This is a reminder that the economy needs a reliable store of value. A CBDC (i.e. everybody gets an account at the central bank) would make sense for this. Ironically, when introduced it might cause bank runs or other stresses for banks though.
I cannot tell why I'm seeing this all over Hacker News.
A Central Bank Digital Currency solves nothing. It only emboldens and tightens the grip of people in power.
By definition it is centralized and forces anyone who needs to work in an economy to be accountable to an entity that can and will remove access controls to their financial streams. It does not change anything in the context of the current financial environment. It does not make things safer for investments.
The only thing this solves is having money be digitized and managed by parties who are not trust worthy.
Get out of here with these comments. You feel like astro-turfing.
I think we can certainly speculate.
Federal IRS and county child support enforcement have ridiculous powers wrote in to State law. They can seize accounts with a letter. Good luck fighting their mistakes when they just seized all your accounts. Child support enforcement in counties are staffed with GED holders, and 'qualified immunity' typically prevents suing for damages. Having one centralized account for seizure makes their jobs easy, and will suck for their victims.
Aren't tight capitol controls seen as a good thing? Surprised to see that as a con.
> managed by parties who are not trust worthy
I thought the idea behind CBDC was it would be a scriptable. Not trying to get heated here but are you saying the Fed isn't trustworthy?
I see the primary use case of banks to be 1) store and transfer funds 2) earn interest on savings.
Use case 1 could be handled by CBDC. Use case 2 could be better handled by literally anyone else
Personally don't have any strong feelings regarding any of this. Interesting to see people get so passionate about banking.
it depends on which side you are.
I myself prefer that the state cannot easily regulate and control capital, but not impossible for them to in dire cases.
E.g., they can control capital flow of criminals, but would need proof or courts involved. They cannot defacto control capital at will for an ordinary citizen.
I wasn't aware that others had made the same comment.
But afterwards I noticed that there was an episode on the Odd Lots podcast (23rd of March) where they interview professor Saule Omarova on this topic.
So it's definitely an idea which has gained some momentum. If you don't see the point of it, I recommend listening to the podcast episode.
> Get out of here with these comments. You feel like astro-turfing.
I am not astro-turfing. Not every idea different from your own is a conspiracy.
CBDC offers governments ultimate control over citizens. When/where/how we’re allowed to spend our money. Add in social credit scores and your CBDC money can be deactivated for any reason that runs counter to the approved narrative. Protest becomes impossible. Everyone is fully dependent on the state for the basic necessities of life. You can't live if you can't buy food/shelter/heat.
Here is Christine Lagarde, making it clear that the real reason Central Banks are pushing for CBDCs is that if they don't, they risk losing control.[0]
The ability to transact is a fundamental human right. There can be no liberty without the freedom to transact.
If you mean an account that holds its absolute dollar value, you are right, although T-bills would do the same thing if traded at sufficient frequency. You are also correct about it causing bank issues. The fed reverse-repo facility, which is essentially what you're describing here but for banks to use partially contributed to this mess.
Overall there is no getting away from the fact that "value" of assets is related to the interest rate of the currency and if the interest rate rises some of those will be worth less which means a slice of people in the economy will have less than they did before. The Fed can't do anything to magic it away.
In a similar vein you can't put all your data on a server somewhere, call it the cloud, and cry foul if you lose your most important source code and IP when the server goes down. Banks can't change underlying economics. It was incumbant on the businesses working w/ SVB to not use them as their treasury anymore than they would put all their code on one AWS server and call it a day.
https://www.forbes.com/sites/norbertmichel/2018/11/05/newly-...
Heck, even China has struggled to push adoption of its Digital Yuan.
the same concept in economics is called "there is no free lunch"
hmm yes, perhaps gold, or even bitcoin for online things
>A CBDC
That seems bad.
Interest comes from lending money to some entity that want to borrow money. Central banks don’t.
Conflating an investment (lending at interest) and a store of value is how we got to the mess we are in.
https://www.federalreserve.gov/monetarypolicy/reserve-balanc...
Currently, things are set up so that the ultra rich have to use their capital to back things that provide actual economic value. (There aren’t enough dollars in circulation to store their wealth.)
This forcing function seems like a good thing to me.
But to your point, why do you advocate for preventing a retiree, the proverbial widows and grandmas, from having access to a reliable store of value that doesn't require they risk their retirement savings in speculation?
Forcing everyone into stock or real estate speculation necessarily results the vast majority of the wealth gains going to the most financially sophisticated (Wall Street), the rich with the best financial advisors, or the lucky few who happened to allocate their savings in optimal bets 30-40 years in the future.
