Could machines put Central Bankers out of a job?

Interesting post reviewing  a paper by Prof. Randall Kroner. He says technology could make jobs of banks and central banks irrelevant. So what Milton Friedman espoused technology can achieve:

The fast-changing technological infrastructure of financial transactions, including nonbank finance, digital currencies, peer-to-peer lending and crowd-funding present a challenge to the monetary policies of the Federal Reserve and other top central banks, says Randall Kroszner, a former Fed board governor.

In a paper presented at the Atlanta Fed’s 20th annual conference on financial markets, Mr. Kroszner explores the implications of technological shifts for commercial banks, whose lending-on-deposits model underpins the ability of interest-rate policy to be transmitted to the real economy.

“From a macroeconomic perspective, commercial banks–and possibly central banks–face the potential for disruptive competition in the payments system that could affect the traditional channels of monetary policy transmission,” writes Mr. Kroszner, who was a Fed governor from 2006 through 2009, through the worst of the financial crisis.

For years, the Fed has loosened or tightened credit by adjusting the amount of banks’ excess reserves, the money they park at the central bank. When the Fed added reserves to the system, interest rates fell, encouraging borrowing and spurring economic activity. When the Fed removed reserves, rates rose and the economy cooled. But now, Mr. Kroszner says, new funding sources could reduce the Fed’s control of the supply of money, rates and inflation…

Interesting futuristic reading..

“Digital currencies, mobile-phone banking, crowd-funding, peer-to-peer lending could diminish the role that traditional commercial banks play in the standard ‘money multiplier’ process through which changes in bank reserve affect the money supply and the price level,

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