DOCSLIB.ORG

How Goldsmiths Created Money Page 1 of 2

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text

Load more

Money: Banking, Spending, Saving, and Investing The Creation of Money How Goldsmiths Created Money Page 1 of 2 If you want to understand money, you have got to start with its history, and that means gold. Have you ever wondered why gold is so valuable? I mean, it is a really weak metal that does not have a lot of really practical uses. Maybe it is because it reminded people of the sun, which was worshipped in ancient times, that everyone decided they wanted it. Once everyone wants it, it is capable as serving as a medium of exchange. That is, gold can be used as money, and it is an ideal commodity to serve as a medium of exchange because it’s portable, it’s durable, it’s divisible, and it’s standardizable. Everybody recognizes what they want, it can be broken into little pieces, carried around, it doesn’t rot, and it is a great thing to serve as money. So, before long, gold is circulating in the form of coins. When gold circulates as coins, it is called commodity money, that is, money that has intrinsic value made out of something people want. Now, once gold coins begin to circulate as the medium of exchange, we have got another problem. That problem is security. Imagine that you are in the ancient world, lugging around bags and bags of gold. You are going to be pretty vulnerable to bandits. So what you want to do is make sure that there is a safe place to store your gold because you can store all of your wealth in the form of this valuable commodity, but you do not want it all lying around somewhere that it is easy for somebody else to pick off. So, whoever it is in town that is the biggest and the strongest and has the most secure fort and the meanest dogs is well situated to serve the role of the protector of gold. Maybe he becomes the goldsmith, and the goldsmith begins by offering safekeeping services. So safekeeping services work this way – the goldsmith has a vault, and people come and they put their gold in the vaults, and the goldsmith gives people receipts, and the receipts tell you how much you are able to withdrawal from the goldsmith later. So if I put ten pieces of gold into the vault, the goldsmith is going to give me a receipt for ten pieces of gold. Now, the goldsmith can charge me a fee for this service because he is doing me a favor, but the goldsmith can also make money by taking the gold that is in the vault and lending it to other people. Think about how this works. So I want to borrow money to start a taco stand, I go to the goldsmith and I say, “I need some gold so that I can pay the people that are building my factory.” He says, “Okay, I will lend you some gold right now, but you have got to bring it back to me later with interest.” So since more gold goes back into the vault than came out, the goldsmith can take part of it as his profit. So the goldsmith can make money by lending gold to others. Now, a problem can arise here, of course, if the goldsmith starts lending out money, and then everybody comes back and there is no gold there. That is called a run on the bank, but one thing that makes that relatively unlikely is called synchronization. That is, think about the way people behave as far as deposits and withdrawals are concerned. People deposit and withdraw from the bank in a kind of predictable fashion. If I go to the goldsmith on a particular day and I want to withdraw some of my gold, chances are that somebody came by earlier that day or maybe the previous day and deposited gold. So the goldsmith, rather than digging in and finding the coins that I actually put in, can give me the gold that the guy left there the day before. So as long as deposits are well synchronized with withdrawals, the goldsmith can take the bulk of this gold and lend it out keeping a relatively small amount on hand if people want to come in and withdraw, then, in the meantime, rely on synchronization. That is, gold flows in and out in some predictable way. Let us think more about what the goldsmith could do, because rather than actually lend out the gold coins, the goldsmith has another strategy. That strategy arises because this receipt that I got for gold may actually begin to circulate as money itself. Think about this. If everybody knows that the goldsmith is reliable and if these receipts cannot be counterfeited easily, that is, that they would have to have the goldsmith’s thumb print on them or something like that, then whenever I want to buy something, I do not actually have to go get my gold out of the vault at all. I can just give you the receipt. Now, you are entitled to go make the withdrawal yourself whenever you want. So, the goldsmith’s receipts begin to circulate as money. They become a medium of exchange. The gold here that is in the vault is the commodity, but the receipt is representative. Because it is representative, people will accept it. That means that the goldsmith does not have to lend out gold at all. What he can do is if you want to borrow money from the goldsmith, the goldsmith can just give you a receipt directly so that you can go out and spend it like money. You give the goldsmith an IOU, which shows up in his vault, and he gives you a receipt, which you go out and spend. Now, anybody who wants to can take this receipt, bring it into the goldsmith, and cash it in for gold. So, the goldsmith now has to be careful how many of these receipts that he issues, because if he should get overstretched, that is, if the goldsmith starts issuing lots more receipts than he has in gold, he is now vulnerable to a run on his bank. That is, “I Money: Banking, Spending, Saving, and Investing The Creation of Money How Goldsmiths Created Money Page 2 of 2 hear the goldsmith is issuing a lot of receipts. We are seeing a lot of receipts out there. I do not think that he has the gold.” Then everybody is going to bring their receipts at once come to the goldsmith, take all of his gold, and break the bank. That is the end of the goldsmith. So you see the problem. This problem helps us understand the basic concept in the financial system. That is the concept of fractional reserve banking. Money circulates whether in the form of receipts for gold or whether in the modern world in the form of checking accounts and currency, but if there are not reserves to back those, and, in particular, in the case of checking accounts, if the bank is creating a lot of checking accounts because it wants to be issuing loans so that it can earn interest; if the bank is creating checking accounts and it does not have dollar bills to back it, then they are subject to the same kind of problems that the over-eager goldsmith is once he has issued all of these receipts. Now, this raises an interesting question. That is, what is a dollar bill backed by? I have dollar bills right here in my wallet. What is it that determines their value? Can I take this and cash it in for gold? Absolutely not. The Federal Reserve that issued this currency will no longer trade it for gold. In fact, private households haven’t been able to get gold from the Fed since the great depression. What is it that determines the value of a dollar? The value of the dollar, because it is not based on anything that is actually backing it, depends on other people’s willingness to accept it, and ultimately, that value is grounded in two things. First of all, the government requires that you hold it to pay taxes, and second, it is legal tender. That is, if I pay a debt with it, then you cannot sue me in court for nonpayment. It all goes back, the basic idea of the way the banking system works, and all goes back to the goldsmith. The goldsmith starts with safekeeping, then begins making loans, then finds himself the custodian of the community’s money supply because his receipts begin to circulate as money. That puts him in the position of wanting to issue enough of the receipts that he makes full profit off of his lending activities, but not so much that he makes people afraid that he cannot actually back his receipts with gold. This is the basic idea behind the modern banking system, a fractional reserve system where checking accounts have to be backed with reserves. We are going to see shortly how that fractional reserve banking system works in the modern financial system. .
Recommended publications
  • Deterioration and Conservation of Unstable Glass Beads on Native

