I am taking part in a discussion on central bank digital currencies (CBDC) this evening.
The event brings together these speakers 6pm on Zoom:
- Brett Scott, Author of Cloundmoney & Economic Explorer
- Danny Kruger, of the Treasury Select Committee (responsible for scrutinising the project)
- Abdul Jabbar, Associate Professor Data Strategy and Analytics, University of Leicester
- Richard Murphy
If you've not yet sent your response to the Bank of England consultation (deadline a week from now) this is an ideal opportunity to delve deeper.
The event can still be booked, here.
I believe a recording will be available afterwards.
I will be expressing my concerns about the apparent lack of awareness amongst those proposing the CBDC of its likely impact on the macroeconomic environment.
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I find this very worrying.
It’s another step away from real money – cash – and the potential to control money in negative ways we may not be able to imagine at the moment.
It looks like a way of increasing the money supply but for who? I’d rather the state issued a digital currency rather than some guy on an encrypted laptop somewhere but I still think it’s going to add to the chaos, create bubbles and reduce our freedom. But also, it’s a crook’s charter for sure.
Danny Kruger ‘over seeing it’. Oh dear…………………………………….
Agreed re Kruger
And much of this proposal really worries me
For me, the key issue is the impact of credit provision to the real economy. If people choose to hold CB money will banks be able to engage in maturity transformation and take credit risk if they cease to be central to the money transmission business?
Also, if banks ‘administer’ CB accounts for people (which seems the plan) there will confusion and finger pointing when things go wrong.
This is key for me
It seems the government wants the debit of banking (risk free deposit taking)
Who provides the credit side?
My thoughts exactly.
I recently heard this described as a clever application in search of a use-case. What exactly is it for? Rather than, say, a cheap, easy and secure national instant payments mechanism, available to all with minimum fuss.
I don’t think most central bankers even understands it, let alone what it is for as yet.
Well, the vast majority of money backed by our central bank is already held and the majority of financial transactions are already undertaken by electronic means (what we used to call “on paper”; that is, through book entries) not through the holding or exchange of physical markers of value (such as coins or notes, or seashells). So we already have an “electronic currency” issued by our central bank. I would be asking the proponents of any new central bank “electronic currency” what advantages it would offer over would the one we already have, that we call pounds sterling.
If the answer is “easier, cheaper, faster, more secure payments” then I would be focusing on the payments system first. Perhaps that invokes distributed ledgers but I don’t see why that necessarily requires blockchain or crypto technology.
The problem with CBDCs is that they break the barrier =between base and bank created money.
If we could all deposit up to £20,000 CBDC wallet, as is proposed, frankly most of us would not notice the difference from what we do now.
But the banks would. They would not have those deposits. They would only pick up liabilities.
But then think what would happen to the gov’t balance sheet. Suppose 20 million people deposited £2,000, That is £40 billion on government borrowing. Some would do more. You can easily see that number rising rapidly. Bit what does that mean for the way we think about government debt – which this would be under current nomenclature.
Then extend the idea to overnight deposits and the repo market goes, bit so too does some use for gilts.
Has any of this really been thought through?
And if this ‘money’ is programmable what are the civil liberties dimensions?
What is it for? Who is it for? What, exactly is it? Where is it located on the hierarchy of money?
“The banks would not have those deposits. They would only pick up liabilities.”
Is it money? The banks essentially create credit; not money; we find that out in a crisis.
I do not know what it is. What is the accounting? As you suggest, do we know if the central banks know what it is, or what will follow from CBDC?
There is another problem here, surely? The elephant in the room? The black economy.
All relevant questions
No one had good answers last night: we only had questions
CDBC are framed in economic terms, hence the discussion above, to obscure the real motive and problem with them. Thomas Fazi nails it in his article on Unherd, https://unherd.com/2023/02/the-tyranny-of-digital-currencies/ :
“CBDCs, after all, would give governments sweeping powers of surveillance and control, allowing them to instantly punish citizens and consumers for behaviours deemed undesirable, by fining them or even locking them out of their accounts at the flick of a switch — in much the same way as China already uses its “social credit” system to prevent people from buying plane and train tickets for so-called “behaviour crimes”. “
I accept all that
I am looking at the macroeconomic issues