Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates.
I'm pretty sure he didn't mean that. To him the issuing of currency would be defined by an algorithm depending on the spendings (assuming a computer can know these data). The FED would have no power on it once it is launched: he insists on the idea of
throwing the key a way, so it is not ambiguous at all.
I doubt there is anyway for a computer to measure economics activities though, since money transfers could easily be fake (with no real economic exchange behind) by anyone willing to increase the money supply. But this is an other matter.
To me a computer should be economicly blind: its only job should be to provide money at a predefined rate, whatever the economic situation is. Selgin doesn't agree with that, but he likes the idea of a monetary system being "human-proof".
I think you are right.
I also think that Dr. Selgin understands bitcoin very well, not so much from this video as he doesn't go into its details, but from antother one I saw before. He understands how decentralized governing by an algorithm works: In the other video, he said that people accept only money (coins) that adhere to their own standard. So that if you change the algorithm (eg. altering block rewards), you created another currency that is only viable if others change their algorithm in the same way.
Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined.
He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically.[...snip...]Any other ideas?
Well if he's so smart, why doesn't he invent a digital currency that does what he wants? It can't be that hard, just define the system very precisely, and there's your skeleton code -- half way there! As it stands, he's just being a smooth-talking critic in front of a camera.
the algorithm must be able to determine the GDP without the interference of humans. Selgin explicitly states that a system like this brings only stability if there is absolutely no human in the loop that can act unexpectedly.
All these massive requirements are built on top of the urban legend that a currency
must grow (and shrink) to keep pace with an ill-defined concept of economic growth. What if a revolutionary new product or industry is created that transforms the economic landscape, thus changing the very definition of economic growth?