My CBDC has two features; 1) an automatic economic-defuckifier, and 2) a stable money supply.
Let's talk about private currencies, central banks, and how I landed on this.
With real central banks the answer is "because creditors in a particular state are legally required to accept it as payment for debt, and everyone else in that state needs it to pay taxes which are owed whether there's money in their account or not". With yours, it's the opposite: if I accept your coins as payment you tax that payment for my work/goods out of my account and if I don't, you give coins to me for nothing. (And I can still earn in other currencies without owing your "tax", just as I always have done)
Contracts & debt can be specified in any currency, including a private one, even if taxes have to be marked to a national currency at the end of the year. But still a question of why adopt it?
A private currency, to get adopted, would have to be as good as a national one, plus more. UBI might help that cause. No transaction fees might be another. Stability without interventions, a 3rd? Accessible to informal economies?
Issues to overcome with each.
Inflation is caused by the market valuing the currency less than it had before. For example, if people don’t trust you, your currency will undergo inflation.
Also, I see a lot of claims about metric dc being linked to MEUs but no explanation of what maintains the peg. You can’t just claim the peg, you have to enforce it somehow. Even the bank of London couldn’t do that in adverse conditions (https://www.investopedia.com/ask/answers/08/george-soros-ban...)
There are no pegs, and especially no pegs to any other currency. It's a free floating currency, but the money supply is capped to the number of verified users/accounts.
Comment order is still preserved here: https://news.ycombinator.com/threads?id=nealbozeman
There's a neat equilibrium here. UBI is put in, but slowly being taxed away while it sits. If your account is zero, you're not paying any tax, and the account grows quicker. The more your account grows, the slower your account grows, and your account growth keeps slowing until it stops at equilibrium. The amount of UBI being put in matches the amount of tax being pulled out. It's an advantage to use the money rather than save it, because you're being taxed on less money.
If you have a lot of property, it costs you more to pay the tax on it than it would cost if the ownership of those properties was split between many smaller owners.
Obviously property owned by you includes properties owned by your subsiduaries so you can't fake-split ownership.
This tax apart from financing UBI will encourage small real estate ownership and will curb the effect where UBI is sucked away by landlords just raising the rent.
Calculation could be fairly easy. To get progressive tax you just take currently tax paid by you and your subsidiaries on the property you own, raise it to some power, like 1.2 (should be fine-tuned), and deduct progressive tax that your subsidiaries pay on that property. I think that should work. Maybe there are better methods?
You could gradually raise the factor over months and years so that large property owners have time to unload and you can control drop in real estate prices due to that.
CB in CBDC means central bank ... I thought it was a theoretical excercise from the point of view of a state actor.
I don't think it can be done privately.
To distribute value as UBI you must first acquire value and digital currencies have only one way of acquiring value, by drawing in greedy capitalists with ponzi-like promises of huge gains coming from widespread adoption by whatever suckers they can find.
So booting up your currency would be a problem because initially it would have zero value.
I wonder what could be other ways of transferring value into a new currency apart from promises of meteoric rise of the price.
Other idea is what tether did. Getting value into their currency by promising price stability. Then the other qualities of crypto like ease if transaction and direct untaxability drew the value to it as long as the promise holds.
If someone with no money benefits the most from UBI then my optimal strategy is to be as many people as possible, each with no money.
You can have accounts that are unverified, or business accounts that are not individuals. They just don't have a UBI, so the tax hits them without their accounts getting replenished. Spend/use the money fast so you don't have to worry about it.
So the best strategy for any individual to maximise their accumulation in your currency (or in practice, minimise their losses) is to refuse to accept payments into their account, insisting on receiving payments in other currencies instead.
As everyone is incentivised to refuse your currency and nobody is incentivised or required to accept it, your currency can't actually be spent.
You want a currency that people want to both spend and earn. If you have a deflating currency then people would rather earn it than spend it, if you have an inflating currency then people would rather spend it than earn it.
You might now argue that the rate of inflation or deflation should be set by the market to find the optimal money tax that balances willingness to spend and receive money.
But here is the thing. If the rate of the national currency is suboptimal people will try to find substitutes. If the central bank tightens the money supply too much and unemployment is too high, then people will also accept this alternate currency because they are going to spend most of it anyway, they won't be paying much tax to begin with.
Also, from what I have seen the fees people are willing to pay on credit cards are quite ridiculous compared to the -5% demurrage of the chiemgauer. The Chiemgauer circulates 3.5 times faster than the euro so the effective fee is something like 1.25% which is less than credit card fees. Unless you are filthy rich and keep all your savings as liquid money instead of lending it out the fee is basically irrelevant.
Once you take into account that lending at 0% interest is possible then from a macroeconomic perspective the system is cheaper for the average participant and if we assume economical stability promises become true then even the wealthy with who insist on holding money will benefit because banks are less likely to need a bailout and there is no inflation.
So the problem isn't that people will refuse to accept it, the question is how do you get it started in the first place. How do you convince a critical mass of people to adopt it?
Ping me if you want some Metrics. Neal@metricdc.org.