    Deterioration and Conservation of Unstable Glass Beads on Native

    Issue 63 Autumn 2013 Deterioration and Conservation of Unstable Glass Beads on Native American Objects Robin Ohern and Kelly McHugh lass disease is an important issue for (MAI), established in 1961 by financier George museums with Native American col- Gustav Heye. Heye’s personal collecting began in G lections, and at the National Museum 1903 and continued over a fifty-four year period, of the American Indian (NMAI) it is one of the resulting in one of the largest Native American most pervasive preservation problems. Of 108,338 collections in the world. The Smithsonian Insti- non-archaeological object records in NMAI’s col- tution took over the extensive MAI holdings in lection database, 9,687 (9%) contain glass beads. 1989, establishing the National Museum of the Of these, 200 object records (22%) mention the American Indian. While the collection originally presence of glass disease on the objects. Determin- served Heye’s mission, “The preservation of every- ing how quickly the unstable glass is deteriorating thing pertaining to our American tribes”, NMAI will help with long term collection preservation places its emphasis on partnerships with Native (Figure 1). Additionally, evaluating the effective- peoples and on their contemporary lives. ness of different cleaning techniques over several When the museum joined the Smithsonian years may help to develop better protocols for Institution, the decision was made to construct treating glass beads. This ongoing research project a new building on the National Mall and move will focus on continuing research on glass disease the collection from New York to a storage facil- on ethnographic beadwork in the collection of the ity near Washington, D.C.
  • New Monetarist Economics: Methods∗

