"As things now stand, the U.S. government lacks the infrastructure to disperse payments widely, and given the nature of the current crisis, speedy action is critical."
I call bullshit. Back when there was a small budget surplus, Bush sent us all a check in the mail. That was almost 20 years ago. This stinks of pushing an agenda.
We learned from the 2008 crisis that bailing out banks and industries causes massive social strife. So now they will bail out people in addition to banks and favored industries in order to make it less controversial. No one cares about $100 billion to the banks when they get a $500 check.
By bypassing banks with Fed Accounts, it just makes handing out cash even easier. They do it in other countries all the time. Saudi Arabia routinely gives citizens thousands of dollars direct to their bank accounts to keep them sated.
$500 isn't going to do jack. Families need $4k per month and individuals need $2k per month. And then giving poor people nothing is a giant slap in the face. All this means testing is too slow. Limit it to exclude individuals who made over $130k or $200k combined last year, but that's it. Everyone else gets their Nixonbucks pandemic checks because the marginal propensity to consume is going to be higher than usual with 20-30% unemployment, or people will starve, riot and/or revolt.
It might buy a couple of rolls of toilet paper too. When rent is $1500, food costs $450 a month for a family now that staple items in particular are scarce and more expensive, car payments aren't going away, and rent will become due after the 90 day pause because there will be no forgiveness. I predict bread lines in 6 months and far more massive homelessness without a proper bailout of small businesses and the people, rather than trillions of corporate welfare. Trickledown Reaganomics corporate welfare will never work, only trickle-up works.
When people don't have money to meet their non-discretionary needs and unemployment reaches 20-30%, which is worse than the Great Depression, what follows is deflation and depression on an unprecedented macro scale. At the street scale, starvation and homelessness would be the impact; Venezuela, Cuba and the UN would be flying in doctors, refugee camp materials and food to the US.
Massive UBI directly to individuals and small businesses enough to meet basic needs is essential, and will be spent into the economy because MPC will be nearly 1.0. Otherwise, the US economy will contract more and for longer than at any point in recorded history.
The thing is they bail out institutions and corporations and the people who fucked up did not necessarily get punished., while people who get hurt are not compensated.
There is a huge incentive to take risk on others' behalf and profit on one's own, then brag that one is a risk taker and an alpha male. You can see this behavior pretty much everywhere.
That doesn't help the millions of recently unemployed. Especially if it takes months for the economy to recover and for those unemployed to be rehired.
Why? I can pay my taxes just fine and I'm still employed because I'm a software engineer. Is there an argument that this will benefit either the economy or keep Americans alive beyond the general, non-crisis argument to get rid of taxes?
Also, what's the plan for paying for government services, such as the military budget that's funding the Army Corps of Engineers that's building emergency ICUs?
This terrifies me more than just about anything they're doing. I think a lot of people just don't see the danger in the total lack of financial/transaction privacy that most cashless Americans live under. This threatens to extend that even further.
If this goes through, then your options for receiving money from the government you might well need to not starve are just two: accept a payment to your 100% surveillance bank account, or accept a 100% surveillance "digital cash" payment if you're unbanked.
In all cases the state will receive detailed permanent records of when, where, and how you spent the money.
Not just surveillance, it would be much easier for the government to restrict where you can spend your money, place a time limit / expiration on when the money can be spent, and inject cash into the economy much more quickly (no overhead) than they can now.
Surveillance accounts are already the case. And, we already conduct "Digital Cash" payments every day - Credit cards, ACH and Wire transfers and many other means where physical paper bundles of cash aren't literally shipped when you send money to another country.
I guess, can you exemplify what exactly the government would be able to do with this bill vs. what it can already do? If they send you a check, that's not helping you much. It goes through the bank and there is 100% traceability of the $$$ from the Fed to your bank account which is already very much "Digital".
Not quite. I can spend cash and nobody knows when or where I did so.
> If they send you a check, that's not helping you much. It goes through the bank and there is 100% traceability of the $$$ from the Fed to your bank account
Many, many Americans receive checks as payment which they then take to a service which will exchange the check for cash in hand, no bank account required. The check issuer has no idea where or how the money gets spent.
FED -> JOE cashes the check -> Buys private stuff with $$$ cash
The FED still knows that it went to JOE. Whether they use the bank as the intermediary or a check-cashing service as an intermediary, its all traceable.
May be my logic is flawed here? To me, it doesn't make any difference. In both cases, what JOE bought with hard $$$ cash is indistinguishable. I think we're making a big deal out of this - I haven't read the bill but I am presuming that its just a modernization of physical mailing of checks to some wire transfer.
I don't think they intend to make any convenient routes for these digital dollars back to untraceable cash.
After all, they'll be debit-card accessible to buy food or supplies; why would you need cash unless you're going to buy drugs or something?
They're talking about using these digital dollars instead of checks, for the unbanked and those without addresses at which they could receive a check, et c.
> Many, many Americans receive checks as payment which they then take to a service which will exchange the check for cash in hand, no bank account required. The check issuer has no idea where or how the money gets spent.
And they pay dearly for the privilege. I imagine the number of Americans who use check cashing for privacy is extremely small compared to the number who use it because they're in poverty and unbanked.
You're talking about payday loans versus cashing paychecks. It's usually a token fee to cash a check at a grocery store or free if you go to the bank that issued the check. Some people live by cash. Some businesses still operate on cash only basis.
All you have to do is look at prisons as a good example, standard currency is tightly controlled, typically not very available to inmates and somewhat pointless to inmates anyway. So alternative currencies are used. Drugs, cigarettes, food, weapons, personal hygiene stuff, people, the list goes on.
