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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

#251

Post by hakfoo »

ObserverNeutral wrote: post #92
throw1234651234 wrote: post #87

Earlier quoted context omitted.

Someone explained this to me last year with an example, and it 'clicked'. The idea is to let the government control the 'velocity of money'. For example, the US is giving out stimulus checks for COVID - the clear goal is to keep business afloat and people spending, but what if they just put the money into savings or crypto? The government did not achieve their goal. To achieve their goal, they program the money with…

Japan tried this in the 90s with expiring vouchers, results were subpar. The bailwick of Jersey sent citizens a prepaid card with £100 expiring in 6 monhts which was also disabled for ATM withdrawls during 2020. Again moderate results. Money is a unit of account, if you mess with it people adjust quickly, there is no free lunch. It's not the same as giving Wellbutrin+Ritalin to somebody who is depressed.

Taiwan tried a variant of it during Covid too-- they issued a bunch of vouchers that you could buy for NT$200/500/1000, and stores agreed to take them at three times face value, until the end of 2020.

I tried to get one for my banknote collection, but it got lost in the post. :/

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

#252

Post by occamrazor »

sneak wrote: post #220
mywittyname wrote: post #200

Earlier quoted context omitted.

This is possible now, since there's a practical limit on how much business can be conducted in all cash. Even if every bank account in the country started charging an account fee to cover negative interest rates, people would continue to use banks because they are just so damn convenient.

Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.

Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).

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

#253

Post by aliyfarah »

bobthepanda wrote: post #249
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…

I'm still not sure I understand. How would a citizen be issued CBDC if not through an account? Also, wouldn't this widespread use require in-kind withdrawal of cash from circulation to have any real effect?

Why is cash withdrawals from circulation be important to CBDC?

Btw I don't think OP argued citizens wouldn't need an account.

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

#254

Post by bobthepanda »

aliyfarah wrote: post #253
bobthepanda wrote: post #249

Earlier quoted context omitted.

I'm still not sure I understand. How would a citizen be issued CBDC if not through an account? Also, wouldn't this widespread use require in-kind withdrawal of cash from circulation to have any real effect?

Why is cash withdrawals from circulation be important to CBDC? Btw I don't think OP argued citizens wouldn't need an account.

> Why is cash withdrawals from circulation be important to CBDC?

>> For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0.

This would only really be effective if CBDC became prevalent enough to actually make a dent in money supply. What proportion of money would have to be CBDC for this to actually have an impact, and would we get there by just pure issuance of CBDC or by taking cash out of circulation and replacing it with CBDC?

> Btw I don't think OP argued citizens wouldn't need an account.

>> CBDCs are a way to give the public M0 without putting the central bank into the retail banking business.

I don't know how you would avoid retail banking unless you were to issue it via a means other than an account.

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

#255

Post by oblio »

jd842 wrote: post #201
oblio wrote: post #116

Earlier quoted context omitted.

The "pushing" isn't the problem. The nature (good/bad) of the thing being pushed is. The imperial system is objectively inferior since the metric system has been created.

It's inferior for some purposes. It's still ideally suited to the purposes for which it naturally evolved in the first place.

Even about that, I'm not sure. The metric system is damn good even for day to day measurements.

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

#256

Post by ObserverNeutral »

laurencerowe wrote: post #248
ObserverNeutral wrote: post #238

Earlier quoted context omitted.

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 hav…

Money is just a unit of account. But without enough of it the system gums up and people are left unemployed. We moved on from the gold standard for good reason.

there is no proof of this

also let the dollar be infinitly divisible up to the 10th decimal and then let's talk about the system clogging up

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

#257

Post by seunosewa »

occamrazor wrote: post #252
sneak wrote: post #220

Earlier quoted context omitted.

Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.

Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).

Wow. Why?

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

#258

Post by [deleted] »

bobthepanda wrote: post #254
aliyfarah wrote: post #253

Earlier quoted context omitted.

Why is cash withdrawals from circulation be important to CBDC? Btw I don't think OP argued citizens wouldn't need an account.

> Why is cash withdrawals from circulation be important to CBDC? >> For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. This would only really be effective if CBDC became prevalent enough to actually make a dent in money supply. What proportion of money would have to be CBDC for thi…

[deleted]

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

#259

Post by aliyfarah »

bobthepanda wrote: post #254
aliyfarah wrote: post #253

Earlier quoted context omitted.

Why is cash withdrawals from circulation be important to CBDC? Btw I don't think OP argued citizens wouldn't need an account.

> Why is cash withdrawals from circulation be important to CBDC? >> For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. This would only really be effective if CBDC became prevalent enough to actually make a dent in money supply. What proportion of money would have to be CBDC for thi…

>I don't know how you would avoid retail banking unless you were to issue it via a means other than an account.

There's a lot more that goes into retail banking than just having an account. Of course citizens would need an account, how else will they be tracked :) I think the OP meant that the central bank could give customers an account for the sole purpose of holding their digital "crypto" coins and sending/receiving money with it....without having to do provide all the other services that go with retail banking like loans, credit cards etc.

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

#260

Post by neilwilson »

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…

"They are not operations on actual pounds (i.e. on the central bank currency)."

They are - because the deposits are insured 100% up to £85,000 by the deposit protection scheme.

You can show mathematically that an insured system and a in-specie system are exactly equivalent.

If I have more that £85,000 then I put it in National Savings for absolute security.

That covers over 99% of "digital cash" situations in the UK.

Neither of those things have anything to do with the central bank, because central bank money in the UK is also a derivative. The operational assets of the Bank of England are a claim on the National Loans Fund with recourse to the Consolidated Fund and ultimately parliamentary authority. Which is where Sterling truly originates.

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