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Bank of England to explore a potential Central Bank Digital Currency

bankofengland.co.uk

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Re: Bank of England to explore a potential Central Bank Digital Currency

#221

Post by betterunix2 »

pharmakom wrote: post #190
treespace88 wrote: post #184

Earlier quoted context omitted.

I would imagine this could lead to interesting changes in how people are taxed. IE taxes based on savings instead of income.

Digital currency makes negative interest rates possible, which is either exciting or terrifying depending on your view.

Nothing makes negative interest rates impossible right now, in fact it is a reality in several countries. Obviously not something that is available to most borrowers, but government bonds with negative nominal rates do exist, and even US treasury debt has negative real rates (i.e. accounting for inflation) for shorter duration notes/bills. Obviously there is a limit to how negative the rates can become -- eventually the market will find other places to invest -- but that would be equally true with digital currencies.

Re: Bank of England to explore a potential Central Bank Digital Currency

#222

Post by roody15 »

aww_dang wrote: post #173
bobthepanda wrote: post #161

Earlier quoted context omitted.

How is it different from what we currently have, assuming that digital pounds/dollars/whatevers are convertible with existing currency? Is existing currency not issued digitally? When central banks issue cash now are they literally sending billions of dollars to the mint, trucking it off to a bank, and then the bank records it on a digital ledger? Seems wasteful.

It is about giving more control to central bankers. Going fully cashless will make negative rates impossible to avoid. UBI can be more specifically targeted as well. Generally speaking, the money supply exceeds the total amount of cash in most countries.

In other words a dystopian nightmare :/

Re: Bank of England to explore a potential Central Bank Digital Currency

#223

Post by betterunix2 »

shadowgovt wrote: post #210
treespace88 wrote: post #184

Earlier quoted context omitted.

I would imagine this could lead to interesting changes in how people are taxed. IE taxes based on savings instead of income.

In a sense, inflation regulation is already taxing based on savings. When the value of the currency falls, everyone's savings is worth a little less (and the more one saves, the more one's relative wealth has diminished).

Which is why TIPS were created -- at maturity TIPS pay the greater of the principle adjusted for inflation or the principle without adjustment (so if there is an extended period of deflation you will still get back the amount you put in, and thus benefit from the deflation). TIPS also pay interest, and the coupon is adjusted for inflation as well.

Re: Bank of England to explore a potential Central Bank Digital Currency

#224

Post by betterunix2 »

analog31 wrote: post #185
jfjfntntkt wrote: post #72

Earlier quoted context omitted.

Please tell me how I can transfer one pound from me to you using a 20 line Python script? That's what people mean by digital currency. If you are going to mention the open banking API initiative, then what are the requirements to get access to that? You can't as an individual. Also, this was the easy case, inter-UK. Now tell me how to transfer using Python and without applying to all kinds of regulators for API acces…

Likewise, explain how it works securely in fewer than 20000 words to a non-mathematician. that's what people mean by currency. ;-)

That is kind of like insisting that you explain why paper money is hard to forge in less than 20k works to a non-chemist.

Re: Bank of England to explore a potential Central Bank Digital Currency

#225

Post by betterunix2 »

throwaway3699 wrote: post #159
jaredtn wrote: post #152

Earlier quoted context omitted.

The parent comment was about enabling micropayments, not the proper price for a song. Forest for the trees...

I guess I'm more wondering what possible value such a tiny micropayment could be. There's no conceivable business that would charge in such small increments. Even an average ad impression is more than a penny. In fact, things are heading the other way, with "micro"-transactions in mainstream games sometimes exceeding the price of the game itself.

Actually, the value of such a tiny micropayment is negative -- it would cost more just to process such a small payment than the amount being paid.

Re: Bank of England to explore a potential Central Bank Digital Currency

#226

Post by ObserverNeutral »

laurencerowe wrote: post #219
ObserverNeutral wrote: post #125

Earlier quoted context omitted.

> Agreed. The money supply should be flexible to help alleviate the effects of inevitable financial crashes. In reality, you either do it in secret...or it makes the crash even worse because people would be even more risk averse because they see the government using these non conventional tool...hence "it must be pretty bad, better save some more" QE is the quintessential example of this. The only American who benefi…

> QE is the quintessential example of this. The only American who benefitted from QE was Bernanke, so he got to be hailed as a hero and now everybody genuflects to him and uses his "playbook". The US came out of the 2008 Great Recession much better than the Eurozone due to its ability to borrow cheaply as a result of QE. The Eurozone was hamstrung by the ECB's inability to act similarly and the 2012 agreement to allo…

US went down more steeply and emerged faster than the EU, not because of QE, or all the fairy tales told by the Fed.

The US as a country is more dynamic, younger and more risk prone than the Eurozone . That's about it. QE had nothing to do with anything.

