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3 - Money and Technology in the Modern Age

Published online by Cambridge University Press:  15 July 2025

Ignazio Angeloni
Affiliation:
Harvard University, Massachusetts
Daniel Gros
Affiliation:
Centre for European Policy Studies
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Summary

This chapters describes the changes in monetary technology that occurred in the twentieth century. We start with a description of the Gold Standard, the global monetary system in the late nineteenth and early twentieth centuries. We characterize that system as a “mountain of paper on a plinth of gold”: gold has fundamental value but is rarely seen in circulation, whereas paper has no fundamental value, but represents it and circulates widely. Scientific discoveries and technological advances in that period resulted in the application of telecommunication to payment transfers and messaging. The first remarkable application was Fedwire, the interbank payment and settlement system created in the United States by the Federal Reserve shortly after its founding. We show how Fedwire worked and how it gave rise for the first time to a single US monetary system based in the dollar, where payments were “final” and irrevocable. The great step to digitalization occurred in the 1950s, with the computerized ledgers first introduced in the United States by Bank of America to handle checks, an arrangement soon adopted by all banks. This gave rise to an explosion of new payment means: credit and debit cards, and, after the rise of the internet in the 1990s, online banking and payment platforms and applications. We note that these new technologies have a common characteristic: They settle in bank books and ultimately in central bank books.

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Chapter
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Money In Crisis
The Return of Instability and the Myth of Digital Cash
, pp. 46 - 76
Publisher: Cambridge University Press
Print publication year: 2025

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