Well no, the way that trade and currencies work is that currencies are made legal tender and backed by mountains of debt and taxes repayable in that currency and as a result are extremely widely accepted, rather than being arbitrarily issued tokens redeemable for nothing with the added disadvantage of demurrage.
But we're not talking about currency, we're talking about tokens that Neal issues to anyone that wants them, and why anyone would want to trade their time or goods for them instead of currency which is much easier to spend and actually possible to hold onto. (You can't just imagine that it has better price stability than the local currency or that it is fungible; these are functions of people having incentives to trade goods or time for them) If my point that this incentive doesn't exist is "overly simplistic" and the incentives instead all point in the opposite direction, it's odd that you don't have a simple answer to the question of how to convince a critical mass of people to overcome this problem.
Local currencies like the now defunct Bristol Pound[1] and the little-used Chiemgauer were guaranteed to be easily redeemable for Euros and Sterling respectively at near parity and supported by lots of local marketing so they basically function(ed) as glorified voucher schemes. Cryptocurrencies are hyped to attract exactly the HODLers demurrage is intended to avoid so can be traded to people who think they will be worth more in future (and still most shitcoins fail) . This proposal has none of those upsides, and more conspicuous downsides. And if I want some Metric just for fun, I don't have to start accepting it, I just open an account and 10,000 of them every month for free...
[1]What they plan to do with Bristol Pay might be interesting, especially to Neal
Private currencies have all the problems of national currencies, and none of the tools to try to unfuckify them when the business cycle ends. So, a private currency needs a mechanism that replaces what the Fed and congress do in a crash, which in the simplest terms, is to get money back out to people to spend.
It looks like it's currently in limited release at the moment - how would somebody go about playing with this?
Is it just the verification that's private, or also the transaction history? Is it private in the sense that not even the central bank can track it, even with a code change?
How do you expect this system to compare to cryptocurrencies that do liquid staking + inflation, where there's a set amount of inflation, allocated to everyone who plays nice in the network? Does this come down to differences in views on inflation?
One failure mode I see here is a hypothetical employer sending paychecks right before the tax hits, sticking the employees with the tax burden. In fact, I imagine there would be a monthly rush to spend and play hot potato. Would some sort of rolling window perhaps address this?
Of course, the spending is by design - it's the forced last-minute nature of it that i wonder about.
The thing about centralization is that you have to abide by banking laws in each country, so accounts that are verified would have an identity that goes with them. This is the trade-off with crypto, but even crypto doesn't have this benefit because to get involved, you go through a centralized, regulated exchange.
Transactions and identities on the CBDC are private as there is no public ledger, but warrants can still be used to compel the bank to give information on an account, same as any other bank.
In my opinion, liquid staking + inflation still has the classic liquidity trap problem. You want to hold the "currency" rather than spend it, and there's not really a process to acquire the currency, other than exchanging other money for it. UBI is a process to acquire the currency, and the tax an incentive to spend it and spread it.
I will do grants this year that people can use to make new business and get new money in to circulation. Employees of businesses getting grants will also get verified accounts.
As you might reason, a Central Bank becomes necessary to account for the identities of those receiving the UBI. No eyeball scanning, just old-fashioned verification, like opening a bank account.
The private model is a classic scam, a VERY classic and well known but curiously for some psychological reasons still working today, being them the substrate owned by someone those can steer the society with the concept of debt. In case of revolts/wars etc controlling TLCs means also controlling economy in a cash-less society, similarly means controlling few services that run a multitude of crappy proprietary devices needed to exchange moneys against a product or for a service.
Democracy need the opposite: a common symbolic unit of measure anybody want to ease economic exchange BUT something NO ONE BUT THE PUBLIC can control. Not only directly (in regulatory terms) but also indirectly (i.e. in infra terms, tech terms etc).
So the actual evolution IMVHO, without proofs, but with enough clues, original cryptos seems to be more a fintech/BigOfIT effort to substitute themselves to classic banking systems [1] probably not worked as expected and corrected by dividing the cake with classical banking systems. The target is declared by various "supra-nationals" institutions like the WEF in it's 2030 agenda, that SOME call nazi-international or the evolution of classic nazism and socialism toward a more effective way of ruling the masses.
The target? A total economical control that led to a total control of the society, apparently absent: you feel to be free, just need to earn enough, without noticing that earning means fulfilling some desires, who are NOT emerged by a network of people interactions, individual agenda's, desires etc, or the classic so called "free market", but you are not to the point you can't live if not comply at least enough. The purpose is the idea of crafting a human evolution with a human selection instead of natural one. The earliest form of this idea I found was in a book from Clinton Roosevelt The Science Of Government, Founded On Natural Law in the 1841. He was one of the scammers of the NY bank before the FED, to read the scam itemized at the end of an historic scammer letter, at the end of the page https://www.heritage-history.com/index.php?c=read&author=car...
So? Well. In MERE economical terms a sane economy need a free currency, an artificial unit of measure controlled by the People themselves through a State. A sane society need to have spread culture, knowledge and DESIRE to evolve. Planned evolution works very well on paper, but fall short thereafter.
[1] see the Geneva Report 2019 https://voxeu.org/content/banking-disrupted-financial-interm...