Sandboxer at the BIS

(Again, in theory, the volatility of the global money market should be decreasing, not increasing, the further out we are from the last financial crisis.) One hypothesis for this counterintuitive trend, Filardo said, is that "central bank intervention in the money markets is contributing to instability." He then presented data to support his more detailed conclusion: that the Federal Reserve’s new floor system has weakened incentives for financial institutions to lend to one another. Owing to the reduction in interbank lending, private financial institutions have less of a reason to monitor one another. In the past, if a bank could not maintain a stable network of market-based lenders, this was seen as a sign of financial distress. Now, however, financial institutions depend on the Fed to pump large quantities of reserves into the market when money becomes scarce, which reduces their need to rely on one another for overnight lending. Filardo pointed to two ways that the Fed could work to re-incentivize market dynamism: first, abandon its current floor system and return to its precrisis corridor system; second, adopt a new "sequestered reserve rule" (which Filardo had developed), which requires financial institutions to "negotiate… and preannounce the amount of reserves [they intend] to hold as high-quality liquid assets."

From Andrew Filardo | Bank for International Settlements

Bold face is mine, they are this sandbox conditions.  Near the bottom, announced reserves. Think of this as setting the risk level for the pit, it is the fund available of there is a scofflaw surge.

Up top, the part of institutions lending to each other.  That is the whole point, keep liquidity priced in a fair pit between a risk equalized representative sample of the monetary zone, the optimum condition. The Fed (and government) are intent on absorbing price risk, bad idea.

Second, we should "mothball at least 100 central banks" and establish currency boards in their stead. Currency boards, Hanke explained, have an "exchange rate policy, but no monetary policy." They also have a far better history of promoting financial stability than central banks have, and they are far more consistent in terms of producing lower inflation, lower debt, and higher rates of economic growth. Finally, Hanke insisted that central banks should "greenlight private currency board systems" like libra and other competitors. Central banks, of course, tend to regard independent currency boards as their own competitors–and therefore as threats to their power. Yet competition is a good thing, Hanke reminded audiences; and central banks’ opposition to independent currencies is perhaps the greatest argument in their favor.

Steven H. Hanke, Professor of Applied Economics at Johns Hopkins University

OK, the leftwards like a central planning central bank. hat to the leftwards propose for Pakistan where a vast section of the population is unbanked? Why would someone in the banking business want pat of the population unbanked? Central banking makes banks too expensive for poor people and private systems like Libra and tethers can step in at lower cost.