    New Monetarist Economics: Methods∗

    Federal Reserve Bank of Minneapolis Research Department Staff Report 442 April 2010 New Monetarist Economics: Methods∗ Stephen Williamson Washington University in St. Louis and Federal Reserve Banks of Richmond and St. Louis Randall Wright University of Wisconsin — Madison and Federal Reserve Banks of Minneapolis and Philadelphia ABSTRACT This essay articulates the principles and practices of New Monetarism, our label for a recent body of work on money, banking, payments, and asset markets. We first discuss methodological issues distinguishing our approach from others: New Monetarism has something in common with Old Monetarism, but there are also important differences; it has little in common with Keynesianism. We describe the principles of these schools and contrast them with our approach. To show how it works, in practice, we build a benchmark New Monetarist model, and use it to study several issues, including the cost of inflation, liquidity and asset trading. We also develop a new model of banking. ∗We thank many friends and colleagues for useful discussions and comments, including Neil Wallace, Fernando Alvarez, Robert Lucas, Guillaume Rocheteau, and Lucy Liu. We thank the NSF for financial support. Wright also thanks for support the Ray Zemon Chair in Liquid Assets at the Wisconsin Business School. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Banks of Richmond, St. Louis, Philadelphia, and Minneapolis, or the Federal Reserve System. 1Introduction The purpose of this essay is to articulate the principles and practices of a school of thought we call New Monetarist Economics. It is a companion piece to Williamson and Wright (2010), which provides more of a survey of the models used in this literature, and focuses on technical issues to the neglect of methodology or history of thought.
  • Federal Reserve Bank of Chicago

    Federal Reserve Bank of Chicago

    Estimating the Volume of Counterfeit U.S. Currency in Circulation Worldwide: Data and Extrapolation Ruth Judson and Richard Porter Abstract The incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the U.S. Treasury and the U.S. Secret Service. This paper assembles data from Federal Reserve and U.S. Secret Service sources and presents a range of estimates for the number of counterfeits in circulation. In addition, the paper presents figures on counterfeit passing activity by denomination, location, and method of production. The paper has two main conclusions: first, the stock of counterfeits in the world as a whole is likely on the order of 1 or fewer per 10,000 genuine notes in both piece and value terms; second, losses to the U.S. public from the most commonly used note, the $20, are relatively small, and are miniscule when counterfeit notes of reasonable quality are considered. Introduction In a series of earlier papers and reports, we estimated that the majority of U.S. currency is in circulation outside the United States and that that share abroad has been generally increasing over the past few decades.1 Numerous news reports in the mid-1990s suggested that vast quantities of 1 Judson and Porter (2001), Porter (1993), Porter and Judson (1996), U.S. Treasury (2000, 2003, 2006), Porter and Weinbach (1999), Judson and Porter (2004). Portions of the material here, which were written by the authors, appear in U.S.
  • Three Revolutions in Macroeconomics: Their Nature and Influence

    Three Revolutions in Macroeconomics: Their Nature and Influence

    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Laidler, David Working Paper Three revolutions in macroeconomics: Their nature and influence EPRI Working Paper, No. 2013-4 Provided in Cooperation with: Economic Policy Research Institute (EPRI), Department of Economics, University of Western Ontario Suggested Citation: Laidler, David (2013) : Three revolutions in macroeconomics: Their nature and influence, EPRI Working Paper, No. 2013-4, The University of Western Ontario, Economic Policy Research Institute (EPRI), London (Ontario) This Version is available at: http://hdl.handle.net/10419/123484 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen
  • Money As 'Universal Equivalent' and Its Origins in Commodity Exchange

