So they are forced to decentralize the currency to some extent, so that banks are the ones to actually issue the currency (after borrowing it from the fed).
[1] “The Fed vs. Stablecoins” https://www.bloomberg.com/opinion/articles/2022-02-01/hedge-...
[2] “Stablecoins: Growth Potential and Impact on Banking” https://www.federalreserve.gov/econres/ifdp/stablecoins-grow...
Because banks lend the money out, earn revenue from that, and thereby pay you interest. Banks aren't vaults; they are money circulation machines. Their business is finding the best investments, which creates efficiency in allocation of capital in the economy.
They were authorized to print 3 trillion, but actually printed 30 trillion
All across the world a China style social credit score called ESG is now being adopted by banks.
What happens when they decide you used up your quota? No flight, no meat or no car ride for you because they won’t let you spend your money.
https://github.com/mit-dci/opencbdc-tx
Detailed architecture:
https://github.com/mit-dci/opencbdc-tx/blob/trunk/docs/archi...
Some remarks:
- Seems to be implemented in C++
- Looks like they reused bits and pieces from the Bitcoin code base (bech32, secp256k1, sha256)
- Claim of being able to handle 1.7M TPS
- Experimented with UTXO-style (Bitcoin-like) but seem to have bet on something called "unspent hashes" instead.
- I found very little on things that matter (policy-related):
- How is the "central authority" implemented
- How is the coin supply managed1. They make it possible to deliver helicopter money directly to the consumers. Now central banks can only work trough banks or financial markets. Digital currency where everyone has access to central bank money can correct the errors in current systems.
2. Currency would be anchored in real economy with sound monetary policy. Nobody in their right mind takes Bitcoin denominated 10 year mortgage.
if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary policy?
Many argue that helicopter money is better alternative to quantitative easing (buying bonds). Just give money to the people. Buying bonds is ineffective because bond holders don't consume. The velocity of money just drops and asset prices increase.
(you may picture helicopter money as trowing more money than is needed, but that's now what the idiom means. It means that the money lands on people, not banks).
Maybe so (I disagree), but wait until central-bank issued digital currencies become a reality, you'll very quickly learn the real meaning of social catastrophe.
Spending 10 seconds thinking about it, I can come up with the following scenarios:
- complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
- total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys.
- security nightmare : how do you guarantee the soundness of such a system when it is centralized. Just ask Sony how long they manage to keep their private keys secret on average.
- security nightmare : preventing the leakage of citizen's private financial information. If the chain is public, there is none. If it is kept under lock and key by the govt: 1) no way to check what the actual supply is 2) subject to hackage and publishing the data publicly. Knowing the track records of governmental institutions when it comes to IT security, this is basically a guaranteed fuck-up within the first 5 years of such a system existing.
- economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs, without leaving any decision-making power to the citizens.
- Geo-replicated latency <1 second.
Amazing technical feat.
This is why such important financial systems MUST be decentralized, at least to the extent that anyone should be able to verify the correctness of the system's state independently.
They could simply copy & paste the existing laws regarding banking privacy, e.g., RFPA.
https://en.wikipedia.org/wiki/Right_to_Financial_Privacy_Act
I jest, it actually is kind of interesting and could allow an even closer look at the day to day operations of banks if the ledger was in fact published.
"banking institutions are more dangerous to our liberties than standing armies," Thomas Jefferson
The idea of a public ledger and distributed witness signatures is sound though, and that should be the basis of a government approved system of inter-reserve asset tracking.
If government bits are just the beginning of a banning of cash, that's the real problem; but there's no reason they can't ban cash now.
The benefit to some sort of government semi-distributed ledger would be that independent people could set up ATMs. Otherwise, I'd just be happy with postal checking/savings. We already have a bunch of post offices.
We already have all of this. The government can tell your bank to do something, and your bank will do it.
It's different from the mass surveillance that a CBDC enables.
You can park your money safely anyway, just buy a vault. There are even specialized bank accounts where they just store you money and don't lend it out.
