Essays on the Future of Money

Charles E. Moulton, Jr.

Major Professor: Lawrence H White, PhD, Department of Economics

Committee Members: Peter J. Boettke, Bryan D. Caplan

Buchanan Hall (formerly Mason Hall), #D180
November 27, 2018, 11:00 AM to 02:00 PM

Abstract:

This dissertation is composed of three essays on the future of money.

The first chapter addresses bitcoin’s high price volatility relative to established currencies such as the U.S. dollar. Supply is fixed by a monetary rule; whereas demand fluctuates considerably. The intersection of bitcoin’s inelastic supply with its enormously erratic demand causes its exchange rate variability. I explore two ways to make the bitcoin supply elastic: 1) change the bitcoin protocol to create or destroy bitcoins based on a macroeconomic algorithm, 2) create and maintain bitcoin banks that issue fractional reserve deposits, banknotes, or electronic tokens redeemable for bitcoin.

The second chapter provides a blueprint for implementing bitcoin as a national currency in the context of either dollarizing or a currency board. Implementation issues unique to digital currencies are explored.

Candidate countries for transition are evaluated.

The third chapter analyzes the costs vs. benefits of financial privacy, against the backdrop of historical trends, current laws, and recent technology. Governments and corporations are tracking purchase history through credit cards and store loyalty cards. Guardians of bank secrecy have caved to government surveillance all over the world, ostensibly to fight crime and collect taxes. Aggregating this information, big data analytics can infer and disclose intimate personal details.