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Central Bank Digital Currencies are coming

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Re: Central Bank Digital Currencies are coming

#141

Summary of the biggest problem with digital currency managed by central banks: Central banks can use negative interests in order to force people to buy stuff. In the current system people would just withdraw cash in order to avoid negative interest rates if they are too high/low. In the future people will be forced to pay the interests or buy stuff. Governments want to use this mechanism in order to control the econo…

Negative rates only work against the bond market. It's not being applied against against cash balance. In large part negative rates drain money out of fixed asset funds that are typically people's retirement funds.

Negative rates will in majority be harming the boomers reducing their pensions. They are legally forced to be in these investment systems. Boomers who don't even think they can quite retire are going to watch their investments shrink. Why is that happening? Because they didnt invest enough and have been believing they will live off the younger generations. They ran up huge debts and expect the millennials to pay.

That's literally impossible. Intergenerational debt is not possible and the boomers now sit there wondering why they cant retire when they planned to do so; despite not saving enough for retirement.

Re: Central Bank Digital Currencies are coming

#142

Summary of the biggest problem with digital currency managed by central banks: Central banks can use negative interests in order to force people to buy stuff. In the current system people would just withdraw cash in order to avoid negative interest rates if they are too high/low. In the future people will be forced to pay the interests or buy stuff. Governments want to use this mechanism in order to control the econo…

Negative rates only work against the bond market. It's not being applied against against cash balance. In large part negative rates drain money out of fixed asset funds that are typically people's retirement funds. Negative rates will in majority be harming the boomers reducing their pensions. They are legally forced to be in these investment systems. Boomers who don't even think they can quite retire are going to wa…

How can boomers simultaneously be sitting on all the wealth and ‘not have saved’ enough?

This argument makes no sense.

As far as I can see, the boomers just expected there to be continued economic growth in good faith, since that is what they experienced and younger generations have found finding this isn’t true.

Why isn’t it true? Very little to do with boomers mentalities, and much more to do with how economic growth has shifted outside the US.

That is absolutely the result of US political decisions, but much more the fault of economists and politicians rather than “Boomers” as a whole.

If younger generations think they can improve their lot by draining ‘money’ from Boomers, we are going to have a different problem, since the value of anyone’s money is determined by the current health of the economy. Yes a few millennials will be able to displace a few boomers from their decaying houses, but we’ll still have a bunch of sick old people to take care of somehow and an unproductive economy.

Re: Central Bank Digital Currencies are coming

#143
post #28

Earlier quoted context omitted.

How? Maybe it is because I live in Denmark where I would claim we are close to a de facto digital currency: a large group(most people under 40) use credit cards or a phone based payment solution for all purchases, use a phone based solution for settling smaller ( While I understand the technical differences, I cannot see why from a policy perspective the government or the central bank would be interested in a cryptoc…

Why this dichotomy between "non-physical cash" and "decentral currency"? These things are linked, but strictly speaking you don't have to choose between them. Abolishing physical cash does not imply migrating to a decentralised currency. But migrating to a decentralised currency is probably only possible by abolishing physical cash; I don't see gold coins coming back. So, how is it different to have your money contro…

Yes but exactly because the decentralized currency is much more difficult to control and explicitly circumvents parts of current banking regulations, I have a hard time fathoming that policy makers and central banks would advocate decentralized currencies. The post that I was replying to seemed to suggest that CBDCs would be decentralized or in some way inherently different from the centralized digital settlement of transfers that exists in many countries today, and I want to understand why that should be the case? Why would CBDCs work more like decentralized cryptographic currencies than the current financial system?

I am not passing a judgment on whether decentralized currencies are good, but I do not understand why central banks would move in that direction.

Re: Central Bank Digital Currencies are coming

#144
post #142

Earlier quoted context omitted.

Negative rates only work against the bond market. It's not being applied against against cash balance. In large part negative rates drain money out of fixed asset funds that are typically people's retirement funds. Negative rates will in majority be harming the boomers reducing their pensions. They are legally forced to be in these investment systems. Boomers who don't even think they can quite retire are going to wa…

How can boomers simultaneously be sitting on all the wealth and ‘not have saved’ enough? This argument makes no sense. As far as I can see, the boomers just expected there to be continued economic growth in good faith, since that is what they experienced and younger generations have found finding this isn’t true. Why isn’t it true? Very little to do with boomers mentalities, and much more to do with how economic grow…

>How can boomers simultaneously be sitting on all the wealth and ‘not have saved’ enough?

I don't believe my argument is that boomers are sitting on all the wealth. That's the problem.

Who owns the most wealth is just a matter of who has died. The older the generation, the more likely they own significant wealth. Silent and older generations used to own >78% in 1989 and has been declining since. The boomers peaked around 55% several years ago and are now declining. Millenials are more wealthy today than ever before.

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...

Today: Silent gen, 17%, Boomers, 53%, millenials, 25%.

The Boomers needed to save significantly more and be up in the >75% range before their retirement. The very problem is that the boomers aren't sitting on all the wealth.

>As far as I can see, the boomers just expected there to be continued economic growth in good faith, since that is what they experienced and younger generations have found finding this isn’t true.

To be of this position you would not need to run deficits. Governments and others would not be in this much debt. In fact if you were to debt adjust the wealth figures. I bet there would be an even worse scenario. The boomers didn't save enough and were busy running up debt living outside their means.

>That is absolutely the result of US political decisions, but much more the fault of economists and politicians rather than “Boomers” as a whole.

Well this is happening in virtually all countries. Note: I'm not an American nor am I in the USA.

Your argument also seems to want to blame politicians and economists rather than the people whom they represent. That's incorrect, these are decisions that the boomers made. If they outsourced the decisions poorly, the blame still lays with the boomers.