However, you won't earn any interest, and thus will lose opportunity cost and also lose value as cash inflates.
Additionally, the money that banks lend is critical to the economy - which includes your job and the general welfare - like water to a person. If banks stop lending - if all that money gets put in a vault - businesses and citizes lose access to money to develop things and we get talented people and valuable resources sitting dormant, a depression.
We live in a world with prisons. Stopping your spending is nothing compared to literally locking you up.
The economic nightmare is maybe a degree up, but not really more. Generally speaking, it also tends not to be just "the government" doing stuff that no-one wants - there will be people liking whatever the policy is.
The only real new point is that CDBCs with any kind of programming would effectively be vouchers, not money (ie your first point).
Why CBDC is good:
- Efficiency: much of the legacy financial institutions are no longer needed in current form (going as far as the Fed and IRS). Opportunity to reform finance as a whole and remove legacy waste.
- Fraud detection: money laundering and financial crime becomes very difficult to hide
- Observability: much better data & insight into economic trends
- Security: Infra being controlled by a public org that can be held more accountable than a decentralized mess of private corporations (see endless Equifax leaks, etc)
- Responsiveness: can rapidly implement policy changes in response to crises
Fraud detection: I'd be very concerned about false positives here.
Observability: forcing everyone to opt into a financial panopticon will have unintended consequences.
Security: we really struggle to hold any organization accountable. Public organizations are not magic, was anyone held accountable for solarwinds? The office of personnel management? If anything holding public entities accountable is even more difficult then private entities because of politics.
Responsiveness: The ability will be there, will it be used effectively or responsibly?
Keynesian economists that dominate a lot of official politics have a hard-on for viewing consumption as the root of all goodness and prosperity. In the midst of a future economic crisis with a central digital currency, it would be trivial for the politicians to start blaming a lack of spending for the problems and to force people to spend received money within X amount of time or it disappears from your digital wallet and thereby incentivize desired behavior. No real saving for the future possible: citizens would be turned into a cattle-like consumption class.
> complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
This problem has nothing to do with having a digital currency, if the government wanted to punish people "if you don't behave as a citizen", it has plenty of tools to do that already. Something like this would be huge government overreach and frankly a violation of the first amendment, I doubt if any law suggested this it would even make it to the supreme court.
Also the current centralized currencies such as PayPal and Banks already do this, if anything this gives deplatformed people more freedom as they have a viable digital alternative to purchase.
> total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys
Banks already know this information and the government could audit the banks if it wants to. What's stopping a banker from publishing your purchase history? Many Decentralized currencies would also publicly show this. That said I think it's a totally valid point.
> security nightmare : preventing the leakage of citizen's private financial information.
This is true, hence why JP thinks "It's more important to do this right than to do it fast". As I said before though, banks and private companies already leak this kind of information.
> economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs
I don't see how this changes anything. The Fed can already run the money printer to whatever throughput it needs. This doesn't change that. Only thing this changes is that it would be easier to give direct aid to citizens, especially the lowest 5% who don't own bank accounts.
>if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt
Yeah that's why I kind of think this is a good idea. We already have private versions of this and we could always... Just use those if we don't want to use whatever Powell coin turns out to be. It only gives us more options. Also it would be great to have digital transactions without the $.35 fees
Like can i get paid instantly for every KWH i deliver back to the grid via solar panels. Can my salary or hourly contract be streamed to my bank account. These sort of things are all possible in crypto.
It just seems to me that everything you can do with crypto you can do with the existing financial system. Maybe not 100% of crypto's features, but easily what a huge majority of people and institutions rely on and use today.
AFAIK, none of the major cryptocurrencies have ever been "hacked."
Also fun fact - back when the US had private currencies, people WILLINGLY preferred to use them despite a gov currency existing. It is only after the government passed high taxes on these currencies(ie having to pay tax for each transaction to exchange them) that they went out of favor. If they were really so terrible, why did the gov feel the need to kill them?
