHE Mădălina-Gabriela ANGHEL Ștefan Virgil IACOB Dana Luiza GRIGORESCU The future of money and the money supply Theoretical and Applied Economics money supply digital system cryptocurrencies economy financial market |
| title | The future of money and the money supply |
| title_full | The future of money and the money supply |
| title_fullStr | The future of money and the money supply |
| title_full_unstemmed | The future of money and the money supply |
| title_short | The future of money and the money supply |
| title_sort | future of money and the money supply |
| topic | money supply digital system cryptocurrencies economy financial market |
| url |
http://store.ectap.ro/articole/1657.pdf
|
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