Timothy Taylor has helpful post. He cites the potential to lower the cost of making payments compared with using bank deposits. But then
At least to me, other advantages sometimes cited for a central bank digital currency often miss the point. For example, one will sometimes hear claims that the Fed needs a digital currency to compete with the cryptocurrencies like Bitcoin and Ethereum. But it’s not at all clear to me that these cryptocurrencies are anywhere near unseating the US dollar as a mechanism for payments, and it’s quite clear to me that competing with Bitcoin is not the Fed’s job. Or one will hear that because other central banks are trying digital currencies, the Fed needs to do so, also. My own sense is that it’s great for some other central banks to try it out, and for the Fed to wait and see what happens. There is a hope that zero-cost bank accounts at the Federal Reserve might help the unbanked to get bank accounts, but it’s not clear that this is an effective way to reach the unbanked (who are often disconnected from the financial sector and even the formal economy in many ways), and there are a number of policy tools to encourage banks to offer cheap or even zero-cost no-frills bank accounts that don’t involve creating a central bank digital currency.
For now, I file CBDC under “solutions in search of a problem.”
Seems pretty clear to me the purpose of these digital currencies is to track all transactions.
This
+100
Bingo!!!!
Yup.
CBDCs, digital health passports, universal digital IDs are all tools for surveillance and control.
With CBDCs, they want the ability to track and control transactions on a granular level.
With digital health passports, they want the ability to hold your freedom’s hostage until you consume a pharmaceutical product.
With digital IDs, they want to a centralized hub of your digital identity. They can also incorporate the aforementioned two systems into this hub.
I don’t get why “libertarians” are so comfortable with this proposition. This has nothing to do with the free-market, and more to do with public-private partnerships/deals between state and corporations.
And no, this isn’t “conspiracy talk:” the agendas are out in the open for anyone who cares to look, and in some cases, being implemented right now.
https://www.europeandatajournalism.eu/eng/News/Data-news/Biometric-IDs-and-health-passports-Safety-at-the-expense-of-personal-freedom
https://www.ukcolumn.org/article/race-new-digital-financial-identity-every-global-citizen
Another purpose of a central bank digital currency is to provide another devaluing offset for yet another currency that has reached (or is/or will reach) its devaluation horizon.
Throughout history, when you’re actively doing things that devalue and destroy value in a monetary system you have to create another parallel system with a corollary value for asset holders to jump ship and dogpile into.
And just like Tom above, your control of the next currency/value iteration MUST BE FIRMLY in your grasp and no one elses.
“MUST BE FIRMLY in your grasp” so you can devalue and destroy whilst lining your pockets.
Arnold, the problems this solution is searching for are real. Don’t kid yourself. They are just not problems from your POV.
BTC is an asset, ETH is smart contract. Fed competing against them would be similar to competing against S&P 500 or AWS, respectively, makes no sense.
However, the current USD is also in many ways a technology due to the ability to wire transfer via Swift. This is a big part of the value of USD as reserve currency. One drawback is that clearing is on the order of weeks even though it appears shorter for trusted entities. Other central banks (think China or EU) could develop a digital currency that would be far superior to the USD-Swift approach. At that point much of overseas USD would likely come home – at least petro dollars, resulting in transfer of US held assets to foreign entities and increasing the rate of inflation. Protecting fiat by maintaining some level of reserve status is likely the major value of a Fed coin.
Oddly, BTC could actually shore up some USD use as a medium for transfer back and forth between the two. (Think El Salvador) BTC provides some protection against currency devaluation, while USD provides protection against volatility of BTC. Not sure if this plays into decision but is likely a side benefit. Tracking all transactions probably does play into the decision but is also likely a side benefit.