The Monetary Regime in Transition

Abstract

In the preceding chapter we made reference to the notion of monetary regimes. This concept describes an amalgam of institutional arrangements pertaining to the prevailing forms of money, the modalities of their coexistence and the management of their use. Not only can forms of money change, but so can the monetary regimes guiding their creation and circulation. When new money types emerge, they may prompt changes in the monetary regime to accommodate their presence. We have seen that happen with the transition from agrarian money to metal money over five millennia ago, during centuries of coexistence between metal coins and bank notes from the early Middle Ages to the British-led gold-exchange standard of the 19th century, and then again with the creation of a new regime centered on state-administered paper money following the collapse of the gold standard in the 1930s. Today we face yet another change in the monetary regime brought about by a new money form, in this case electronic money. Completing the trend towards the dematerialization of money, we have finally arrived at a point where money is nothing but a flow of data between interconnected computers. Such virtual money renders obsolete any regime designed for paper money and will therefore bring about major changes in the way we manage the monetary process.