胡佛研究所-中央銀行數(shù)字貨幣：一個有新篇章的古老故事（英）-2022.11-34正式版

CentralBankDigitalCurrencies:anOldTaleWithaNewChapter*MichaelD.BordoRutgersUniversity,NBERandtheHooverInstitution,StanfordUniversityWilliamRoberdsFederalReserveBankofAtlantaEconomicsWorkingPaper22124HOOVERINSTITUTION434GALVEZMALLSTANFORDUNIVERSITYSTANFORD,CA94305-6010November21,2022Weconsiderthedebutofanewmonetaryinstrument,centralbankdigitalcurrencies(CBDCs).Drawingonexamplesfrommonetaryhistory,wearguethatasuccessfulmonetarytransformationmustcombinemicroeconomicefficiencywithmacroeconomiccredibility.Aparadoxicalfeatureofthesetransformationsisthatsuccessinthemicrodimensioncanencouragemacrofailure.Overcomingthisparadoxmayrequirepoliticallyuncomfortablecompromises.WeproposethatsuchcompromiseswillbenecessaryforthesuccessofCBDCs.JELCodes:E42,E58,N10Keywords:monetarysystems,banknotes,centralbanks,digitalcurrenciesTheHooverInstitutionEconomicsWorkingPaperSeriesallowsauthorstodistributeresearchfordiscussionandcommentamongotherresearchers.WorkingpapersreflecttheviewsoftheauthorsandnottheviewsoftheHooverInstitution.ThispaperwaspreparedforaconferenceheldinhonorofAngelaRedishattheUniversityofBritishColumbia,October14,2022,TheopinionsexpressedinthispaperarethoseoftheauthorsandnotoftheFederalReserveBankofAtlantaoroftheFederalReserveSystem.Everyyearanewcohortofeconomistsbeginstheirprofessionalcareerswithatripintoafantasyland,onemoreunlikelythananythingWaltDisneyeverimagined.Inthismake-believeworld,knownastheArrow-Debreumodel,anygoodmaybeeffortlesslyexchangedtoobtainanother:socksforautomobiles,peanutbutterforelectricity,laborhourstodayformedicalservicestenyearsfromnow.Yetdespiteitsevidentlackofverisimilitude,thisabstract“theoryofvalue”underpinsmuchofmoderneconomicsandfinance.TheidealizednatureoftheArrow-Debreumodelalsooffersinsightintothefunctionofmoney.Onereal-worldcomplicationthatmakesthemodelseemunrealisthephenomenonofadverseselection,famouslydescribedbyGeorgeAkerlofinthecontextofusedcars(“themarketforlemons”;Akerlof1970)andbyGrouchoMarxfornewhouses(“youcanevengetstucco”;ParamountPictures1929).2Money,apointlessentityinthelandofArrow-Debreu,offersapopular,ifpartialsolutiontothisproblembyconcentratingadverseselectionononesideofatransaction:thebuyergetsagood,thesellergetsmoney.Thevalueofthemoneyreceivedcanbedeterminedby“tale,”i.e.,bysimpleenumeration.Acceptanceofmoneyisnotsomuchdrivenbyillusionasbyinformationalparsimony.Anidealmoney,fromthisinformationalperspective,wouldthusbeanasset1)whosevalueissoobviouslyinvariantthat“noquestionsareasked”(Gorton2017),and2)whichcanbetransferredinaquick,costless,andverifiablemanner.Theevolutionofmoneycanbeseenasaprogressionoftechnologiestobetterapproximatethisideal,aswasexplainedbyDavidRicardoin1816:Allwritersonthesubjectofmoneyhaveagreedthatuniformityinthevalueofthecirculatingmediumisanobjecttogreatlybedesired.Everyimprovementthereforewhichcanpromoteanapproximationtothatobject,bydiminishingthecausesofvariation,shouldbeadopted.