Making Money

75 Pages Posted: 18 Mar 2022 Last revised: 24 Feb 2023

See all articles by Gary B. Gorton

Gary B. Gorton

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Chase P. Ross

Board of Governors of the Federal Reserve System

Sharon Y. Ross

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: February 24, 2023

Abstract

It is hard for private agents to produce money that circulates at par with no questions asked about its backing. Privately-produced money was last circulated in the U.S. before the Civil War as private banknotes. Stablecoins are new privately-produced money. Stablecoins are currently used to facilitate crypto trading. But could stablecoins eventually circulate as a hand-to-hand currency? We study pre-Civil War banknotes to determine what forces pushed these monies from a negative convenience yield to a positive convenience yield. We then ask whether the same forces affect stablecoins, pushing them toward positive convenience yields.

Keywords: money, convenience yield, stablecoins, privately-produced banknotes, cryptocurrencies

JEL Classification: E40, E51, G12, N21

Suggested Citation

Gorton, Gary B. and Ross, Chase P. and Ross, Sharon, Making Money (February 24, 2023). Available at SSRN: https://ssrn.com/abstract=4021072 or http://dx.doi.org/10.2139/ssrn.4021072

Gary B. Gorton (Contact Author)

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New haven, CT 06511
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HOME PAGE: http://mba.yale.edu/faculty/profiles/gorton.shtml

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Chase P. Ross

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Sharon Ross

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sharonyross.com

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