    Money As 'Universal Equivalent' and Its Origins in Commodity Exchange

    MONEY AS ‘UNIVERSAL EQUIVALENT’ AND ITS ORIGIN IN COMMODITY EXCHANGE COSTAS LAPAVITSAS DEPARTMENT OF ECONOMICS SCHOOL OF ORIENTAL AND AFRICAN STUDIES UNIVERSITY OF LONDON [email protected] MAY 2003 1 1.Introduction The debate between Zelizer (2000) and Fine and Lapavitsas (2000) in the pages of Economy and Society refers to the conceptualisation of money. Zelizer rejects the theorising of money by neoclassical economics (and some sociology), and claims that the concept of ‘money in general’ is invalid. Fine and Lapavitsas also criticise the neoclassical treatment of money but argue, from a Marxist perspective, that ‘money in general’ remains essential for social science. Intervening, Ingham (2001) finds both sides confused and in need of ‘untangling’. It is worth stressing that, despite appearing to be equally critical of both sides, Ingham (2001: 305) ‘strongly agrees’ with Fine and Lapavitsas on the main issue in contention, and defends the importance of a theory of ‘money in general’. However, he sharply criticises Fine and Lapavitsas for drawing on Marx’s work, which he considers incapable of supporting a theory of ‘money in general’. Complicating things further, Ingham (2001: 305) also declares himself ‘at odds with Fine and Lapavitsas’s interpretation of Marx’s conception of money’. For Ingham, in short, Fine and Lapavitsas are right to stress the importance of ‘money in general’ but wrong to rely on Marx, whom they misinterpret to boot. Responding to these charges is awkward since, on the one hand, Ingham concurs with the main thrust of Fine and Lapavitsas and, on the other, there is little to be gained from contesting what Marx ‘really said’ on the issue of money.
  • Helicopter Ben, Monetarism, the New Keynesian Credit View and Loanable Funds

    Helicopter Ben, Monetarism, the New Keynesian Credit View and Loanable Funds

    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Fiebinger, Brett; Lavoie, Marc Working Paper Helicopter Ben, monetarism, the New Keynesian credit view and loanable funds FMM Working Paper, No. 20 Provided in Cooperation with: Macroeconomic Policy Institute (IMK) at the Hans Boeckler Foundation Suggested Citation: Fiebinger, Brett; Lavoie, Marc (2018) : Helicopter Ben, monetarism, the New Keynesian credit view and loanable funds, FMM Working Paper, No. 20, Hans-Böckler- Stiftung, Macroeconomic Policy Institute (IMK), Forum for Macroeconomics and Macroeconomic Policies (FFM), Düsseldorf This Version is available at: http://hdl.handle.net/10419/181478 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available
  • The Neo-Chartalist Approach to Money by L. Randall Wray

    The Neo-Chartalist Approach to Money by L. Randall Wray

    The Neo-Chartalist Approach to Money by L. Randall Wray* Working Paper No. 10 July 2000 ∗ Senior Research Associate, Center for Full Employment and Price Stability, University of Missouri-Kansas City In his interesting and important chapter, Charles Goodhart makes three main contributions. First, he argues that there are two competing approaches to the study of money, with one dominating most research and policy formation to the virtual exclusion of the other. Second, he examines and rejects Mundel’s Optimal Currency Area approach, which is based on the dominant approach to money, leading to a criticism of the theoretical basis for European Monetary Union. Finally, he introduces some historical literature on the origins of coins and money that is not familiar to most economists, and that seems to conflict with the dominant approach to money. This chapter will focus primarily on what Goodhart identifies as the neglected “cartalist”, or “chartalist” approach to money, with a brief analysis of the historical evidence and only a passing reference to the critique of Mundel’s theory. I. The Orthodox, M-form, Approach Goodhart calls the orthodox approach the M-form, for Metalist. This is so dominant that it scarcely needs any exposition, however it will be useful to briefly outline its main features in order to contrast them with the “Chartalist” or C-form theory later. I still think the Metalist approach is best summarized in a quote from Samuelson I like to use. Inconvenient as barter obviously is, it represents a great step forward from a state of self-sufficiency in which every man had to be a jack-of-all-trades and master of none….If we were to construct history along hypothetical, logical lines, we should naturally follow the age of barter by the age of commodity money.
  • Nominality of Money: Theory of Credit Money and Chartalism Atsushi Naito