(Ricardo1816,7).Moresuccinctly,Ricardonoted(ibid.)that“inthemediumofcirculation,[the]causeofuniformityis[the]causeofgoodness.”Thetheoryofpaymentsassumesthatinformationalfrictions,includingadverseselection,aresoextremethatnoexchangecanoccurwithoutsomespecialarrangement;seeKahnandRoberds(2009)foranintroduction.1Modernformsofmoneyandpayments,readilyavailableandeasytouse,appeartoapproachRicardo’sdreamofubiquitousuniformity.Barterexchangeisrarelyprohibitedbutpeopleprefertoswapgoodsformoney.Monetaryexchangehasbecomesoconvenientthateconomistsareoftentemptedtopretenditdoesnotexist,orthatitexistsonlyasathinveilovertheimaginarylandscapeofArrow-Debreu.Manyotherwisesophisticatedeconomicmodelseffectivelypresumethatcarscanbereadilyswappedforpeanutbutter.Howeversuccessfulbothinpracticeandintheory,modernmoneycontinuestoderiveitsvaluefromtheunderlyinginformationalasymmetryofreal-worldtransactions.Trustthereforeremainskeytoanasset’smonetaryfunction,meaningthatallmoneyistosomeextentfiduciary.Thisfactgivesrisetoaphenomenonwelabel“themonetaryparadox”:thecloseranassetcomestothemonetaryideal,thefewerquestionsgetaskedandtheopaqueritbecomes;yetthissameopacitycreatesatemptationformoneyproducers(privateandpublic)tounderminethequalityoftheassetviaoverissue.Micromonetarysuccessbreedsmacromonetarymischief.InthewordsofMiltonFriedman:Solongasthefiduciarycurrencyhasamarketvaluegreaterthanitscostofproduction—whichunderfavorableconditionscanbecompressedclosetothecostofpaperonwhichitisprinted—anyindividualissuerhasanincentivetoissueadditionalamounts.Afiduciarycurrencywouldthusprobablytendthroughincreasedissuetodegenerateintoacommoditystandard—therebeingnostableequilibriumpriceshortofthatatwhichthemoneyvalueofcurrencyisnogreaterthanthatofthepaperitcontains.Andinviewofthenegligiblecostofaddingzeros,itisnotclearthatthereisanyfinitepricelevelforwhichthisisthecase.(Friedman,1960,p.7)AfacilewayofsummarizingAngelaRedish’scontributionstomonetaryeconomicsisthattheyhavechronicledasequenceofmonetarytransformations,encompassingbothimprovementsasenvisionedbyRicardoandvarietiesofcheatingasenvisionedbyFriedman.Theresulthasbeenafinenarrativeofhistory’srediscoveriesofthemonetaryparadox.ThisessaywilldrawonRedish’sworktoreviewthehistoryofmonetarytransformationsandtoexploreanemergingtransformation,thearrivalofcentralbankdigitalcurrencies(CBDCs).Fromthisreview,wewillarguethatCBDCscanbestbeunderstoodasnewchapterinanoldtale,andthattechnologywillnotprovideaneasyescapefromthemonetaryparadox.2CoinsastheoriginaltransactiontechnologyModerneconomicsreferstoearliertypesofcoinas“commoditymoney,”anamethatissometimestakentomeanthatthesecoinswerestandardizedchunksofbullion.WorkssuchasRedish(1988,1993,2000)andGlassmanandRedish(1988)illuminatethetruenatureofcommoditymoney,whichwasdecidedlymoreinformation-intensive.Thoughthevalueofcoinsultimatelyderivedfromtheirfinecontent,itwasnotpracticaltoweighandassaycoinsforeverytransaction.Adefinitiveassayrequiredmeltingdownthecoin.Successfulcoinswerethusopaqueinstrumentsthatoftentradedabovetheirputativemetallicvalueandsometimeswellabovetheirlegallyassignedvalueintermsofthelocalunitofaccount.Opacitycreatedstrongincentivesformonetarydegradation,incentivesthatfiscallyconstrainedsovereignsoftenfounddifficulttoresist.Redish(2000,61-62)catalogsthefourcommonwaysofmanipulatingcommoditymoney.Thesewere,inorderofincreasingsubtlety:reducingacoin’sweight,reducingitsfinecontent,assigninganewlegalvalueto(“cryingup”)acoin,andintroducinganewcointhatresembledanexistingcoinbuthadahighernominalvalueperunitoffinecontent.Allformsofmanipulationweredefactodebasements.GlassmanandRedishemphasizethatthesemanipulationscouldalsobebenign,mostlydefensiveresponsestoexternalforcessuchasclippingandcounterfeiting,movementsinthemarketgold-silverpriceratio,ordebasementsofcompetingcoinsfromneighboringjurisdictions.Inaddition,rulerswereawarethatmodestdebasementscouldimpartmonetarystimulustotheirlocaleconomies.Afourteenth-centuryFrenchmonarch,PhilippIIIofNavarre,receivedsomepointedadvicetothiseffectfromhisadvisor,GuillaumedeSoterel.DeSoterelobservedthatmanymerchantsactuallyfavoreddebasement,whenpracticedinmoderation:[This]sortofmenarethosewhoengageincommerce,whowishforanothersortofmoney.Thatisamiddlesortofmoney…Tradeisalwayspoor,exceptwhenmoneyisinamiddlestate.(Leroy1972,110,citedatSpufford1989,305)However,DeSoterelwascarefultodistinguishthismildlydebased“middlesortofmoney”fromthegrosslydebasedcoinsmintedduringwartime:3[This]sortofmoneyisdesiredbylordswhentheyareatwar,andhecanthusstrikecoinsasfeebleashelikestohavethemeanstopayhistroopstodefendhimandhispeopleandhisland.Butattheendofthewar,heoughttotakethismoneyinagain.(Ibid.,306)AsRedishhasargued,themostsurprisingfactaboutdebasements,offensiveanddefensive,maybehowoftenpeopleignoredthem.3Theinformationaladvantageofanopaquetransactionsinstrumentwasenoughforpeopletotolerate,orasDeSoterelsuggested,evenpreferacertainpaceofendemicmonetarydegradation.Thisadvantagewassufficientlylargethatanimportantadvanceincoinagetechnology,edgemarking,wentunimplementedforabout150years(Redish2000,54-61).Edgemarking,alsoknownasmilling,enhancedmonetaryuniformitybyreducingcoinclipping.Sovereigns,mintmasters,andmarketinsiders(moneychangers),allofwhombenefitedfromthevariablequalityofunmilledcoinage,delayedthecommonuseofthistechnologyuntilthelateseventeenthcentury.Bythattime,amorefar-reachingmonetarytransformationwaswellunderway.Transformation1:fromcoinstopaperIn1545,amanstumbledacrossasilverlodenearPotosí,inmodern-dayBolivia,ostensiblywhilelookingforalostllama(Lane2019,20-22).Thechancediscoveryofthissilverlode,theworld’slargest,soontrebledglobalsilverproduction(Soetbeer1876,8).PotosíwasfollowedbyotherspectacularfindsofsilverandgoldoreintheNewWorld(TePaskeandBrown2010,56,113).4Bythecloseoftheeighteenthcentury,70percentoftheworld’ssilverand40percentofitsgoldhadbeensuppliedfromAmericanmines.Thisfloodofpreciousmetalissometimescreditedwithcausingaaworldwideinflation(Hamilton1934)butitsmorelastingAlthoughpricesdidtendtoadjustquicklyinresponsetolargewartimedebasements;seealsoRolnick,Velde,andWeber(1996).Whypeoplechosetoreadilyacceptdebased,clipped,orotherwiseflawedcoinshasbeenasubjectoftheoreticalinvestigations,includingVelde,Weber,andWright(1999),BignonandDutu(2017),andBajaj(2019).4BeforethediscoveryofthePotosílode,thevalueofworldgoldproductionslightlyexceededthatofsilverproduction(Soetbeer1876,7).Post-Potosí,however,silverdominatedworldpreciousmetalproductionuntilthediscoveryoftheCaliforniagoldlodesin1849.Silver’srelativeabundancemeantthatmostcountrieswereonadefactosilverstandardduringthisperiod.4effectwastoturbochargelong-distancetrade.5Trade,inturn,madepreciousmetalgloballyscarceandironically,helpedfosterthedevelopmentofEuropeanpapermoney.Themostimportantpaperinstrumentfortradingpurposeswasthebillofexchange.Billsofexchangeallowedmerchantstomovefundsbetweencitieswithoutthephysicaltransferofpreciousmetal.CreditextendedviabillswasalsoexemptfromtheChurchbanoninterest.Onceabillofexchangelandedinitsdestinationcity,however,therethenarosethequestionofhowthebillwouldbesettled.6Inprinciple,settlementscouldbemadeincoin.Inpractice,however,merchantsoftenpreferredtosettleinlocalpapermoney(JobstandNogues-Marco2013).Formsofsettlementincluded“fairmoney,”apracticeofnettingoutobligationsduringtradefairs,usingacommon,fictionalunitofaccount(B?rnerandHatfield2017),andsettlementusinglocalprivatebanks,knownasthe“goldsmiths”inLondon(Quinn1997)or“cashiers”intheLowCountries(Aerts2011).7Settlingdebtsonpapereconomizedtheuseofpreciousmetalandsidesteppedthequalityproblemsendemictoearlymoderncoins.Fromthefifteenthcenturyonward,publicbanksassumedalargerroleintheprovisionoflocalpapermoney.8ThefirstsuchinstitutionwasBarcelona’sTauladeCanvi,foundedin1401.TheideaofpublicbankingthenspreadtoMediterraneancommercialcitiessuchasGenoaandVenice,andintheseventeenthcentury,tonorthernEuropeancitiessuchasAmsterdam,Hamburg,andStockholm(RoberdsandVelde2016a).Byonecount,therewere25publicbanksoperatinginEuropeatthecloseoftheseventeenthcentury(Clapham1945a,3).Almostalltheseearlypublicbanksweremunicipallychartered,ledger-moneybanks.Topaywithbankmoney,payorandpayee(ortheirservants)literallywalkedtothebankandinitiatedthetransferoffundsfromthepayor’saccounttothepayee’s.Everytransactionwasrecordedonthebank’sledgerandSeePalmaandSilva(2021).“Turbocharge”isarelativeterm.Earlymodernworldtraderatios(annualexportsplusimports,asapercentageofworldGDP)remainedinthesingledigits(Estevadeordal,Frantz,andTaylor2003).Bytheturnofthetwentiethcentury,thisratiogrewtoabout20percent,andtodayitrunsabout60percent.Thesecularincreaseintradehasbeenanimportantdriverofthemonetarytransformationsdescribedinthispaper.6Billsofexchangecouldalsocirculateviaendorsement,totheextentthiswasallowedbylocallegalsystems.Such“negotiable”billsofexchangethusservedasmoney;see,e.g.,Gorton(2020)onthemonetaryuseofnegotiablebillswithinEngland.7BoththeLondongoldsmithsandtheLowCountriescashiersalsoissuedcirculatingnotes.Thesewouldnotattainthewidecirculationandbroadacceptanceoflaterissuesbypublicbanks.8Thetermearlypublicbanksincludesbanksownedbymunicipalities(asinAmsterdam),banksownedprivatelybutoperatingunderanexclusivecharter(asinLondon),andatleastonecase(Naples)ofcharteredbankinginstitutionsoperatedbyreligiouscharities.5waswitnessedbyatleastthreesetsofeyes,minimizingthepotentialforfraud.Credibilityofthebankwasensured,inprinciple,byconvertibilityofaccountbalancestocoin.Theledger-moneytypeofpublicbankwasmostsuccessfulinAmsterdam(Dehing2012,QuinnandRoberds2014,2019).There,convertibilityofaccountswaslimitedfrom1683,enablingtheBankofAmsterdamtocreatefiatmoney.ThismoneywasusedtosupportthecitygovernmentandtheDutchEastIndiaCompany.ConsistentwithFriedman’sprediction,excessivelendingtothelatterledtothebank’scollapsein1795(QuinnandRoberds2016).Transformation2:fromledgermoneytobanknotesLedger-money(“giro”)transactionsenjoyedsomesuccess,especiallyforlarge-valuetransactions.Butgirotransactionswerealsocostly,inconvenient,andbytheirnatureneverfullyprivate.ThesedisadvantagesledpeopleinearlymodernEuropetoexperimentwithcirculatingbanknotesasanalternativeformofpapermoney.9Thefirst,tentativeuseofhand-to-hand,public-bankinstrumentsemergedinthelatesixteenthcentury.Bythecloseofthenineteenthcentury,banknoteswereusedinallmajorEuropeancountriesandhadassumedamodernform:standardized,fixed-denominationbearerinstrumentsissuedexclusivelybyacentralbankorbyagovernmentquasi-monopoly(Redish1993,82).Theintervening300yearswerenotcharacterizedbyasmoothprogressiontowardRicardo’suniformity,however,butbyasequenceofmonetaryexperiments,manyoftheseendingbadly.SomeoftheearliestsurvivingpublicbanknotesarefromNaples(CostabileandNappi2018).Thesenotesresembleportableledgers,withthenameofthepartytowhomthenotewasissuedrecordedonthenoteandthenamesofallsubsequenttransferees,aswellasthedatesandamountsoftransactions.10Moreanonymous,bearer-typenoteswereissuedbypublicbanksinAmsterdamin1660(Dehing2012,92)andStockholmin1666(Wetterberg2009,44–45).Bearernotesrepresentedaninformationsavingsoverearlierledger-typenotes,asonlytheobligationofWewillnotconsidertheearlierandextensiveuseofpapercurrencyinplacesoutsideEurope,ofwhichChinaprovidestheoutstandingexample(Glahn2016).10Thesenoteswerehoweverstillbanknotesinthesensethattheywereatalltimesobligationsoftheissuingbankandnotthenoteholder.6theissuerwasrecordedonthenote.11Thesealsohadtheadvantagethattheycouldbeusedprivately,butthisprivacyproveddifficulttomanage.BoththeAmsterdamandStockholmnoteswerebesetwithfraudandendedwiththeexecutionandjailing,respectively,ofthebankofficialsresponsibleforissuingthenotes.BanknotesattainednewrespectabilitywiththefoundingandriseoftheBankofEngland(“theBank”).DrawingontheexampleofGenoa’sCasadiSanGiorgio,theBankwascharteredin1694asadebtmanagementagency.Theprivately-ownedBanksoughttoleverageitsstockholders’capitalbytheissueofvariouskindsofshort-termbillsandnotes.12ThesewereintendedtofundtheBank’slargeholdingsofstatedebt.ThetargetmarketfortheBank’sshort-terminstrumentsconsistedofLondonmerchantswhowereusedtodealinginfinancialclaims,includingearliertypesofnotesissuedbyprivateparties(i.e.,goldsmiths).PublicskepticismofthisplanwasreflectedinthefactthattheBank’sinitialcharterranforonly11years.SkepticismalsomeanttheBank’snoteswerenotrecognizedaslegalmoney,onlyclaimstomoney(i.e.,tocoinheldattheBank).Followingasomewhatshakystart,theBankenjoyedfabuloussuccess.TheBank’sfirsttypesofnotes,customizedandhandwritten,gavewaytomoreconvenient,preprintedbearernotesinfixeddenominations,whichwereeasytospendandwereredeemableincoinondemand.Notedenominationswerekeptlarge,￡20beingtheminimumuntil1759,13thisamountbeingequaltoabout40weeks’payforanordinarylaborerin1700.14ThesenotesprovedextremelypopularwithLondonmerchantsandtheBankexperiencedlittletroublegainingcharterrenewalsfromParliament.15ThequidproquoforeachrenewalwasthattheBanktakeonmorestatedebt,butbyacombinationofshrewdmanagementandgoodfortune,theseaccommodationsdidnotfoundertheBank.By1788,theBank’snote-heavybalancesheethadInmodernpaymentsjargon,theseearlynotesweretoken-basedratherthanaccount-basedpaymentinstruments;see,e.g.,GortonandZhang(2022).Richards(1934,219-30).TheBank’sfoundinghassometimesbeendescribedasadebt-for-equityswap.SeetheBankofEnglandwebsite<bankofengland.co.