Saturday, December 19, 2015

The future of paper currency.

What's the future of money? Paperless and coinless, say leading finance experts

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Electronic currency could improve the economy, according to experts at a conference organised by the Business School last month.
The conference was organised by the Brevan Howard Centre for Financial Analysis at Imperial College Business School, together with the Centre for Economic Policy Research and the Swiss National Bank. Leading figures from the world of finance gathered in central London to discuss the challenges posed by negative interest rates, which have been introduced by some central banks following the global financial crisis.
We asked Franklin Allen, Executive Director of the Brevan Howard Centre, for his reflections on some of the key points raised during the event. 
Franklin Allen
What were you hoping to achieve with this conference?
We wanted to provide a forum to debate the issues surrounding negative interest rates and the impact on consumers and the economy. 
Some banks, such as the Swiss National Bank and Denmark’s central bank, have purposely set negative interest rates to prevent their exchange rate rising too much.  Other organisations such as the Swedish Riksbank, are trying to prevent deflation. 
However, as long as paper money exists there is a limit as to how negative rates can become.  As cash holds its value, consumers could respond by withdrawing and storing large amounts of cash (perhaps stuffing it under their mattresses) – making them feel better off than if they had left the money in the bank. If this was taken to the extreme then banks would stop being able to raise funds and would go out of business. 

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