US and Europe Financial Leaders Signal Central Bank Digital Currencies

Federal Reserve Chairman Jerome Powell has just gave a zoom conference with two of his European counterparts that there is the possibility of Central Bank Digital Currencies. Jerome Powell talked about a possible move to Central Bank Digital Currencies. He said this would be slow but transparent process which would require specific authorization from Congress.

This seems to signal that although it may take years there will be stablecoin versions of current major currencies.

SOURCES – Federal Reserve, CNBC
Written By Brian Wang,

46 thoughts on “US and Europe Financial Leaders Signal Central Bank Digital Currencies”

  1. As I mentioned below, the purposes of a CBDC are:

    1. Negative Interest Rate Policy: Be a good little consumer and spend all your money, citizen, or watch your bank balance diminish day by day. This will "stimulate the economy".
    2. Total surveillance of purchases. No dodging the tax man, no purchasing illegal goods, and the government bureaucrats now have a very convenient centralized database they can use to leak embarrassing info about any citizen who has become an inconvenience to the ruling elite.
    3. Can also be used to track location. Absolute 1984 totalitarian surveillance.

    Central bankers are not your friends!

  2. The point is NIRP: Negative Interest Rate Policy. Force people to spend rather than save to "stimulate the economy" by applying a negative interest rate during a recession. It's hard to do that now because people can withdraw cash and avoid the negative rate. With the CBDC there is no zero bound, no cash escape, no liquidity trap.

  3. Tulips were just too perishable. But now with digital tulips, we can go back to investing in them! (As soon as I thought of it, I knew that someone surely was doing it. A quick google, and sure enough…)

  4. I've always wondered if deflation REALLY is all that bad. Deflation tends to happen when the economy slows – but deflation seems more of an effect, not a cause.

    Economists say that inflation forces people to invest rather than leave their money idle – so why are banks paying close to 0% interest on savings, if keeping money invested is so important? If my savings were getting more valuable, would I not keep it in a bank?

    Economists claim that deflation discourage business borrowing – but an interest rate of 5% apparently doesn't prevent that, and that has exactly the same effect on the borrower! If 5% isn't a barrier to borrowing, why would an interest rate of 3% prevent borrowing during a period of 2% deflation?

    My suspicion is that deflation is "bad" simply because government prefers inflation that lowers the value of government debt. There wouldn't be government debt if the government only spent in ways that boosted the nation's taxable GDP enough to pay off debt. But governments like to spend on things that make the politicians look good or that pay off their campaign donors, which often aren't things that result in more tax revenues.

  5. Officially more like 85%, but yeah…
    Which wasn't TOO bad, so long as you could stick your money in a savings account and have it earn at least enough to balance inflation.

  6. I just want to make it clear that I don't know Tangential's friend, not do I approve of their anti-robotic prejudice.

  7. Crypto is flattening the entire world economy. The cost to make international transactions, access capital and borrowing money in second and third world countries is being reduced by almost an order of magnitude. 

    Just yesterday I sent 300usd to an unknown designer on the other side of the world, the transaction was completed in less than 15 minutes at a cost of 2 cents. I’m already using crypto to pay some of my company services and worker’s bonuses. In the next 2 years I pretend to use smart contracts and tokenization on our international fast expansion. 

    The crypto pace is slower than expected, but is still going forward very fast, you just need to look to the right place and pay attention to what the tech savvy early adopter are trying or doing with it in the real world.

  8. Beautiful posts Asteroza. The inevitable necessity of this kind central government system, perfectly correlate with the inevitable necessity of blockchain alternatives.

  9. The crypto market isn't crashing. It's experiencing a correction; just like stocks or any other asset pool. I've ridden through several of these corrections now, and it always comes back to a higher level. Stocks do the same thing. Cryptos are just another asset pool along side stocks and commodities. That's how I view it.

