71–80 of 149 posts
one frightening prediction I've heard is that we will have parallel economies. One for UBI consumer serfs who receive a monthly stipend that expires at the end of each month, another for people who work and receive payment perhaps in other independent currencies, and another, which already exists, for the very wealthy who hold wealth primarily in tangible assets like real estate and fine art. This will either fail sp…
Earlier quoted context omitted.
> The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, that is, central bank digital currency (CBDC). Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments https://www…
What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?
European banks recently started toying with the idea of passing down negative interest rates to customer bank deposits, so that banks are less squeezed by reserves yielding negative returns (breaking the typical bank business model). Just think, if CBDCs pass down the negative interest rates to everyone's cash, inside or outside of banks. That's not a currency I would be happy to hold.
And that's the very goal of the monetary policy. Pushing you to invest into something riskier (including selling the currency).
Earlier quoted context omitted.
> The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, that is, central bank digital currency (CBDC). Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments https://www…
What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?
Are these proposed central bank “digital currencies” anything more than a centralised or federalised database of who-owns-how-many? And if so, how does that differ from what we have now? That is, in a European country, I have an account with my bank, and my bank has an account with the central bank (or the two interact in some other way). My understanding of the current system is limited, I merely know some large por…
This is, however, a simplification. Central bankers like this idea because it gives them more control. Most people should be suspicious of this idea for the same reason.
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I think if we want to argue that central banks will soon be pushing for CBDCs to let people have accounts directly with the central bank we need to argue why they at the same time are opposing* narrow banks, which to me seems to be a different technical tool achieving an equivalent goal? * At least the Fed seems to be: https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
The main reason the Fed is rejecting this is that it doesn't want to give banking privileges to entities which don't perform the core function of commercial banks from the Fed's point of view (lending) and really dislikes the idea of the public getting reasonably high interest rates for zero risk and zero contribution to the economy for reasons discussed in your article. If that's proposed as a goal for CBDCs, they w…
Earlier quoted context omitted.
Well, the current system as you describe is a two-level system with your bank in between; a CBDC allows you to "have an account" directly with the central bank directly and make/receive payments without needing a retail bank intermediary. It also enables central banks to achieve policy goals that they could not earlier - for example, in the last big crisis all the quantitative easing did not result in as much actual…
I read somewhere that in the US some banks took the QE money and put it back into their accounts with the Fed where it collected interest. Rather than lend it out, they essentially got paid just to hold it. There’s an economic argument saying that it made them safer, etc. but it doesn’t sound quite right to me.
When QE did involve the purchase of assets from banks (i.e. QE3 with MBS/ABS purchases, and in the EU where banks held a lot of govt debt) then it did lead to increase lending but the effect varied significantly (for example, in the EU the effect was tiny because most banks in the region are functionally insolvent).
So QE is not thought to have any particular effect on bank lending, and is generally not used with that aim in mind now. I think this was thought to be true in 2008 but we know now that it has no/little effect (i.e. QE is mainly effective through portfolio rebalancing). And central banks that did try to increase bank lending (the UK in the mid-2010s, and the ECB...always) use other techniques (i.e. FLS, LTRO...which, iirc, are direct lending to commercial banks by central banks...I think, I don't follow this stuff closely anymore).
Just generally too, if commercial banks are holding a lot of govt debt then that is usually a sign of problems elsewhere (i.e. the EU).
These are not the cryptos you're looking for. You don't want ones that trade like currencies, you want ones that trade like stocks.
Here's the full interview