Patrick Harper, you stepped into it

Philadelphia Federal Reserve Board President Patrick Harker said in a speech April 3. This will spark a debate, and I am only the second to chime in. He missed the boat on he sandbox.  It is neutral, it is a congestion management architecture we are slipping under the cash technology.  Whatever merits Patrick expouses about central banking, he can spout them right along as we change the technology, the sandbox is an unbiased closure of cash. But I pick on him anyway.

“Fintech overall is actually just natural market evolution,” he said, “and the assumptions about disruption — or indeed, creative destruction — are, with apologies to Schumpeter, probably out of proportion.”

Disruptions?

• Creation federal reserve 1913
• FDR going to variable gold pricing
• Nixon from gold to market pricing

Al of them at least a local disruption.  In fact, echnology and money co-develop, disrupt each other. They are at maximum disruption when government needs to default.

“The underpinning of currency, like the financial system itself, is trust,” Harker said in his speech, one in a series at the school on technology, business and government. “A fiat currency like that in the United States, which is issued by a central bank in a secure and stable economy, works because we trust it. A dollar is a dollar. We all agree that it is and there’s not much that can undermine that faith. We experience inflation, sure, but not often in dramatic or abrupt ways.

 There is certainly the trust that the government tax dollar removed the government tax agent.  That function remains.  But paying taxes is only about 1/4 of what we do, and government's monopoly is limited to taxes, not all commerce. Taxes is enough to garner the largest share of the currency markets, grant him that.

“Research by my staff indicates that privately issued currencies can lead to unstable money supply and depreciation of the currency,” he said. “Why? Because there’s no fundamental guarantee of its value in the same way that there is with currency issued by the central bank of a credible and stable government.”

Say what?  The value of government guarantees are as volatile as any digital currency. Proof is simple, digital currencies will always count government actions, including central banking, with greater or equal precision as any other technology.