Do We Need Central Banks? (2017)
professorwerner.org
Do We Need Central Banks? (2017)
1–10 of 176 posts
Re: Do We Need Central Banks? (2017)
#2It's interesting to think about how the role of central banks might change in the age of crypto currencies.
Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if this grip holds up.
Re: Do We Need Central Banks? (2017)
#3Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.
Re: Do We Need Central Banks? (2017)
#4It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…
Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors.
That said since no blockchain currently offers a credit system it’s not really possible to test this out fully since there is no true equivalency.
A better question would be not if we need central banks but rather should the economic system be based on credit and interest or not.
Re: Do We Need Central Banks? (2017)
#5Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.
That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank.
The big difference is that unlikely most fiat currencies there is no credit and interest system built into any (mainstream) crypto currency that I am aware off, hence there is also no fractional reserve (outside of what shady exchanges may or may not do).
Re: Do We Need Central Banks? (2017)
#6It's a long article and I admit to not heaving read it in its entirety, but...
> There are overcapacities in the banking sector of some countries” in the Eurozone. Which country could he have been talking about? Germany boasts by far the largest number of banks – about ten times as many as the global centre of international finance, the UK.
Same here in Austria. Per capita, the people employed in the banking sector is significantly higher than in other countries.
I work in this sector, and the overcapacity is notable. To question this is basically a statement of ignorance.
> 80% of these banks in Germany are local, not-for-profit community banks, which do not pay bankers’ bonuses, and which serve ordinary people and small firms, creating a strong SME sector (the main employer in most countries).
Without knowing the German banking sector that well, this is almost certainly hyperbole.
I believe he is talking about Genossenschaftsbanken, Raiffeisen et al. There's a historical reason why these banks have most of the banking licenses issued (the 80% he alludes to), but that reason is no longer relevant. It's also misleading, since most of these banks are tiny, basically your typical savings & loan.
> Why is the ECB taking policies that are killing the majority of banks in the Eurozone – the beneficial not-for-profit community banks – while helping big banks with its asset purchases?
Because it's an anachronism. There was a time in Austria when we had the saying "A Raika (Raiffeisen Bank) and Post in every village", regardless of the village size. This is where the insane 80%-number comes from!
This is horribly inefficient. It might have been a valid approach at a time when everything was rural and a village was effectively a microcosm, but in today's world with online banking and such, it's horribly outdated.
Operating these banks costs money. These costs are passed on to the customers. Reducing the banking sector size is therefore in the interest of the customers.
> Central banks have proposed the abolition of cash
No, they haven't. Some guys employed there might have toyed with the idea as a thought experiment, but nobody even close to policy-making has proposed such nonsense, not that it would work anyway.
> Central banks have proposed the introduction of central bank cybercurrency
I'd trust a central bank far more than Coinbase or any other of the centralized controllers of currently-so-popular cybercurrencies.
I've spotted numerous other smells in the article, but the above were the easiest to point out.
Re: Do We Need Central Banks? (2017)
#7The short answer is: Yes. The long answer is, that central banks are in my opinion a way to regulate banking and money supply so that it is useful for the economy and the people. His point that deregulation, liberalisation, and privatisation are bad ideas which are likely to fail is something I can agree on. Also his point that central banks are usually not really accountable for they do and that banking consolidation wasn't a good idea to begin with. I'm still glad to live in a country where they are a lot of local banks, which can help SME much better than big banks, which have only a little branch in town. It matters where decisions are made.
The central bank's job is still important, it is lender of last resort and it is an important regulatory body for the banking and financial sector. It is something we need if we want to prevent those financial crisis like in 2008.
Re: Do We Need Central Banks? (2017)
#8Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.
That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank. The big difference is that unlikely most fiat currencies there is no cr…
Even forgetting about cryptocurrency: if each country had a constitutional amendment requiring that its currency be backed 100% with gold reserves (no bi-metalism; no fixed gold pricing), domestic custodianship, annual audits, and the elimination of fractional reserve banking, I suspect the world would be much better off.
Re: Do We Need Central Banks? (2017)
#9It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…
Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…
There's no fundamental reason why Bitcoin shouldn't also have fractional reserve. I mean, cash also has a fixed supply! (from the Bank's POV) It's not like Chase Bank (or whatever non-central bank) can just print more dollars.
If you just sit on your Bitcoin it collects 0% Bitcoin-denominated interest. Maybe you'd prefer to make a loan to a bank and have them pay you interest. For the term of the loan that money isn't sitting in an address you control, it's been given to the bank and they're consequently free to lend it out to other people. Viola, Bitcoin have been created, just not on-chain.
EDIT: I was referring to physical dollars. As in, dollar bills and actual coins. I'm aware that Chase creates money, but it cannot literally print money.
Re: Do We Need Central Banks? (2017)
#10It's a long article and I admit to not heaving read it in its entirety, but... > There are overcapacities in the banking sector of some countries” in the Eurozone. Which country could he have been talking about? Germany boasts by far the largest number of banks – about ten times as many as the global centre of international finance, the UK. Same here in Austria. Per capita, the people employed in the banking sector i…
Many co-op banks are merging into bigger ones these days, they are still local banks which are owned by members of the co-op which are usually people from the region. There are also several bigger co-op banks or rather supra-regional banks. But even small and medium sized banks need regulations and that is what the central bank can really do.