Gianluca Benigno on Central Bank Balance Sheets, Stablecoins, and Nonlinear Inflation

Central bank balance sheets, stablecoin regulation, and the persistence of nonlinear inflation define the current macroeconomic landscape. Gianluca Benigno, a professor at the University of Lausanne, explains how the Swiss National Bank’s reliance on foreign currency assets creates a "fiscal scale trap," where currency appreciation triggers valuation losses and complicates fiscal transfers to regional governments. Regarding stablecoins, T-account analysis reveals that these instruments primarily relocate safe assets rather than expanding the money supply, though they may shift deposit structures toward custodial banks, thereby increasing reserve demand. Furthermore, global supply chain disruptions, such as those impacting the Strait of Hormuz, drive persistent inflation in essential goods. Because these shocks propagate through interconnected production networks, traditional interest rate hikes may prove ineffective or counterproductive, as they fail to address supply-side constraints while disproportionately burdening consumers reliant on essential commodities.