Central banking is nothing but a power grab. The "it stabilizes the baking system" is nothing but a lie.
In fairness, if Jefferson had his way, there wouldn't be much of a military around to plot a coup in the first place.
He'd also be considered a staunch non-interventionist were he alive today - "peace, commerce, and honest friendship with all nations and entangling alliances with none." Not much use for a standing army when that’s how you see your role in global affairs.
I wonder why
Standing armies’ threat to liberty isn't exclusively, or even mostly, via military coup, it's through acting without effective oversight against citizens when employed in a domestic security role, heightened by the separate culture and us-vs- them attitude standing forces create.
And, since the mid-19th century, it's mostly been realized in the US through standing paramilitary police forces rather than an normal standing military, as the former were established as permanent entities before regular standing armies in the US, and displaced regular standing armies from the dangerous domestic role that is the main underpinning of them being in Jefferson’s statement.
Tiered systems for central bank digital currencies that allow complete tracking of all transactions are an active area of interest by central banks. For instance, the PBoC has filed over 80 patents on the subject. You can be sure that these systems don't attempt to solve BFT, don't use as much electricity, and don't protect the peasants from the abuses of the rulers.
[1] https://decrypt.co/resources/byzantine-fault-tolerance-what-...
A blockchain is just blocks of data linked together using hash functions to guarantee the authenticity of previous blocks. There's no mining, and only a tiny amount of electricity used.
You are either ill-informed and should educate yourself on the subject (blockchain != proof of work-based consensus) or willingly creating confusion by mixing up concepts.
Let's assume the first, shall we?
Maybe the summary is saying something completely different, in which case the use of 'blockchain' within it can still concern me and any other readers who are similarly wrongly informed.
Proof of work is the thing that uses the electricity. blockchains can use or not use proof of work.
If their goal was to spur consumption, they could block some types of investment from some or all people at any random time.
We already have different legal classes of investors based on wealth: you effectively need at least 25K in a broker to be able to day-trade, and the requirements to get a designation of accredited investor are even more substantial.
It would make it trivial to assign different rights based on wealth in a digital system and use it to enforce policy.
It’s an authoritarian’s dream.
If you hate the idea, you'd still be free to park your cash with some rando that promises to keep it safe, just without subsidy. Hell, the existence of a gov digital currency might ironically stabilize bitcoin or a bitcoin-like.
Private, untraceable, accurate, high capacity banks.
The privacy implications of CDBC are a real problem, but the rapidly approaching end game of the current slippery slope is one in which, among other things, all participation in the economy is gated entirely by private banks. No sovereign country should accept that. And yes, any real implementation of a blockchain as a day-to-day cash replacement will have the same problem. These are legal problems requiring a legal solution, not a technical one.
Nakamoto consensus was the innovation, the major energy consumer, and not necessary for cryptographic data integrity like a CBDC or git repo needs.
https://m-cacm.acm.org/magazines/2019/8/238347-the-history-o...
Sound is generally used specifically in a connotation of not debasing the currency.
Also gotta strongly disagree that the concept of helicopter money has no connotation of amount.
to each their own I guess.
Fed has to work within the tools it has. Especially when government is stuck and fiscal policy is almost never sound or enough. With the tools it has, it has done it right. The problem is that there is zero lower bound.
As you'd be right to point out, almost nobody defines monetary policy in these terms, but it's your definition. The fed balance sheet is 1/4 the size of the total economy, the over night rate is so low that OMO only works in one direction, it takes more than 1.5 Trillion dollars of reverse repo a night to keep banks in operation, and the Fed is so backed into a corner that they purchased bonds and didn't raise rates (expansionary) in January while inflation was at 7%.
Meanwhile former Fed board members, former treasury secretaries, and basically every macro bank analyst in existence is commenting that the Fed has made it's biggest policy error of all time.
So sure, keep arguing that they are doing "sound policy" whatever that means. Most people aren't going to buy it.
https://en.wikipedia.org/wiki/War_of_1812#Unpreparedness
Apparently having a very small army didn't help when Jefferson's party wanted a war. I guess they over-rated state militias?
