This makes no sense. Are you saying that digital currency is a fancy term for a direct deposit? We've had direct deposits for a very long time. My tax refund comes as a direct deposit. The government seems to be able to directly give me money digitially just fine.
> Are you saying that digital currency is a fancy term for a direct deposit?
Basically yes, but specifically only for the case of a direct deposit between the Federal reserve and an individual. That doesn't currently exist.
But that's also basically my point. CBDCs are nothing new from an operational or technological perspective which I think is something many people are getting confused about. They are a new thing in terms of policy capabilities for central banks. They are not a new thing in any other way. All the technology already exists.
Fair enough. I guess it feels almost unbelievable that all this fuss is over something so mundane.
I guess i dont really understand why though. It sounds like the central bank is thinking about becoming, well, a normal bank. We already have normal banks. Governments can already transfer cash to accounts in normal banks. Governments can already sell bonds to people who want some sort of very stable investment backed by the state. What's the point of becoming a consumer bank? Why are they bothering? How do they benefit? Is there anything to this other than the desire to jump aboard the anything-that-sounds-remotely-like-bitcoin-even-if-unrelated hype train.
I think this is actually a monumental shift in the whole US political system were it to be enacted.
Because it drastically broadens the scope of actions the Fed or another CB is capable of therefor increasing its influence and importance. And keep in mind the people running it are not democratically elected and are partially private banks.
Right now the fed basically has no direct tie to the real economy. They always have to act indirectly via asset purchases from large institutions. They basically have one hand tied behind their back all the time. This unties that hand and allows them to interact with the real economy directly and not just the financial intermediaries.
> It sounds like the central bank is thinking about becoming, well, a normal bank. We already have normal banks.
That's not entirely the right way to think about this. The money in your account at a "normal bank" only exists as a liability of that bank, and thus would disappear if the bank goes under. A CDBC would not be a liability of any bank, it would be equivalent to physical cash.
I guess you could still think of that as a "liability of the central bank" because they would be responsible for maintaining the ledger. But a central bank cannot go bust in the same way that a normal bank can.
Technically, at least in the case of the fed, all currency is a liability on the feds blanace sheet, and cbdcs would probably be included in that. That's really just a technicality though.
"Fair enough. I guess it feels almost unbelievable that all this fuss is over something so mundane."
It's because Bitcoiners chants to rally a number of different causes, that pro-Bitcoiners claim through their propaganda will claim it's the solution for A, B, C ... X, Y, Z - from local to global issues - so the group grows by bringing in people who want to solve those issues and believe the claims to be true - who are aligned by what - money, a financial incentive of Bitcoin being structured as an MLM - and arguably has a Ponzi scheme structure as well. Then you have it being global and decentralized, then you get marketing forums online taking it on to be at the base of the MLM, then you get the VC-financial industrial complex aligned with it + amplified by mainstream media.
The Republican party many decades ago was taken over by industrial complexes/corporations - and because corporations couldn't vote - they rallied with narratives/messaging to attract different smaller interest groups to become aligned; Noam Chomsky explains this here: https://boingboing.net/2019/04/20/useful-idiots-r-us.html
Accounts at central banks might make taxation easier for governments, especially if other current (and possibly savings) accounts at normal banks would be banned.
Also it would be easier for governments to select policies based on someones income. E.g. tax high income people more and provide financial benefits for low income people.
Also a universal basic income would be easier to implement if every citizen has only a single account at a central bank.
It would also be easier to watch and seize the transations of people who oppose the governments. Maybe your tax would depend on your social score.
It would allow to automatically punish not only the targets directly, but also everyone who interacts with them. Like, not only would the undesirables not be allowed to get a good job or study at university, they couldn't even buy an ice cream at the corner, because the vendor would be warned that if they accept their money, the vendor's social score will be reduced in turn. (And there is no way to accept the payment without the system seeing the transaction.) The companies would be warned that if they hire them, their tax rate will be increased. The government could enforce social ostracism even if most people wouldn't mind the thoughtcrime per se.
Eliminating the man in the middle(What you call normal banks). Saving costs(Fuck them all!). Tracking(Harr Harr!). Control(Control!). Whatever(Yes. Really.)
Btw. from my point of view the central bank thing would be the normal, what we have now is an inversion, IMO. We're just used
to it because that's how it was and is until now.
Benefit is that currently government insures bank deposit, which is subsidy to banking. For example, FDIC does deposit insurance in US. There is cap in FDIC insurance, which complicates large deposit. We can get rid of all these complexity with CBDC.
FDIC is funded via premiums paid for by member banks, not the gov. That's not a subsidary.
As far as the insurance cap goes, if the new plan is that the central bank doesn't need insurance because it can always print new money, i suppose that's true, but that is one hell of a subsidary and one that sounds scary from a fiscal responsibility standpoint.
No, but it's the consequence of equating a dollar in a database with a real dollar and the subsequent ownership of that dollar. A deposited dollar in your bank account is a low yield investment. You don't own the dollars, you own the promise that you will get your dollars back.
You can have deposit in a bank, and that bank has deposit in the central bank. That's the current situation. With CBDC, you can have deposit in the central bank. This is an important difference.
Important to whom? As a private citizen, why would i want this? As a central bank, why would i want this? Which parties benefit from such an arrangement, which to me seems only superficially different from the staus quo? How and why do they benefit?
One less middleman that can only add extra delay and extra fees.
Also, removes part of systemic risk since "digital currency" is held at central bank and not with retail banks, then it decouples transactions/accounts from deposits/lending. Currently, if a major bank fails because of lending issues, there's a push to prop them up since them failing would also cause immense harm to all the businesses who just transact through that bank, if this is decoupled, then the economic system would be a bit more stable during crisis.
Bank bailouts will become very unattractive since there is a less risky alternative. It's like building a nice bridge that can collapse vs an ugly bridge that will never collapse.
Consider the difference between a Bitcoin and dollars in your bank account. You can own Bitcoin but your bank account just shows how much dollars your bank owes you, you don't own any of the dollars yourself.