>If younger generations think they can improve their lot by draining ‘money’ from Boomers,

This is the reality of intergenerational equity. 1 generation cannot indebt the next one. The boomers as they retire will depend on younger generations to service their needs. That labour cost will automagically adjust to service the debt.

At the end of the day, that's exactly what negatives rates represent. The older you are, the more likely you have a low risk pension portofolio. Which means you will be in negative rates. The money is draining from the boomers right now. Google the 'real yields of bonds are negative' as they are often lower than inflation.

>we are going to have a different problem, since the value of anyone’s money is determined by the current health of the economy. Yes a few millennials will be able to displace a few boomers from their decaying houses, but we’ll still have a bunch of sick old people to take care of somehow and an unproductive economy.

We are seeing this in other aging countries like Japan and South Korea. Seniors are largely speaking ending up in poverty. It also creates a new problem of 'silver crime' whereas the seniors basically have to go back to work or start stealing.

Also yes, you are correct about that. The labour shortage of 2030 is set in stone. There wont be enough people to service the elderly or really any skilled trade will be quite short. Therefore wages increase but as we already established, the pensions are shrinking under inflation and negative rates. Seniors wont be able to afford to take care of themselves.

Re: Central Bank Digital Currencies are coming

#145
post #142

Earlier quoted context omitted.

How can boomers simultaneously be sitting on all the wealth and ‘not have saved’ enough? This argument makes no sense. As far as I can see, the boomers just expected there to be continued economic growth in good faith, since that is what they experienced and younger generations have found finding this isn’t true. Why isn’t it true? Very little to do with boomers mentalities, and much more to do with how economic grow…

>How can boomers simultaneously be sitting on all the wealth and ‘not have saved’ enough? I don't believe my argument is that boomers are sitting on all the wealth. That's the problem. Who owns the most wealth is just a matter of who has died. The older the generation, the more likely they own significant wealth. Silent and older generations used to own >78% in 1989 and has been declining since. The boomers peaked ar…

“Your argument also seems to want to blame politicians and economists rather than the people whom they represent. That's incorrect, these are decisions that the boomers made. If they outsourced the decisions poorly, the blame still lays with the boomers.“

Only if your goal is to create an arbitrary division between generations using the concept of blame.

As far as I can see there is literally no amount of money the Boomers could have ‘saved’ that would have made any difference if there isn’t enough surplus value (not money) generated in the present day economy to service their needs.

This has nothing causal to do with generational debt - that is just a symptom.

It has everything to do with economic decisions made by politicians and economists, around education and trade policies, that leave the US (and many other economies) in a weak position.

You can certainly argue that whoever was around to vote for these policies is responsible for them, but that’s a weak position.

Voting is too coarse grained to assign that level of responsibility to the group.

Individual political and economic decisions are in fact important, not who happened to be a certain age when the decisions were made.

Re: Central Bank Digital Currencies are coming

#146
post #140

Earlier quoted context omitted.

That's not a U BI then is it? Isn't the point of a UBI to give it to everyone universally regardless of their specific situation?

Yeah it's not UBI, but it still gives rise to a set of people described by "UBI consumer serfs". Who are basically locked in, because even if they got a job, they'd likely be worse off than before, having to pay for more things that were free previously, and having much larger personal costs (having to get up at 6 am every day).

Yes my point was that that wouldn't happen with a real UBI as it wouldn't go away if they got a job or started saving money.

Re: Central Bank Digital Currencies are coming

#147
post #130
post #37

Earlier quoted context omitted.

Sweden is probably the most advanced in considering an "e" currency and so far the proposals have been of keeping the two-tier system, i.e., you still have an account with a bank.

The riksbank seems to be advocating an "e-krona" where each citizen would use a state-issued digital identity to directly use central bank money as a means of payment similar to physical cash, no?

They have not decided whether e-krona would be a 'account-based' (like you say) and a competing/backup payment system. Or a 'value-based' where it's 'stored on a card'. At the same time they do not want to impact lending facilities of banks so if they go with the first option they will most likely deemphasize it considerably to keep deposits in traditional banks. The 2nd option seems to me like a total fail, similar to what Chipknip was in the Netherlands. The main motivation for the ekrona seems to be the move away from cash, but Sweden has been cashless for a long time now (between Swish and cards).

Re: Central Bank Digital Currencies are coming

#148
post #127

Earlier quoted context omitted.

These "digital currencies" are simply new types of bank accounts where retail consumers can hold money at central banks. They are no more digital than any other bank account. They have absolutely nothing to do with crypto either.

..are are they a "currency" in any augmented way, or is it just currency as it is now?

The only currency involved in a digital dollar is USD. There is no new currency proposed here.

The thing that makes an existing dollar digital is being in a new type of bank account that is held by the fed instead of a retail bank. So this is an new type of bank account, not a new type of currency.

I do a youtube channel on monetary issues and my last video was specifically on this topic. Feel free to check it out if you are interested

https://www.youtube.com/watch?v=n9qnhV9SAyg

Re: Central Bank Digital Currencies are coming

#149
post #117

It may come across as snark, but I happen to believe this quote of Bill Hicks truly captures most of my thoughts on the subject. “Rock stars against drugs – that's what we want, isn't it? Government-approved rock-n-roll? Woo! We're partying now!” The entire reason for crypto is the already ridiculous level of control exerted over various gatekeepers. How do I know? I am part of the system.

The systems being proposed here have absolutely nothing to do with crypto currencies, blockchain, bitcoin, or anything tokenized. They are simply reshuffling of rules about how central bank reserve accounts work.

The thread directly references that the main idea for this came from Libra, a crypto digital currency that is backed by a blockchain. So I don't know where you're coming up with that.
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