A lot of the founders' ideas didn't work out they way they hoped. (For example, they tried to prevent political parties and failed utterly.)
When people quote American founders out of context, it's as if it settles things, but they were just making it up at the time, often based just on what sounds good. Jefferson in particular was often a rather impractical man, but a popular politician who promoted a lot of bad ideas (and a few good ones) that made for good politics at the time. He's hardly the only one.
That was the general approach of the United States until ~ the early 20th century. Before that, the 'standing' military was generally tiny, the employer of last resort (criminals, drunks, etc.), and was greatly expanded by volunteers in times of warfare.
Basically there is a parallel instant SEPA that is only partially implemented in between certain banks in some countries. Cross border SEPA between two SEPA system countries is much more likely to be just as slow as the US ACH system.
So the only way people could possibly believe this works is if they and their friends use the same banks. Which is basically the case, most Europeans don’t even use the SEPA system to another European country compared to using a few big banks in their single tiny country with their friends and local businesses. But if an outsider wanted to do business in the European banking system, wanting to believe the experience Europeans come on forums to talk about, they likely wont be able to experience it.
Expect 3 - 7 business days and some questions for your banking partners who might not know where the transaction currently is.
SEPA payments are cleared five times a day on every business day. Payment Services Directive establishes that money must be credited to a recipient's account at the latest by the end of the next business day.
On top of that, about a quarter of all banks already support Instant SEPA, which clears immediately 24/7/365.
Interest paid on deposits is a free market (generally speaking); if that rate isn't worthwhile to people, they will start leaving and the bank will raise its rates.
> I am skeptical of this explanation for why we should let the banks hold our money.
You aren't 'letting' them and it's not a collective decision. You personally choose to give them your money. Put it elsewhere if you like.
> Or indeed remain alive as anything but a source of borrowing.
They can't lend money without deposits. The deposits are the money they lend.
No, that is evidently not happening. When I said "banks", I meant "literally all banks" (minus tiny regional credit unions or the occasional fluke that might give you up to 1.2% - wow, that is so much money, I could retire on it). People generally don't move banks either. They tend to stay with whomever they started banking first.
> You aren't 'letting' them and it's not a collective decision. You personally choose to give them your money. Put it elsewhere if you like.
My main alternative to holding cash in a bank is cryptocurrencies (which are accepted ~nowhere), or holding my money as cash. Handling cash has been in decline even before the pandemic, and nowadays I very rarely see people pay cash. Assuming that cash remains on the current trajectory, banks will become the only mainstream option.
> They can't lend money without deposits. The deposits are the money they lend.
They have enough money saved up in their coffers for that. I also can't imagine that most loans for a higher value than a credit card account would be entirely unsecured. This is especially true for house purchases - it's generally impossible to buy the house you want without a mortgage, and the house is what you lose I'd you don't pay them back.
I am fairly certain this isn't true, at least not in the US/UK.
Such a military force would be facing a very well armed citizen-led guerilla response.
Given the amount of private gun ownership in the US, holding on to power after a coup would prove a rather difficult proposition.
As well-armed as the citizenry may be, the military is infinitely more so - they have, you know, tanks and planes and smart bombs - and in this fantasy civil war-esque scenario I don’t think the junta would be shy about exploiting that advantage.
Meanwhile improvised bombs seem to be far more important to and effective for a modern insurgency than firearms.
Add in that it sure seems to be more common to read about private militias aiding an authoritarian coup than successfully resisting it and I think the pro-widespread-individual-firearm-ownership faction has an uphill battle just to demonstrate that the practice is a wash, let alone beneficial to the preservation of liberty and democracy.
There are a few cases of private arms being used in anti-corruption "wars" or stand-offs in the US, but at least as many in which they're used for essentially the opposite purpose (supporting anti-liberty, and especially racist, policies and actions). In any case, the national guard stepping in tends to end these in a hurry.
