IslamicFinance.de

by K. Kivanç Karaman, Sevket Pamuk, Seçil Yildirim-Karaman 24 February 2018

Some findings from a very longterm historic perspective on monetary systems:

selected quotes:
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The evidence collected suggests that, despite many switches between standards and systems, fiscal capacity and political regimes ultimately shaped patterns of monetary stability. Theories of monetary stability that rely on the mechanics of monetary systems perform poorly when such a long-run perspective is taken.
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Through the period we study, monetary systems were transformed more than once with the introductions of ledger, fiduciary, and fiat monies. These new monies were made possible by technological innovations in minting and printing and institutional innovations in banking and legal systems.

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A related second debate is whether states can institute mechanisms to insulate monetary policy from politics. Historically, this debate has revolved around preventing discretionary monetary policy by adopting the gold standard, and currently, by central bank independence. Leaving aside the question of whether preventing discretion is desirable in the first place, historical evidence suggests that unless political preconditions are satisfied, it is not feasible.
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A third debate concerns whether the state can be shut out of the monetary system altogether. Historically, the debate has centred on the feasibility of monies issued by private institutions, and currently, digital currencies. The long-run evidence suggests that the prospects for privately run monetary systems are dubious. Historically, it was private banks, goldsmiths, and moneychangers that innovated and developed new forms of money. States, however, sooner or later appropriated and monopolised these innovations, supported or banned them, and retained the control over the monetary system. Money was, and arguably will continue to be, too important to leave to private prerogatives.

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