Typography

I last wrote about Fedwire data two years ago. Since then, Fedwire has entered into a (nominal) recession. Is this something we need to worry about? We should be interested in this data because  Fedwire is the U.S.'s most important financial utility. Operated by the Federal Reserve, Fedwire processes payments between the nation's commercial banks using central banks money, or reserves, as the settlement medium. It accounts for a significant chunk of U.S. spending, or aggregate demand. Below you'll see a chart of quarterly Fedwire transaction values using data back to 1992. It shows the total dollar volume sent over Fedwire each quarter: You can see that the flow of spending conducted over Fedwire has been declining since the third quarter of 2014; a six quarter decline. How rare is it to see this degree of stagnation? To check, I've plotted Fedwire yearly data going back to 1987: Assuming 2016 continues to trend lower (as it has in the first five months), then we are ...

Early map of Fedwire. Source: FRBNY The pace of Fedcoin sightings has been accelerating this year. If you're new to this blog, Fedcoin is a catch-all term I like to use for a central bank-issued cryptocurrency. Earlier this month the Federal Reserve itself hosted a conference called Finance in Flux: The Technological Transformation of the Financial Sector . The keynote presentation was given by Adam Ludwin, CEO of blockchain firm Chain Inc , who had some interesting things to say about a central bank digital currency. A criticism I have of blockchain advocacy in general and Fedcoin in particular is that evangelists tend to understand little of the history or qualities of the institutions that they are trying to overthrow. The result is that they invariably end up mis-estimating the benefits of replacing existing systems with new ones. For instance, Ludwin calls his presentation Why Central Banks Will Issue Digital Currency,  a title that must have got Janet Yellen scratching her...

A Zimbabwean washes U.S. dollars, from NPR Planet Money Here's a surprising development. Zimbabwe, a dollarized nation, is on the verge of issuing its own $2, $5, $10, and $20 banknotes. Here is is the central bank's press release. Let's back up a bit. Zimbabwe suffered one of the worst hyperinflations in history during the 2000s thanks to awful policies by the government. Citizens were so fed up that they spontaneously dropped the Zimbabwe dollar in late 2009, the U.S. dollar being recruited as media of exchange and unit of account and the South African rand serving a backup role as small change. Since then the rand has been steadily moving to the background in Zimbabwe monetary affairs: Currency utilization levels in Zimbabwe [ source ] Another change is that last year Zimbabwe re-entered the world of monetary production by minting its own 1, 5, 10, 25, and 50 cent coins, otherwise known as bond coins. At the time I was in favor of bond coins because Zimbabwe was follo...

Say the San Francisco Fed decided to secede from the Federal Reserve System or the Bank of Greece started to print its own euro notes without the consent of the Eurosystem. What happens to a nation's currency when the central bank is split into parts? There is a possibility we might be seeing such a situation developing in Libya with the emergence of two different Libyan dinars. Libya's political scene is ridiculously complicated so I'll paint the picture in broad brush strokes. The Central Bank of Libya has several offices, the two relevant ones being the western one in Tripoli and the eastern one in Bayda. Prior to the Arab spring, each area was under the control of the Gaddafi government but both have since come under the control of competing regimes. Tripoli is run by the U.S.-backed Government of National Accord (GNA) while Bayda is under the control of the Tobruk-based House of Representatives. As I understand it, over the last few years of strife the two offices have...