    Nominality of Money: Theory of Credit Money and Chartalism Atsushi Naito

    Review of Keynesian Studies Vol.2 Atsushi Naito Nominality of Money: Theory of Credit Money and Chartalism Atsushi Naito Abstract This paper focuses on the unit of account function of money that is emphasized by Keynes in his book A Treatise on Money (1930) and recently in post-Keynesian endogenous money theory and modern Chartalism, or in other words Modern Monetary Theory. These theories consider the nominality of money as an important characteristic because the unit of account and the corresponding money as a substance could be anything, and this aspect highlights the nominal nature of money; however, although these theories are closely associated, they are different. The three objectives of this paper are to investigate the nominality of money common to both the theories, examine the relationship and differences between the two theories with a focus on Chartalism, and elucidate the significance and policy implications of Chartalism. Keywords: Chartalism; Credit Money; Nominality of Money; Keynes JEL Classification Number: B22; B52; E42; E52; E62 122 Review of Keynesian Studies Vol.2 Atsushi Naito I. Introduction Recent years have seen the development of Modern Monetary Theory or Chartalism and it now holds a certain prestige in the field. This theory primarily deals with state money or fiat money; however, in Post Keynesian economics, the endogenous money theory and theory of monetary circuit place the stress on bank money or credit money. Although Chartalism and the theory of credit money are clearly opposed to each other, there exists another axis of conflict in the field of monetary theory. According to the textbooks, this axis concerns the functions of money, such as means of exchange, means of account, and store of value.
  • Central Bank Digital Currency in Historical Perspective: Another Crossroad in Monetary History1

    Central Bank Digital Currency in Historical Perspective: Another Crossroad in Monetary History1

    Central Bank Digital Currency in Historical Perspective: Another Crossroad in Monetary History1 Michael D. Bordo, Rutgers University, NBER and Hoover Institution, Stanford University Economics Working Paper 21113 HOOVER INSTITUTION 434 GALVEZ MALL STANFORD UNIVERSITY STANFORD, CA 94305-6010 July 14, 2021 Digitalization of Money is a crossroad in monetary history. Advances in technology has led to the development of new forms of money: virtual (crypto) currencies like bitcoin; stable coins like libra/diem; and central bank digital currencies (CBDC) like the Bahamian sand dollar. These innovations in money and finance have resonance to earlier shifts in monetary history: 1) The shift in the eighteenth and nineteenth century from commodity money (gold and silver coins) to convertible fiduciary money and inconvertible fiat money; 2) the shift in the nineteenth and twentieth centuries from central bank notes to a central bank monopoly;3) Then evolution since the seventeenth century of central banks and the tools of monetary policy. This paper makes the case for CBDC through the lens of monetary history. The bottom line is that the history of transformations in monetary systems suggests that technical change in money is inevitably driven by the financial incentives of a market economy. Government has always had a key role in the provision of outside money, which is a public good. Government has also regulated inside money provided by the private sector. This held for fiduciary money and will likely hold for digital money. CBDC could make monetary policy more efficient, and it could transform the international monetary and payments systems. Keywords: digitalization, financial innovation, evolution, central banks, monetary policy, international payments JEL Codes: E5, F4, N2.
  • The Natural Law of Money