Currency is only as meaningful as its usefulness to people. If a large number of people can't or won't use a currrency, they'll just find another. It wouldn't be the first time in history a majority currency became too inconvenient for a large number of people and alternatives were found.
It’s very likely the majority use the currency their government pays them in and requires citizens to pay taxes with. Alternate currencies will always exist, governed by the needs of market participants.
When I get a check or ACH direct deposit, I can go to the ATM and get cash out of it and spend that cash, so while there is a record of "I got paid" and "I withdrew $200" (and "I paid my credit card bill, and here's what I bought with it"), for the things I buy with cash, there's no more record than that.
Can I do the same with digital dollars, or must it be spent directly out of the account?
I guess that's actually a practical question in general, independent of the privacy concern. Can you go to any member bank and withdraw cash?
I have always been a huge fan of the idea of the Fed providing deposit accounts directly to citizens, at no cost. Banking should be a utility, not a for profit business (you can carve off lending and investments to for profit entities that do this, separate form traditional banks), and you suddenly make the unbanked the banked (and nuke alternative finance providers that charge for services that should be free, check cashing and the like; "its expensive to be poor").
Your credit card data is already sold [1]. Your banking data is already sold [2]. Read the privacy notices you receive from your banks and credit cards to see when and to whom (these notices are required by law). Any transaction over $10k generates a CTR [3]. Any transactions that appear to be structuring are going to generate a SAR [4].
The solution, as always, is regulation, governance, and oversight, not outright turning down the idea. At the same time, the ability to turn your fiat into physical currency must always be preserved for privacy reasons; require the Fed issue debit cards and all ATMs accept them for dispensing hard currency.
> Banking should be a utility, not a for profit business
100% agree. Just consider the overhead of the massive government policy infrastructure required to adequately support all of the banks which exist purely to turn a profit off of people through oftentimes usurious methods. There's no reason the federal government can't simply provide a bank run not-for-profit.
However, the Fed is not the federal government, it is a private corporation; so this is not the correct entity. Instead, the national bank you're suggesting would necessarily have replace the Fed with a fully transparent public institution.
You'll find that most times in history when a Western country tries to do this, the moneyed elites do not enjoy it.
I agree with most of what you're saying, but think the Fed is the ideal route for such a role if we presume that at some point in the future, they will acquire an outsized amount of financial assets similar to what central banks in other developed countries facing stagflation have done (Bank of Japan); it then becomes trivial to issue a citizen's dividend from those assets to citizen accounts. I'd settle for a national government-operated bank if I had to.
There's a reason the Fed is disjointed from the normal branches of government and does not answer to Congress or the President directly. You need that separation to keep the system from corrupting itself. If it were up to Congress, they'd print $100 trillion a year and spend until the system collapsed on itself. Some would argue we've already gotten to that point and we just have yet to see it play out in the economy. That may be true. There's a lot of very real systemic risk in the market right now. Financial mismanagement has destroyed many empires. America's system is vulnerable. Retail banking should be the last of the Fed's concerns at this time. It doesn't cost much, if anything, to open a checking account in the U.S. A lot of the unbanked either have illegal status and are keeping their funds off the books for good reason, or they choose to use cash for privacy reasons, which is totally valid.
If you want a non-profit bank, that's what credit unions are for. They've been around for decades.
Your premise is that a person needing money not to starve is worried if the government knows their money is going to food? Or rent? Or a student loan? Or a hospital bill?
I'll take at face value that this person does exist. They should take the digital payment and use it for a single or two lump sum payments they don't care about being tracked, like rent.
Is this really a Binary situation, where as soon as one or two not so private payments are trackable, now you can't use cash for the rest anymore? Maybe just don't use government stimulus for private things?
I'll buy this, if you're making a slippery slope argument about cash being completely obsoleted.
Agree with this. Humans/civilians are not government employees or public entities just by being alive. I'm probably not as big of an advocate for privacy as many of my peers, but trying to keep a public spending ledger of individual people is crossing a line.
Once fed "digital cash" dollars exist and can be used by everyone, including the unbanked, they have a plausible reason for discontinuing the use of "inconvenient" paper cash. After all, it's only used for money laundering, drugs, criminals, gambling, and prostitution. Who wants that stuff?!
Once that happens, there is no option whatsoever for trading with everyday people that does not involve complete surveillance, recorded and saved for all time.
Your movement at all times will then be reported in realtime to the federal police, provided you eat or buy fuel or water at any point during your travels (just as it is today if you use a payment card or contactless payment).
> they have a plausible reason for discontinuing the use of "inconvenient" paper cash. After all, it's only used for money laundering, drugs, criminals, gambling, and prostitution.
This excuse is already being used against the £50 note:
I won't disagree with any of that..but, for example, if I pay rent in cash, I will cash out the Fed account to pay rent. The Fed account is simply a mechanism for me to cash out. But yeah, someday the bills themsleves will have RFID-like strands, and monetary privacy lost.
Agreed. Most money is digital money held by banks and businesses. Even with paper dollars, something like 95% of the paper money supply is in $100 bills, which the typical American only rarely uses.
Most Americans are not representative of the most common uses of the USD when you weight things by payment volume.
Which is why measuring economic health by GDP is utterly useless. It only measures the wellbeing of a minority of Americans -- those that have the most money to spend.
I call bullshit. Back when there was a small budget surplus, Bush sent us all a check in the mail. That was almost 20 years ago. This stinks of pushing an agenda.