The notion that the 2nd amendment is vital to the preservation of liberty and democracy in 2022 seems to be dubious at best. I'm not in favor of a blanket gun ban but I think that particular argument in favor of gun rights—which seems to be what anti-gun-regulation folks fall back on very quickly, when challenged, which makes sense as it's the reason given in founders' writings and, arguably, in the constitution—is, at best, pretty weak.
Unless enough citizens were on the side of the coup. I don't know why no one ever seems to acknowledge that as a possibility, especially after Jan. 6. Gun owners are just as driven by politics and ideology as anyone else.
Plus just because you have a gun in a safe and maybe sometimes shoot watermelons in the backyard with it doesn't mean you'll be effective in guerilla warfare against an actual military. I know Americans like to bring up Afghanistan and Vietnam as examples of guerilla warfare succeeding against the US, but fighters in both cases still went through training that would break the average American gun owner.
Until this year, we've hardly had any inflation since before 2008, at least. Deflation was a bigger concern. The margin between inflation and interest rates was very small.
I see what you are asserting, but again, what is all this based on?
When every transaction goes through FED, the government won't need to call or subpoena anyone to know where your money come and go.
They will be able do that, not for you, but to you.
And so much more.
The return address can be made up. Although the general area it is sent from is recorded in the form of zip code.
The contents of the letter are also not known.
So even if that info got out, there’s really not much information beyond the fact that mail was received, and we probably know who sent it.
Thats a world of difference from cryptographically signed transactions between known parties with known amounts.
Public enough that they can't play fast and loose like everyone else, but private where it matters in terms of not having literal Federally administered databases all just eafer for the reaping.
Kurds in Northern Syria.
>US military is occupying
US military has presence and has engaged in (importantly) air support, but to call it "occupying" all the Kurdish territory is an intentional I think misrepresentation. It's hilarious that anyone would call it "occupying" when the boots on the ground were minimal to almost non-existent. I really don't need to go off these ignorant statements when I bore witness to what was happening with my own eyes, but I'm sure you know more from whatever you read on the internet.
That was kinda the whole point of the revolutionary war. #DemocracySpeaksManyLanguages
Remove the part where it's easy to get things Stateside, and I assure you, a U.S. military coup/junta will be fighting a two sided war as well. Both internal from the populace, and external from former Allies who in no way, shape, or form are going to sit idly by and be threatened by a militaristic U.S. Armed Forces that's even remotely controversial enough to even be considered a coup by the populace.
People forget: The Army Sabotage Manual is public domain.
The military knows exactly the hell it will be entrenched in if it ever goes against the public's wishes. They literally wrote the book.
The US military problem would be that it has to subdue a population that has been socialized to resist (to the point that it already birthed paramilitary during the previous democracy) and constitutes the replacements for that military (and the industries necessary for supply) for coming generations. Hell, once it had a democracy the first time, it still went to civil war. Thinking about the short term doesn't get you much.
Predator drones, nukes, etc won't solve the problems that couldnt be solved in a foreign land. Domestically it would be harder and longer fought.
For example, let's say that the military made a deal with <insert the most extreme sub-faction of your least favorite party here>. Then they'd have people to install into the newly vacated positions of civilian economic administration, and in that, they'd have a way to motivate that faction to join them and support their legitimacy.
The entire public’s wishes, yes. Now consider what would have happened if the military leadership hadn’t resisted the call to join the January 6th insurrection — it’s much easier to imagine something like 90s Serbia where a substantial fraction of the population hopped up on propaganda supports the military efforts and will keep their neighbors from forming an effective resistance.
Separating banking, investment banking, and insurance into separate legal entities and preventing the banks from consolidating into mega-banks prevented another a Great Depression for ~70years. Then roughly 8yrs after we repealed all that, we unsurprisingly had another Great Depression level financial crisis.
The Fed’s lending support, along with govt stimulus, prevented the actual depression from happening, so you could argue that the Central Bank does have some impact on banking system stability. But it was only necessary because we removed the structural regulation that had maintained a stable banking system for over half a century.
