On Digital Money

Abstract

The flat output and employment trajectories worldwide and the animated discussion surrounding virtual currencies, private and public, are independent topics. We attempt to connect the two elements. The circuit model of the monetary process is used to make the case for a central bank initiating activity by creating an account in the form of an advance of a wage bill to invest in production. Processes thereafter must be recorded in separate accounts as the circuitistes insist. We make the case for a narrow bank account of the central bank managing the money needs of capitalists and workers, of the investment bank account of the central bank monitoring the equity objectives of executives and rentiers, while capitalists and workers are free to use financial markets to optimize their risk-return payoffs over time. Specifically, we modify the four scenarios of S.C. Gouevia et al. (2017) to develop our case.