In turn the dynamism and risk proneness of the US is nothing compared to places like India, Pakistan or Nigeria.

The EU is still a bit more risk prone than Japan but it's really close

Japan is the most risk averse country on Earth and are stagnating since the 90s , no matter how much QE they do or how much they tinker with their unit of account. Economic growth requires entrepreneurial risk taking and consumer risk taking. Down there they don't even risk going to the bar and approach girls, they hardly have sex anymore. With this social landscape the entrepreneurial risk taking which is necessary to start a business and consumer risk taking necessary to max out a credit card for purchases...that's a pure mirage and tinkering with the unit of account or the plumbing won't save them, or anybody for that matter. Just serves as a way for Treasury secretary and the BoJ chair to keep his job and justify his social status because he is "doing something to fix the economy"

Back to the GFC, the US went down more steeply and emerged faster the same way a dude in his 20s can do too much drugs, be wasted and out for a couple of hours and then go to work as nothing happened in the morning.

The destiny of megasocial groups made up of 400M people are not decided by the few elected officials, it's the elected officials who find themselves in those spots because they enact the policies which are popular among the 400M people.

Re: Bank of England to explore a potential Central Bank Digital Currency

#227

Post by matwood »

arcticbull wrote: post #217
shadowgovt wrote: post #210

Earlier quoted context omitted.

In a sense, inflation regulation is already taxing based on savings. When the value of the currency falls, everyone's savings is worth a little less (and the more one saves, the more one's relative wealth has diminished).

Inflation isn't a tax on savings because you're not supposed to be saving currency. You're supposed to be saving value by investing currency. That's how currency works: it retains value only for as long as necessary. Investments, on the other hand, retain value in the long run. No need to conflate the two. In fact it's a harmful narrative to try and conflate the two. This is a pretty fundamental misunderstanding of m…

Where inflation gets people is typically with wages since wages rise slowly. People with large savings are not sitting on cash. They are invested in things that typically rise right along with inflation.

Re: Bank of England to explore a potential Central Bank Digital Currency

#228

Post by betterunix2 »

tumetab1 wrote: post #104
KaiserPro wrote: post #30

I've not really understood the need for a "digital" pound, the pound is pretty digital already. I can already have an entirely digital bank account from at least three "challenger" banks. There are also now at least two business accounts that also entirely virtual. "Faster Payments" (customer bank transfers) are delivered in seconds. I can see a need for speeding up BACS, and reducing the price of CHAPS, but apart fr…

A good example why current currencies are not digital, like Bitcoin, is the settlement process of a public trade stock which takes 2 days because of the current financial system. A digital currency would make possible to settle a trade stock in minutes or even seconds. A digital currency would remove a lot of transactions costs associated with buying/selling stocks.

Actually, no. Stock trading is settled over a period of two days only because of how the system is currently organized; it is technically possible to settle trades at the end of the day, or even in real time, and there are exchanges in the world that settle trades rapidly. The reason the US exchanges have not changed is inertia, and settlement periods have actually decreased just in my lifetime.

One real reason why digital currencies are not widely deployed is crime. Already there is a growing problem of ransomware demanding Bitcoin payments; a "true" digital currency that was as convenient as Bitcoin and allowed offline (peer-to-peer) payments (which Bitcoin does not and cannot support) would enable "perfect crimes." This was a concern raised in the 90s when digital cash was being proposed:

https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.46...

This was one of the concerns that prevented banks from adopting e-cash (as the term is understood by cryptographers), though I have been told by people who worked on this that law enforcement agencies were satisfied that they could still "follow the money" since the anonymity property was narrowly defined (banks could not link deposits to withdrawals, but banks would still know who had made a particular deposit, merchants would still be able to identify customers, etc.).

Re: Bank of England to explore a potential Central Bank Digital Currency

#229

Post by mandelbrotwurst »

thehappypm wrote: post #214
shadowgovt wrote: post #210

Earlier quoted context omitted.

In a sense, inflation regulation is already taxing based on savings. When the value of the currency falls, everyone's savings is worth a little less (and the more one saves, the more one's relative wealth has diminished).

Though this is intuitive it's not really true in a real sense because it's trivially easy to avoid this "tax". Any asset -- down to a humble CD -- will beat inflation. However, assets increasing in value also increases tax revenue due to capital gains!

1 year CD rates are currently about .65% in the US - well below inflation even if you’re talking Core CPI only.

Re: Bank of England to explore a potential Central Bank Digital Currency

#230

Post by Kiers88 »

I don't see how digital currency based on bitcoin architecture will be attractive to banks AT ALL. AT ALL. You can't "double spend" bitcoin, which is the sine qua non of BANKING! You can't "create" bitcoin into existence to make a loan as banking does all the time. What is this canard of CBDC....i don't understand what their game is!
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