A reasonable long term store of value would help address inequality. By not having one we force the working class to trust their financial future to a predatory casino run by a den of wolves.
Which they will use when they've grown old.
What I'm getting at is that there is no such thing as a secure long term store of value and such a thing has never existed. Not even gold can be that. We can all wish for it, but it cannot exist.
So how they do it today is by using violence to forcefully exploit the surplus production from younger generations to support the elder generation. All political "systems" and ideologies today serve that goal. Any young person in the Western world who is working gets exploited in at least the following:
- Receiving less in salary than she produces, so that the company can turn a profit. This profit in general goes to stock owners who are pension funds or elderly individuals. This is how capitalism exploits the worker and it could be fine if it was only this.
- Paying taxes on their salary and hidden taxes before receiving a salary. A young worker has almost no benefit of government spending, while a huge amount of the government expenses goes to supporting the elderly. This is how socialism exploits the worker and it could be fine if it was only this.
- Paying pension fees / forced retirement investing. All this money goes to the elderly, with the promise that the young worker will receive when she is old - even though it is a fact that all pension funds are rapidly going broke and retirement ages are constantly being increased. This is how liberal democracy exploits the worker and it could be fine if it was only this.
- Paying rent/mortgage. This varies a bit, but lately it has become the rule that workers in Western countries are massively siphoned of their income in paying huge rents or having to go into debt for life to buy a home. This money goes to the elderly, who had the good sense of being born early. This is how feudalism exploits the worker and it could be fine if it was only this.
Since workers are exploited by at least four different political systems being imposed on them, there are also several classes of exploiters and an opportunity for the rulers to divert all fighting for freedom and change. But in the end, all of them work to benefit the elderly while taking their own cut - and that cut is huge since the amount of wealth being transfered is gigantic. So they can tell the exploited workers to blame "the 1%", the corrupt government, the greedy landlords etc - but they are simply working on behalf of the elderly generation, who refuses to acknowledge any responsibility for what they have done and what they continue doing, while reaping the benefits. Comfortable.
Younger generations sacrificed greatly in order to please the elderly - mainly by not having children of their own since they were trying to fight to establish themselves in a society where all odds are against them. Now they are rapidly diminishing their quality of life in order to continue to serve and if we continue on this trajectory, young people in the Western world will be reduced even further.
The only long term store of value that works in the long run is "values" instilled from parents to their children, so that when the parents are old their children will actually want and take pleasure in caring for their elderly relatives and the elderly in their communities. The current generation of elderly have chosen to band together to deceive and exploit the younger generations - their children and grand children - for their own benefit. That circle has to be broken for traditional and sensible values to return. We break that circle by treating our children and young in a completely different way than what has been.
let's break this down.
Over a long time, technological improvements happen, which makes "things" cheaper, all else equal. So presumably, maintaining purchasing power over time means you get to partake in these technological improvements for zero risk - ala, your $1000 dollar can be used to buy an iphone in 10yrs time that is hundreds of times better.
But the implicaation that you didn't take any risk - the losses on development & research, investment and the dead ends - are all paid for by somebody else. If the investors demand a high return based on this risk, they will absorb all of the profit from taking the risk. This absorption includes a return on the price of said goods being sold, so it _cannot_ cost the same in 10 yrs time as today and only account for inflation (if this were the case, it means they made no profit).
So both scenarios cannot coexist - you either lose purchasing power by not investing, ala you lose to inflation (same thing). Or the technological improvements don't come.
Disagree that all goods and services behave the same way. As counter-examples look at the HHH of higher than inflation industries: healthcare, higher education and housing all of which experienced growth in cost at double digit rates in recent times.
Also, I am not arguing that a widower who buys a certificate of deposit deserves the same rate of return as someone investing in a risky tech stock - they don’t.
I do think there should be a safe option for savers to store their savings for a modest return net of inflation - say 2-3% for the time value of the money.
Savings != Investment
They are separate use cases and there should be room for both.
The closest you can get to this ideal "store of value" is to take the general idea behind ETFs and take it way further to find ways to "invest" in society itself, but in a much more multi-modal way. If done properly, unless society started to somehow fall apart, you would always be guaranteed returns. The key thing is that because you would be investing extremely broadly, the notion that you're privately owning this or that company or bank account would begin to vanish.
This is, of course, just a financial way to describe socialism.
Yes, money is good. No, more centralized control over money is not good. Stop it with the socialist nonsense.