This is not at all clear.
> Separating banking, investment banking, and insurance into separate legal entities and preventing the banks from consolidating into mega-banks prevented another a Great Depression for ~70years. Then roughly 8yrs after we repealed all that, we unsurprisingly had another Great Depression level financial crisis.
Are we forgetting the inflationary period in the 70s? How the gold standard was lost during this time? All the emerging market crises? How the USD has lost 98% of its value since the 70s? How inequality is sky high due to interest rate suppression causing asset price inflation? How we have a massive trade defect leading to an extremely large negative net-foreign-investment balance? Does it makes sense to you that countries that are much "poorer" than us are lending us money?
> The Fed’s lending support, along with govt stimulus, prevented the actual depression from happening, so you could argue that the Central Bank does have some impact on banking system stability. But it was only necessary because we removed the structural regulation that had maintained a stable banking system for over half a century.
We trade depression for inflation then. Is this good? Bad? Not sure. We are living in that experiment though. One day this excessive debt and money printing will catch up with us. It has happened to every single fiat currency in history.
You’re conflating a bunch of unrelated things. The single most economically devastating type of event in a banking system is a credit crisis or credit collapse [1]. That’s what both the Great Depression and the Global Financial Crisis were.
All these other things you reference pale by comparison in the level of harm they can inflict on society. Are they bad? Sure. Are they remotely in the same league of harm as the GD or GFC? No.
The point of structural banking system regulation is to prevent this worst case scenario, not to solve every single problem with the banking system. If you can prevent credit collapses from occurring then you’ve significantly improved the stability of the banking system.
If you're against this, what you want is more inflation, not less. This is the entirely intentional result of the strong dollar policy.
By what metric has the USD lost 98% of its value since the 70s?
I'm not much of a historian, but are you referring to company stores? https://en.wikipedia.org/wiki/Company_store
> Saint Peter don't you call me 'cause I can't go // I owe my soul to the company store
— Johnny Cash, Sixteen Tons
> […] even in [locations] that were not [poor], workers paid in scrip had little choice but to purchase goods at a company store, as exchange into currency, if even available, would exhaust some of the value via the exchange fee. With this economic monopoly, the employer could place large markups on goods, making workers dependent on the company, thus enforcing employee "loyalty".
At least in the old wildcat banks, you had a shot of redeeming for specie if you went out to the sticks where the main branch was.
The US financial crises--terrible as they are--are not even remotely comparable to the damage inflicted by a military coup. Putting these two things in the same category is a nonstarter.
That's not what happened. After the Great Depression, we have not had any crises matching was a a regular cycle before then.
The Fed is fully governed by a federal agency. (The Fed Board of Governors).
The individual regional Fed banks are private-public hybrids, but they don't govern the system.
Yes, [ although I suppose technically they are maybe not civilians once they pick up arms in a war. ]
> I pointed out how that is nonsense because they are being backed operationally by the most powerful military on the planet.
You have no fucking idea what you're talking about, and I have the memory burned in of many now dead faces in my mind of those who died with almost no "backed operationally" presence by the US. Imagine literally being told by some dude on the internet that my personal experience defending Kurds from ISIS is wrong because he thinks based on what he read on the internet that we were 'occupied' by the US. You can say whatever you like, I'm sure it will stroke your own ego to believe that.
I can recall sitting in a border town with literal children one building over sleeping with guns, hoping they would survive. A month later I found out several of them were dead. I personally viewed this town and there was not a single US soldier there, barely enough provisions to survive, and those defending themselves had essentially no US weapons.
The effort of the Kurds fighting Syrian government and ISIS is critical to their defense; the US contribution standing on its own is completely incapable of maintaining Kurdish Syria. The boots on the ground is by far Kurds (not part of Syrian gov) themselves, with arms largely either coming from those privately stashed or brought in via militia. In a number of attacks on Kurdish territory such as in Kobani, essentially anyone with arms engaged in defense with whatever they had.
you're splitting hairs. 7x .02 doesn't change the trend.