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JP Koning

JP Koning

JP Koning blogs on the topics of monetary economics,
central banking, precious metals, economic history, and financial technology.

Banknotes and Coronavirus

Banknotes and Coronavirus

  • Date
  • author JP Koning
  • Comments 6 Comments

With the coronavirus pandemic sweeping the globe, many people are worried about infected banknotes. Over the last few weeks, central bankers have themselves taken a number of measures to mitigate virus transmission risks on banknotes.

But what does science have to say about the presence of pathogens, such as viruses, on banknotes?
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Gold confiscation – Could it happen again?

Gold confiscation – Could it happen again?

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  • author JP Koning
  • Comments 3 Comments

Democratic governments have forced citizens to sell their gold in the past, the US in 1933 and the UK in 1939. Should modern gold owners worry about similar forced gold sales or seizures in the future? Continue Reading arrow

Eight centuries of interest rates

Eight centuries of interest rates

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  • author JP Koning
  • Comments 8 Comments

Today's era of low - even negative - interest rates have been described as absurd, crazy, and an abomination. But economic historian Paul Schmelzing's recent paper covering eight centuries of interest rates shows that periods of zero or negative rates are not rare. Continue Reading arrow

The shrinking window for anonymous exchange

The shrinking window for anonymous exchange

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  • author JP Koning
  • Comments 4 Comments

To help reduce money laundering, German authorities have reduced the amount of precious metals that citizens can purchase anonymously with cash to €2000. While cash limits like this may work in theory, we still have very little evidence to show that the benefits of anti-money laundering regulations exceed the costs. Continue Reading arrow

A new era of digital gold payments systems?

A new era of digital gold payments systems?

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  • author JP Koning
  • Comments 1 Comments

Ever since the internet emerged in the 1990s, entrepreneurs have been trying to created digital gold payments networks. But these efforts haven't garnered much success. Will the newest push, so-called "blockchain gold," make digital gold payments more popular? Continue Reading arrow

Life under a gold standard

Life under a gold standard

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  • author JP Koning
  • Comments 14 Comments

Consumer prices react differently under a gold standard and a fiat standard due to the relative flexibility of each system.

What would life be like living under a gold standard, and how would it differ from our day-to-day and year-to-year experience under a fiat standard?
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Why are gold and bonds rising together?

Why are gold and bonds rising together?

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  • author JP Koning
  • Comments 4 Comments

In the 1970s, gold and bond prices tended to move in opposing directions. This is because higher-than-expected inflation pushes up the price of gold, but hurts the price of bonds.

But over the last two decades, the prices of these two assets have moved together. Why has this relationship changed?
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Does anyone use the IMF’s SDR?

Does anyone use the IMF’s SDR?

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  • author JP Koning
  • Comments 4 Comments

Introduced by the IMF in 1969, Special Drawing Rights (SDRs) were originally devised as a paper version of gold that central banks could hold as a transferable reserve asset.

But in addition to serving as a specialized payments medium, the SDR also acts as a unit of account, or a way of expressing value.

Although the SDR never really took off as a transferable reserve...
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Hyperbitcoinization

Hyperbitcoinization

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  • author JP Koning
  • Comments 13 Comments

Hyperbitcoinization, a term coined by Daniel Krawisz in 2014, refers to a thesis under which bitcoin, at first slowly and then rapidly, would replace traditional currencies. In effect, bitcoin-induced currency demonetization.

Although bitcoin certainly has plenty of good features, for mass adoption it would have to overcome the network effects of the world's domestic...
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More on the puzzle of negative interest rates

More on the puzzle of negative interest rates

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  • author JP Koning
  • Comments 0 Comments

While interest rates on many bonds have plunged into negative territory, the real returns on business capital are buoyant. This is a puzzle which suggests both a stagnating and strongly growing economy. But which of the two conflicting interest rates should we trust and why the disparity?

Although improved liquidity, high demand and tight supply may have pushed the price of...
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The not-so-crazy world of negative interest rates

The not-so-crazy world of negative interest rates

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  • author JP Koning
  • Comments 12 Comments

Are negative interest rates an artificial phenomenon that central bank technocrats have foisted on the world? Or can interest rates naturally turn negative, of their own accord? Continue Reading arrow

How Much U.S. Currency is Held Overseas?