  10. I don't agree with that. Cryptocurrencies aren't currencies; they're assets and asset pools. Sort of like gold or silver but with simply code backing them. Can you eat gold? Well, no. Gold is an asset pool that has value because we as a society place value on it. Same goes for Bitcoin. Ethereum is a little different because of the ecosystem built on top of it, but largely the same as gold or bitcoin.

    As for central banks and cryptocurrencies, they're still a fiat currency. It's an asset pool backed by faith in the central bank running it. Arguably harder to inflate, but still largely the same. The advantage for grubermints is that at the barrel of a gun they can mandate the use of their "coin". Once paper goes away and all you have is transactions committed to a blockchain, every transaction (to include off the books black market or shadow transactions) is tracked and can be taxed. I think this is the real allure to central banks and the feral grunbermint for cryptocurrency. Politicians of all flavors are salivating over the potential tax income.

  11. All money is a bubble, and will crash if a critical mass of people "cash out". This is even true of gold, although the "gold bubble" has survived for thousands of years so far. On the other hand, the US Greenback bubble has lost more than 95% of its value in the last 50 years.

  12. The latest attempt to sandbag the public from taking up non-government-controlled stores of value eg Bitcoin, Monero.
    It will fail like all the previous FUD attempts.

  13. Very true, all governments has demonstrated a distinct desire to inspect all transactions under the guise of law enforcement, and that is far too tempting a data target. Also, deplatforming a dissident becomes supremely easy, as well as tracing their life graph for counterintelligence purposes.

    That said, I have always believed a necessary precursor to UBI will be some sort of guaranteed postal bank account for all citizens, removing the "unbanked" blockage and provide direct deposit of UBI and other benefits. An interesting variation I have seen is the government can in principle only deposit, not withdraw, from the basic citizen account. There's a lot to be said for having a digital first postal banking system for all citizens. By having a major and common interface, it also accelerates the API-ization of financial activities.

  14. Has your friend ever made an amused comment online, laughing at those poor robots from Boston Dynamics being kicked and nearly falling over?

    Or, if not online, within 10m of an active cell phone. Or a voice activated, cloud based system of any type.

  15. I hear that Etherium fees are very pricey and that's driving the adoption of ETH2.0. I suspect fees will skyrocket but it will just support the trend away from spending bitcoin (you're already seeing this) and holding it.

  16. Miners get 6.25 bitcoin per block and that rate is halved every 4 years.
    What happens when the last bitcoin is mined or that reward become too low and miners have to depend on transaction fees($24 to $31 per)?

    The rules will have to change or people who want their transactions recorded will be at the mercy of the miners.

  17. Some think bitcoin is the way to avoid the "banksters" and their transaction fees or to save value for when civilization collapses. Reality has a way of impinging on ones fantasies.

  18. What happens when AI controls all financial transactions and it is taken out of human hands? Asking for a nervous friend…

  19. Right now, everyone pretty much converts to dollars for any international purchase. This has made the dollar the world's reserve currency and kept it's value up. It has also allowed banks to get a nice cut right off the top for currency conversion.

  20. If economies didn’t grow, that might be a good thing. Deflation is a far worse problem than inflation. There’s a reason the Fed targets 2% inflation rather than 0%.

  21. The crypto market was a bubble, it didn't really need anything to crash except a critical mass of people deciding to cash out.

  22. The obvious downsides are that it combines the capacity to track every exchange in real time, with the capacity to block transactions in real time.

    It pairs well with social credit scores and Operation Choke Point style initiatives. At 2PM the President decides he doesn't like industry X, or individual Y, by 3PM they can't do transactions, and he has a handy database of everybody who did business with X over the last few years.

    Visa/Mastercard have this capacity to some extent, but the proposal would put the power directly in government's hands, allowing them to skip the inconvenient, "Lean on the bank" step.

  23. The secret is to find the wikipedia article BEFORE I write the comment. That way, if I've remembered it wrongly I just stop there before I've wasted time, or embarrassed myself.

