I didn't downvote you, but I haven't grokked your answer yet. Yep, I gotta read something about monetary policy. In any case, I gather that "new digital currency" in this context mean centralization of accounts.
EDIT: Do I understand it correctly that under this new system, there would be no money multiplication or IOW no fraction reserve banking?
Yes, it does but through that centralization of accounts, you are fundamentally changing how monetary policy operates (again, the concept of high-powered money changes totally...we are talking about the most fundamental aspects of how monetary policy works).
If you read about Positive Money, they have written a few books about how this works. A significant simplification is: our monetary policy would be more like Japan pre-1991...but it is more complex than this (the politics of this are also significantly more complex...no-one has written any books about this). But reading something like Mishkin is a better starting point.
EDIT: there is no "money multiplier" in the real economy, that is a device used to teach undergraduates...when banks make a loan, they just credit your deposit account, the money doesn't come from anywhere, the bank needs no reserves (reserve requirements are used functionally in China, I don't believe they are functional in the US, and they haven't been a central policy instrument in monetary policy generally since the 60s)...so the central bank "outsources" money creation to private banks, the exact purpose of these proposals is to stop this outsourcing although the actual implementation will vary.
I have a sneaking suspicion you are better-read than I in the matter. But I have questions =)
You say there is no money multiplier. But we do have capital requirements, don't we? Like Bâle III. Doesn't that equate to an implicit 'percentage' for the money multiplier?
The money multiplier is irrelevant because the only limits to money creation are the availability of resources and labor in the real world.
It doesn't matter who creates the money and if you create the money in a way that does not utilize resources or labor it doesn't even matter how much you create.
The Fed and the government effectively have an unlimited number of dollars at their disposal, if you were pragmatic their bank account balance would be literally infinite dollars.
This oversimplification should make it strikingly obvious that inflation is not driven by the amount of dollars, after all there are infinite dollars in existence so expected inflation is infinite according to old economic wisdom but for some reason isn't.
If increasing the money supply by infinite dollars does nothing, then so does increasing the money supply by a few trillion dollars.
On the other hand, if you give people money and they spend it, you can bet that it increases inflation even if the total amount of stimulus is very small.
However, you're right that there is bureaucracy involved in the lending business and it can be a bottleneck.
In this case I think you're making the common mistake of confusing capital requirements with reserve requirements.
That said, if we change "capital requirements" to "reserve requirements" your question is still valid: this does become an implicit money multiplier. The fallacious thinking lies in assuming that "banks cannot lend in a way that exceeds their multiplier." Because they do, all the time.
In normal (non-QE) times, banks keep the minimum amount of reserves they need to meet the requirements. This means any loan they make violates the reserve requirements temporarily. After they've made the loan, they go get more reserves to cover the requirements.
In other words, the money multiplier does not say anything about how much they can lend given the reserves they have, it says (indirectly) how much reserves they have to get after they have made the loan.
EDIT: Do I understand it correctly that under this new system, there would be no money multiplication or IOW no fraction reserve banking?