How Much U.S. Currency is Held Overseas?

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  • author JP Koning
  • Comments 0 Comments

While everyone is familiar with the fact that US dollars circulate in many countries around the world, the same is not true of foreign currencies circulating in the US.

The question then is why is there so much international demand for the US dollar, and how much of the total $1.74 trillion paper dollars in circulation globally is in the US and how much is used overseas?
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The Puzzle of Electrum Coins

The Puzzle of Electrum Coins

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  • author JP Koning
  • Comments 0 Comments

The earliest coins in antiquity are thought to be those that originated in the Lydia empire in around 640 BC. Made from a naturally occurring alloy of silver and gold called electrum, these electrum coins had standard weights in a variety of denominations.

But the variable gold & silver mix found in electrum would have created difficulties in valuing these coins, which is why...
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Why central banks should hold gold (and many other assets too)
Where did all the silver coins go?

Where did all the silver coins go?

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  • author JP Koning
  • Comments 10 Comments

In the 1800s, the coins used in the UK and US contained mostly silver. But when the value of silver in coins exceeded the value of the coin itself, people would melt coins down. This lead to crippling coin shortages. The solution to coin shortages was to remove the silver content of coins, which is why to this day not a trace of silver is to be found in circulation coinage. Continue Reading arrow

Europe’s INSTEX payments channel won’t help Iran

Europe’s INSTEX payments channel won’t help Iran

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  • author JP Koning
  • Comments 7 Comments

After months of anticipation, Europe has finally introduced INSTEX, a payments channel to help support Iranian trade in the face of U.S. sanctions. But INSTEX won't have much of an effect.

For the time being, it won't facilitate the all-important Iranian crude oil trade. But even if it does, U.S. sanctions are too powerful for INSTEX to attract many users.
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The Great Japanese Gold Trade of 1859

The Great Japanese Gold Trade of 1859

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  • author JP Koning
  • Comments 3 Comments

When Japan opened for trade in 1858, Western merchants were thrilled to learn that the Japanese valued gold at a third its international price. This would create an arbitrage for enterprising merchants.

While the arbitrage didn't last long, here's how it occurred in a historical context, and here's how the traders tripled their money.
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How California stayed with gold when the rest of the U.S. adopted fiat money

How California stayed with gold when the rest of the U.S. adopted fiat money

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  • author JP Koning
  • Comments 4 Comments

When the Union switched over to an inconvertible paper money standard during the American Civil War, California managed to stick to its gold standard. This episode give some insights into why contemporary monetary switches, including a potential displacement of the dollar by bitcoin, are so difficult to achieve. Continue Reading arrow

An early attempt at standardizing money using international gold coins

An early attempt at standardizing money using international gold coins

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  • author JP Koning
  • Comments 4 Comments

Last month the world settled on a new definition of the kilogram. Our success at harmonizing weights stands in contrast with our failure to establish a universal unit for measuring monetary value. This post explores the difficulty of this project by investigating a late-1860s effort to establish an international system for comparing value. Continue Reading arrow

Why the US Mint once issued gold discs to Saudi Arabia

Why the US Mint once issued gold discs to Saudi Arabia

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  • author JP Koning
  • Comments 11 Comments

Shortly after World War II, the U.S. produced almost 200,000 gold discs for Saudi Arabia. Coin collectors usually link the discs to ARAMCO, the Saudi-American company responsible for producing much of Saudi Arabia's oil. This post revisits the monetary arrangements of the era to determine why the discs were actually issued. Continue Reading arrow

Gold’s Official Price is $42, and maybe that’s a Good Thing
Sanctions Busting, European Style

Sanctions Busting, European Style

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  • author JP Koning
  • Comments 13 Comments

Germany, France, and the UK intend to create a new Special Purpose Vehicle (SPV) to enable cross-border payments with Iran, which is currently being sanctioned by the U.S. The SPV will be able to carve out some space for the rest of the world to engage in Iranian trade, but we shouldn't overestimate its ability to override U.S. economic power. Continue Reading arrow