  24. I guess the main advantage is they could use crypto-greenbacks to prevent counterfeiting. I wonder if this is what is causing the crypto market to crash?

  25. We don't need to imagine a gold asteroid.

    We have solid historical examples of precious metals suddenly having inflation.

    Such as when the Spanish conquered South and Central America and suddenly found themselves owning huge silver mines.

    The flood of silver back to Spain seriously messed up the economy back in Europe, resulting in Spain being simultaneously the richest empire in Europe and in century long economic depression at the same time.

    And nobody could understand what was happening because they didn't have the economic theory developed yet to understand that you could have lots of silver and still be poor if silver had lost all its value. Which they couldn't explain because they measured value in silver.

  26. Yeah, at this stage crypto is to a real central bank currency like an experimental 1800 hot air balloons were to international shipping.

    They are pretty, technically fascinating, people get all excited. And for a couple of tiny, almost toy purposes they can do stuff that ships can't. But to imagine they are a threat to the shipping industry is a pure fantasy.

    Alternatively, they are like experimental 1800 steam train. And we can't tell at this point.

    The critical point is that if you were looking to buy a ship in 1800, or 1820 for that matter, neither mattered. Only if you were looking at a 50 year investment did you need to be concerned.

  27. crypto currency is challenging nation based fiat money

    No, it's not. It's just another tulip bulb people exchange for fiat money, or as normal people call it, money.

  28. There's a world of difference between these half-baked stablecoin cryptocurrency concepts, versus simply accelerating the current banking system by being overwhelmingly digital-first, and using a government transaction clearinghouse that can be accessed by consumers directly.

    Visa/Mastercard have demonstrated the transaction speed and stability of such a clearinghouse concept in reality, it's just a matter of setting up equivalent infrastructure by a government. In terms of procedural issues, that could be implemented via a postal banking system where at least all citizens have a guaranteed postal bank account (accessible online, as well as offline via post offices). The account will not be % savings based (need to do that with another account) but is strictly a "cash" account, primarily intended to service living expense related transactions (minute/hour/day/month type). Since it's a centralized system by design, it's easier to implement trusted P2P transactions via central PKI. Wanna pay something, just touch a device with a means of user locking/confirmation (smartphones, NFC cards with fingerprint readers like IDEMIA F.CODE, etc) . We are tantalizingly close to this already.

  29. I think that crypto currency is challenging nation based fiat money and in so doing poses a threat. Imagine if one country couldn't devalue another nations currency. Imagine your currency increasing in value instead of being devalued and also how difficult taxation could become. This crypto could be the beginning of a world currency .

  30. The blockchain needs to be able to do more than a few transaction per second. So probably another one will be?

    Currently it works because it's seen as an attractive fine tulip for collectors, and not a lot of them are changing hands in daily commercial transactions.

  31. I am pretty sure my money is already digital. They don't store my paper money in a box in the bank vault.

  32. What makes bitcoin particularly interesting as something that may become extremely valuable and a form digital gold is that it has a hard circulation limit and thus cannot inflate. Even gold can inflate…image a solid gold asteroid is found (however unlikely).

    Fiat currencies can always inflate and die in the long run.

    Bitcoin may even become a replacement for fiat currencies…Zimbabwean dollar or Venezuelan dollar anyone? I am a trillionaire in Zimbabwe (you can find trillion dollar notes on ebay – $5)

    If bitcoin succeeds in becoming a worldwide-accepted reserve currency (which I predict it will) it will go to $1 million.

  33. It all depends on the implementation. National vs. global. non-controlled vs. smart-contract based (if they contain contractual clauses, every scenario – good and very, very bad- is possible). Oh and they will find an excuse to tax you on the use of the currency (electricity bill/environmental/corruption risk associated with it (true or not doesn't matter) which is now simply paid for by the user without any issues) and expand the taxes from there.

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