    The Natural Law of Money

    THE NATURAL LAW OF MONEY THE SUCCESSIVESTEPS IN THEGROWTH OF MONEYTRACED FROM THE DAYS OF BARTER TO THE INTRODUCTION OF THEMODERN CLEARING-HOUSE, AND MONETARY PRINCIPLESEXAMINED IN THEIRRELATION TOPAST AND PRESENT LEGISLATION BY WILLIAM BROUGH ,*\ Idividuality is left out of their scheme of government. The State is all in aIl."BURKE. G. B. PUTNAM'S SONS NEW YORR LONDON 27 WEST TWENTY-THIRD STREET a4 BEDFORD STREET, STRAND %be snickerbotkrr @reas COPYRIGHT,1894 BY WILLIAM BROUGH Entered at Stationers’ Hall, London BY G. P. PUTNAM’SSONS %be Vznickerbocker preee, mew ‘Rocbelle, rP. 10. CONTENTS. CHAPTER I. PAGB THE BEGINNINGOF MONEY . 1-19 What is meant by the " natural law of money ""The need of a medium of exchange-Barter the first method of ex- changeprofit a stimulus to trade-Money as a measure of values-Various forms of money-Qualities requisite to an efficient money-On the coinage of metals-" King's money " -Monetary struggles between kings and their subjects. CHAPTER 11. BI-METALLISMAND MONO-METALLISM. 2-57 Silver and gold as an equivalent tender-The Gresham law "Mutilation of the coinage in England-Why cheap money expels money of higher value from the circulation-Influ- ence of Jew money-changers in raising the monetary stand- ard-Clipping and sweating-Severe punishment of these offences-Value of the guinea-Mono-metallism succeeds bi-metallism-The mandatory theory of money-The law of natural displacement-A government's legitimate service in ~ regard to money-Monetary principles applied to bi-metal- lism-Effects of the demonetization of silver in 1873"The Latin Union-Effect of legislative interference with money -The per-capita plan-The Bland Act-The Sherman Act "Present difference in value between a gold and a silver dollar-Effects of a change to the silver standard-No levelling of fortunes, but an increased disparity.
  • The Emergence of Fiat Money: a Reconsideration

    The Emergence of Fiat Money: a Reconsideration

    THE EMERGENCE OF FIAT MONEY: ARECONSIDERATION Kevin Dowd One of the fundamental questions in monetary economics is why fiat money has value: Why do rational agents trade real resources for intrinsically worthless pieces of paper? Monetary economists have long understood that part of the explanation relates to the superiority of a monetary equilibrium over a barter one. However, it is one thing to explain why fiat money is better than barter, and quite another to explain how fiat money actually emerges. Recognizing this point, a number of recent studies (e.g., Kiyotaki and Wright 1991, 1992, 1993; Ritter 1995; and Williamson and Wright 1995)1 have sought to explain the emergence of fiat money by means of a hypothetical direct jump from barter to a fiat money equilibrium.2 This paper suggests that these attempts are fundamentally miscon- ceived. They suffer from three main problems. The first is the “start problem”3—that is, the difficulty of ensuring an initial demand for fiat money balances. If fiat money is ever to emerge from barter, someone must be the first to exchange real goods for pieces of paper money that, by definition, do not provide any direct consumption Cato Journal, Vol. 20, No. 3 (Winter 2001). © Cato Institute. All rights reserved. Kevin Dowd is Professor of Financial Risk Management at Nottingham University Business School. He thanks Charles Goodhart and George Selgin for very helpful correspondence on the issues discussed in this paper. The usual caveat applies. 1Some of the issues raised in this literature are also discussed by Goodhart (1997) and Selgin (1993, 1994, 1997).
  • Central Bank Digital Currencies: Foundational Principles and Core Features

    Central Bank Digital Currencies: Foundational Principles and Core Features

    Central bank digital currencies: foundational principles and core features Bank of Canada European Central Bank Bank of Japan Report no 1 Sveriges Riksbank in a series of collaborations Swiss National Bank from a group of central banks Bank of England Board of Governors Federal Reserve System Bank for International Settlements This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2020. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN: 978-92-9259-427-5 (online) Contents Executive summary ........................................................................................................................................................................... 1 1. Introduction ...................................................................................................................................................................... 2 1.1 The report ................................................................................................................................................................. 3 1.2 CBDC explained ...................................................................................................................................................... 3 “Synthetic CBDC” is not a CBDC .................................................................................................................................................. 4 2. Motivations, challenges and risks ............................................................................................................................