uk/about/history>.HistoricaldataonEnglishwagesareavailableinthedataset“AMillenniumofMacroeconomicData,”whichcanbedownloadedfromtheBankofEngland’swebsiteat<bankofengland.co.uk/statistics/research-datasets>Renewalsweregrantedin1697,1708,1713,1742,1764,and1782;seeBrozandGrossman(2004,51).7swelledtoseventimesthatofitsmostprestigiousrival,theledger-moneyBankofAmsterdam(RoberdsandVelde2016b,485).TheBankofEngland’striumphwasnotatechnologicalone.ItsnotesweresimpleIOUsbutwereseenastrustworthyamongtheBank’swealthy,London-basedclientele.Adherencetostrictaccountingstandardslargelyeliminatedinsiderfraud.CounterfeitingandotherformsoffraudwerealsominimalintheearlydecadesoftheBank(McGowan2007).TheseemingeasewithwhichtheBank’snotesenhancedBritain’sfiscalcapacitygeneratedenvyandeventually,imitationinotherEuropeancountries.Thesecountriesdiscovered,however,thattherealkeytotheBank’ssuccesswasnotthesuperficialuniformityofitspapermoney,butitsunwillingnesstotakeonmorestatedebtthanitsnotecirculationcouldreasonablysustain.TheBank’scredibilitywasalsoenhancedbyParliament’spolicyof“funding”(allocatingspecifictaxrevenuesto)mostofthedebtheldbytheBank(BrozandGrossman2004).TheBank’ssuccessstoryproveddifficulttoreplicate.Sweden’ssecondattemptatapublicbank,theRiksensSt?nderBank(“BankoftheEstatesoftheRealm,”laterrenamedtheSverigesRiksbank)wascharteredin1668andbegan(reluctantly)issuinglarge-valuecustomized,notesin1701(Wetterberg2009,58).Theseweregraduallyshiftedtolow-denomination,fixed-denominationbearernotes,whichenjoyedconsiderablesuccess,especiallyasanalternativetothecumbersomecoppercoinagethenprevalentinSweden.In1739,however,anewpoliticalparty(the“Hats”)cametopowerintheSwedishparliament.TheHatsweredeterminedtoexploittheRiksbankinordertosupportSweden’sexpensivemilitarycampaigns(BordoandLevy2021)andtooffermortgageloanstothenobility(Heckscher1934).Theseactivitieswerefundedbytheissueofadditionalbanknotes,whichbecameirredeemablefrom1745(Fregert2014,342).TheresultwasacollapseintheforeignexchangevalueoftheSwedishcurrencyandultimately(in1765),apoliticalbacklashwhenanewpoliticalparty(the“Caps”)cametopower.TheCapscontractedRiksbanklending,boughtupmanyofitsnotes,reestablishedredeemability,andcollapsedtheSwedishpricelevelby37percentwithinfouryears(1765to1769),therebyplungingthecountryintodeeprecession(EdvinssonandS?derstrom2010).8TheRiksbanksurviveditstroublesandexiststodayastheworld’soldestcentralbank.Otherearlynote-issuingpublicbankswerenotasfortunate.France’sBanquegénéralewasfoundedin1716byaScottishfinancier,JohnLaw(Velde2003).Law’sbankexpandedquicklyandattemptedtofundtheentireburdenofFrenchpublicdebtviabanknotesandanequityissue.Whentheequitysharesdidnotsell,Lawprintedmorenotesandusedthesetopumpuptheshares’price.Collapseensuedin1720.Austria’spublicbank,theWienerStadtbanco(ViennaMunicipalBank)wasfoundedin1706(JobstandKernbauer2016).Toallaypublicdistrust,thisbankwascharteredasamunicipal(notcrown)agencyandfundeditselfnotwithbanknotes,butwithinterest-bearingtimedeposits.Unrelentingfiscalpressure,however,resultedinthedefactonationalizationofthebankin1759andthefirstissueofbanknotesin1762,asmeasurestohelpfinancetheSevenYearsWar(1756-1763).Thisinitialemissionofbanknoteswaswithdrawnandpubliclyincineratedfouryearslater,butNapoleonic-erafiscalpressuresledtomorenoteissues,suspensionofconvertibility,andultimately,apaper-moneyquasi-hyperinflation.TheMunicipalBankwasdeclaredinsolventin1816anditsnoteholdersendureda92percentwrite-down.Directissuesofnotesbysovereignstatesfarednobetterthanthenotesofmostearlypublicbanks.Highlyinflationaryissuesbyrevolutionarygovernments,ContinentalsintheUnitedStatesandassignatsinFrance,didlittletoenhancethereputationofpapercurrency(Capie1986,White2009).AraresuccessstoryoccurredinScotland,whereprivatebanksissuedstable,widelyusednotesduringtheeighteenthandearlynineteenthcenturies.Theliteraturehasdebated,however,whethertheScottishsuccesswasduetoastuteregulation(White1984)oroligopolisticindustrystructure(Goodhart1988).Eventheposterchildofbanknoteissue,theBankofEngland,wasconfrontedwithseverechallengesduringNapoleonicperiod.WartimefiscalpressureledtheBanktosuspendconvertibilityin1797andissueemergencymoneyintheformof￡1and￡2notes,pushingtheBankintotheunfamiliarbusinessofretailpayments.16Organizedcriminalsthenunleashedwavesofcounterfeitsmall-denominationnotes(Palk2006,McGowan2007).TheneedtoobtainjuryconvictionsofcounterfeitersmeantthatBankwasnowconfrontedwithacostlyanddifficult16Atthistime,￡1wasequaltoabouttwoweeks’wagesforanaverageworker.9enforcementproblem.17Newlegislationpassedin1801allowedtheBanktoprosecuteanyonecaughtwithacounterfeitnote,foranyreason,withthemorelenient(i.e.,non-capital)punishmentofdeportationtoAustraliafor14yearsuponconviction(“transportation”).Armedwiththisnewlaw,theBanktooklegalactionagainstthousandsofcounterfeiters,manyofthemwomen,andwasabletotransportorexecutethemajorityofthem.Theferocityofthisanti-counterfeitingcampaignunderminedtheBank’sstandingwiththepublicingeneralandwithjuriesinparticular.ConvertibilityofBankofEnglandnoteswasresumedin1821butthetroublesomesmall-denominationnoteshadtobewithdrawn,acapitulationtotheforcesofadverseselection.TheearlyUnitedStates’publicbank,theFirstBankoftheUnitedStates,offersaninterestingcontrasttoitsEuropeanpredecessors(Cowen2000).CharteredbyCongressin1791andcloselymodeledontheBankofEngland,theprivatelycapitalizedbankwasabletoavoidmanyofthemistakesofitscross-Atlanticcousins.Itdidnotsufferinsiderfraud,grossmismanagement,widespreadcounterfeiting,orfiscaldepredation.Itslarge-valuenotesweretosomeextentseenasNQAassets,and,thankstoanationalbranchnetwork,theseachievedawidecirculation.TheundoingoftheBankwasitstechnicalsuccess.Jealousybysmaller,state-charteredinstitutionsandresentmentofitsforeignshareholders(manyoftheseBritishcitizens)ledtothedissolutionoftheBankin1811.Table1summarizesthenote-issuingexperiencesofselectedearlypublicbanksintoa“reportcard.”Therecordoftheseinstitutionswashardlyoneofconsistentsuccess.Onlyintwolocations(LondonandNaples)didpublicbanknotesobtainaclear“passinggrade.”Morespecifically,theBankhadtopayrewardstopoliceforturningovercounterfeiters,hireitsownnetworkofprosecutors,selectwinnablecasesforprosecution,andpursuethesecasestoconviction.Publicsympathyforthetypicallyunderprivilegedcounterfeiters,whofacedthedeathpenaltyifconvicted,oftenresultedinjurynullificationoftheBank’sefforts.10Table1:ReportcardfornoteissuesbyearlypublicbanksLocationFirstnoteResult“Grade”issueNaples1587Modestsuccesswithcustomized,led