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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

#231

Post by arcticbull »

matwood wrote: post #227
arcticbull wrote: post #217

Earlier quoted context omitted.

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.

Wages have kept pace with inflation according to BLS data. Thing about wages though is that they're a social issue and a fiscal policy issue, not a monetary policy issue. Had there been no inflation, wages would have stayed flat in both notional and real dollar terms. The units don't matter, the quantities do. Pointing at monetary policy because the units shifted is not actually addressing the root of the problem.

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

#232

Post by dragonwriter »

JumpCrisscross wrote: post #164
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.

> Is existing currency not issued digitally? It is, but it's restricted. M0 is central bank money [1]. Currently, only financial institutions have it. If the public could open accounts at the BoE, they too could own M0. CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. That gives central banks powerful new levers. For example, cash limits how negative rates can g…

> For example, cash limits how negative rates can go.

No, it doesn’t. Cash with depreciation or expiration (both preannounced and ad hoc) has been used before. Politics, not technology, limits the use of that tool, and CBDC doesn’t meaningfully change the politics.

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

#233

Post by JumpCrisscross »

dragonwriter wrote: post #232
JumpCrisscross wrote: post #164

Earlier quoted context omitted.

> Is existing currency not issued digitally? It is, but it's restricted. M0 is central bank money [1]. Currently, only financial institutions have it. If the public could open accounts at the BoE, they too could own M0. CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. That gives central banks powerful new levers. For example, cash limits how negative rates can g…

> For example, cash limits how negative rates can go. No, it doesn’t. Cash with depreciation or expiration (both preannounced and ad hoc) has been used before. Politics, not technology, limits the use of that tool, and CBDC doesn’t meaningfully change the politics.

> Cash with depreciation or expiration (both preannounced and ad hoc) has been used before

Yes, if you changed the cash we're talking about, pounds sterling, it would be different.

> CBDC doesn’t meaningfully change the politics

Remember a few years ago, when IT would talk about getting long-needed projects greenly because they slapped "blockchain" on the proposal?Expiring cash is toxic. CBDC is not. Branding matters.

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

#235

Post by laurencerowe »

ObserverNeutral wrote: post #226
laurencerowe wrote: post #219

Earlier quoted context omitted.

> 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…

The Eurozone crisis that followed the Great Recession resulted from the structure of the Euro, which had removed the option for countries in the Eurozone to monetize their debt, creating a default risk, forcing them to inflict disastrous austerity on their economies and lengthening the recession.

While US states saw similar affects on their budgets (since they are not allowed to run deficits) this was offset by large federal deficits which kept the economy running. Borrowing costs were kept low by the Fed's QE.

EU central spending is only about 1% of GDP, much less smaller than the US Federal Government spending of 20% in normal years and does not borrow in its own right. The ECB's eventual agreement to stand behind Eurozone governments and pledging to buy their debt was crucial to resolving the crisis.

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

#236

Post by bingbong70 »

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…

>Inflation isn't a tax on savings because you're not supposed to be saving currency.

It is a tax on savings whether currency is "supposed" to be saved or not. All retail banks offer savings accounts specifically for this purpose.

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

#237

Post by eointierney »

monkeydust wrote: post #11

Probably lends itself GNU Taylor which works with central authority. https://taler.net/en/index.html

Why is this not more widely deployed?

It's been around a while, is compliant with a bunch of regulations, is from perhaps the world's best software "stable", and doesn't require idiotic amounts of energy to compute.

Should we not not all run our own Taler servers?

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

#238

Post by ObserverNeutral »

laurencerowe wrote: post #235
ObserverNeutral wrote: post #226

Earlier quoted context omitted.

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…

The Eurozone crisis that followed the Great Recession resulted from the structure of the Euro, which had removed the option for countries in the Eurozone to monetize their debt, creating a default risk, forcing them to inflict disastrous austerity on their economies and lengthening the recession. While US states saw similar affects on their budgets (since they are not allowed to run deficits) this was offset by large…

Money is a unit of account.

You like to see human agency in the resolution of the crisis.

In my opinion that's not the case, all the interventions and the tinkering of the unit of accounts and messing with the plumbing of the money markets has a neutral effect.

Wallace Neutrality and Miller-Modigliani prove this mathematically.

You also have to take into account the extreme worry if not outright panic that people have when they see the Fed resort to these sort of hail mary interventions.

"If they need to do this...how bad must it be?"

This was a recurrent theme during the GFC, so there's empirical evidence to claim it's not even neutral but actually counterproductive

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

#239

Post by megameter »

lottin wrote: post #157
jfjfntntkt wrote: post #86

Earlier quoted context omitted.

The fact that there are problems to solve doesn't meant that we should just not have the thing. What happens if I give a street artist 5 pounds to draw my picture and then he flatly refuses? What happens if someone mugs me on the street and steals 100 pounds from me? Should we not have cash at all because of these two problems, and others?

The problems are already solved with the current financial system. That's the point.

They're addressed, not solved. The problems still exist.

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

#240

Post by jcfrei »

laurencerowe wrote: post #216
rahimnathwani wrote: post #163

A bunch of comments in this thread claim that the pound is already digital, because you can send and receive pounds using a mobile app or online banking. But these transactions simply transfer obligations (debts) denominated in pounds between parties. They are not operations on actual pounds (i.e. on the central bank currency). You can trade 'pork bellies futures' quickly, and using nothing but a computer. But no one…

While deposits up to some amount are guaranteed FSCS, in reality the government simply can't stand by while there's a run on a consumer bank. Northern Rock was nationalized when this happened in 2008. Even with the FSCS, customers don't want to risk their money being inaccessible while they wait on their claim to be processed.

Now imagine a banking system where banks can go bust without savers (with just cash on their accounts) having to worry. The aftermath of the global financial crisis would have been quite a bit different: Fewer bankers getting a bailout and more shareholders of big banks actually being held accountable for the unduly risk they took. The fact that a lot of people's money is debt on the balance sheet of a bank creates dangerous co-dependencies between let's say the investment banking and the classical private banking. There are many ways this can be addressed but CBDC are definitely one of them.
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