Why the SEC keeps rejecting Bitcoin ETF listings
Turkey’s Attempt to Mop up Mattress Gold
Singapore, Brunei, and the $10,000 banknote

Singapore, Brunei, and the $10,000 banknote

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  • author JP Koning
  • Comments 4 Comments

This post talks about Singapore and Brunei's $10,000 note, the most valuable banknote denomination in the world. It delves into the historical monetary relationship between the two nations. Continue Reading arrow

Gold and the Monetary Blockade on Iran

Gold and the Monetary Blockade on Iran

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  • author JP Koning
  • Comments 2 Comments

Gold was used as an intermediary commodity for evading sanctions imposed on Iran, particularly in 2012-13. Gold has certain properties, including a high value-to-weight ratio and good liquidity, that made it convenient. Given that sanctions will probably be reimposed, what will gold's role be in the next round of Iranian sanctions? Continue Reading arrow

The future of Cash: Iceland vs Sweden

The future of Cash: Iceland vs Sweden

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  • author JP Koning
  • Comments 2 Comments

When people think about the future of cash, an increasingly cash-lite Sweden is one of the benchmarks that is often brought up. Yet Iceland should not be ignored, since not only does it lead Sweden in digital payments adoption, but it is also experiencing a resurgence in cash usage. Continue Reading arrow

Types of Gold Standards

Types of Gold Standards

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  • author JP Koning
  • Comments 4 Comments

From one version of the gold standard to the next, society benefited from the price stability afforded by a link to gold while being liberated from some of the metal's inconvenient physical burdens. Continue Reading arrow

Money as a Measuring Stick

Money as a Measuring Stick

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  • author JP Koning
  • Comments 3 Comments

Imagine if the world's metre sticks all grew or shrunk a bit each year. That would make for a confusing system of weights and measures, wouldn't it? Well, that is exactly what happens with money. This post looks at the history of the Pound, the weight and the currency, right up to the modern day Pound Sterling. Continue Reading arrow

Why QE didn’t send gold up to $20,000

Why QE didn’t send gold up to $20,000

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  • author JP Koning
  • Comments 17 Comments

Because quantitative easing created trillions in new dollars, many people thought that this would lead to a hyperinflation and a much higher gold price. Yet this didn't happen. This post explores why. Continue Reading arrow

Should we Restore the Gold Standard?

Should we Restore the Gold Standard?

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  • author JP Koning
  • Comments 21 Comments

Would it make sense to rebuild an international gold standard like the one we had in the late 1800s? Over the years I've been following two economists who have debated this very topic on multiple occasions. Larry White says the idea has merit, David Glasner believes it isn't worth the risk. Let's look at one or two of the most important themes running through the White v Glasner debate. Continue Reading arrow

Bitcoin backwardation, gold contango

Bitcoin backwardation, gold contango

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  • author JP Koning
  • Comments 7 Comments

Since bitcoin futures began to trade on the CBOE in December 2017, they have often traded below bitcoin's current price, a pattern called inversion or backwardation. Gold, which is a similar asset in many respects, almost never inverts. It is always in contango. This article explains why this pattern has prevailed and hypothesizes that it is likely to continue in the future thanks to... Continue Reading arrow

Why does money inflate?

Why does money inflate?

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  • author JP Koning
  • Comments 1 Comments

People who live in developed nations have grown used to inflation of around 2% a year over the last few decades. Why do prices generally rise by that amount? What drives the purchasing power of money in these countries? This post explores the last thousand years of monetary history--and three different sorts of monetary systems--to help understand the causes of inflation. Continue Reading arrow

Bitcoin isn’t Digital Gold, it’s Digital Uselesstainium
Hyperinflation in Zimbabwe – It’s back, but maybe not for long

Hyperinflation in Zimbabwe – It’s back, but maybe not for long

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  • author JP Koning
  • Comments 0 Comments

Despite having dollarized back in 2008, Zimbabwe has once again entered hyperinflation territory. With it, the infamous dictator and the world's oldest leader at 93, Robert Mugabe, is finally losing grip of power. In this blog post, you can read about Zimbabwe's recent monetary experiment again hideously trying to issue a new version of the Zimbabwe dollar. Continue Reading arrow

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