CBDC Benefits, Risks, and Policy Considerations
Editorial by Boyd Evan White
The Federal Reserve is seeking input from a wide range of “stakeholders” that might use a CBDC (Central Bank Digital Currency) or be affected by its introduction. A CBDC is defined as a digital liability of a central bank that is widely available to the general public. In this respect, it is analogous to a digital form of paper money.
The Feedback Form asks technical questions pertaining to the PDF linked below; to answer the questions in context it is pertinent to read what the Federal Reserve has written.
Money and Payments: The U.S. Dollar in the Age of Digital Transformation (January 2022)
The online feedback form can be found here.
Central Bank Digital Currency (CBDC) Feedback Form
The paper does say, “The Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
People who are wary about a Global Agenda impugning the sovereignty of the USA might take alarm at one of the sections in this paper pertaining to Cross-Border payments with the emphasis of “…the G20 countries agreed in 2020 to a multiyear roadmap to identify and deploy improvements to cross-border payments.”
Oh Geez, and here is a mouthful, written with a cheery spin, noting the CBDC would not need to be backed by Deposit Insurance nor any Assets, well Jeepers, that is good know, “As a liability of the Federal Reserve, however, a CBDC would not require mechanisms like deposit insurance to maintain public confidence, nor would a CBDC depend on backing by an underlying asset pool to maintain its value. A CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk.”
Are we so stupid as to not realize the “Full Faith and Credit” of the USA, meaning its land, people and things, ARE an asset pool? If that were not true the Federal Reserve could not be doing what it is doing.
And here is another paragraph that is grandly delusional, talk about painting one’s own wagon, “Because central bank money is the safest form of money, a widely accessible CBDC would be particularly attractive to risk-averse users, especially during times of stress in the financial system. The ability to quickly convert other forms of money—including deposits at commercial banks—into CBDC could make runs on financial firms more likely or more severe. Traditional measures such as prudential supervision, government deposit insurance, and access to central bank liquidity may be insufficient to stave off large outflows of commercial bank deposits into CBDC in the event of financial panic.
So, who considers this to be true, “…central bank money is the safest form of money…”? Wow! And the premise that in the event of a monetary catastrophe people are going to RUSH to put their funds into CBDC…isn’t that mindbogglingly obtuse? Double Plus Wow on that one.
Since all of our comments would be submitted to the Federal Reserve over the internet, and no one would know what anyone else said, here are the Questions from the Feedback From and an attempt to honestly answer them.
Question #1. What additional potential benefits, policy considerations, or risks of a CBDC may exist that have not been raised in this paper?
Comment: Let’s not mitigate the only real fact ya’ll are presenting the CBDC; and that is that you have so totally screwed up the Federal Reserve Note and the mandates of the Federal Reserve that you don’t have any more options other than to say…like Bullwinkle the Moose, “Hey Rocky, watch me pull a rabbit out of my hat.” And probably to the same effect.
Question #2. Could some or all of the potential benefits of a CBDC be better achieved in a different way?
Comment: Yes, you could put one ounce of silver in a vault and call it our Financial Reserve. There are 35 quadrillion atoms of silver in an ounce. You could peg a USD at 875 atoms of silver and thereby create a monetary system of $40 trillion dollars. No debt; no obligation, no FRN, no CBDC. A silver backed dollar of 875 atoms.
Question #3. Could a CBDC affect financial inclusion? Would the net effect be positive or negative for inclusion?
Comment: Yes, like the Mark of Beast in the Bible would affect inclusion, “Sure, folks, step right up, take the Mark.”
Question #4. How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum-employment and price-stability goals?
Comment: First, people would have to agree to be paid in CBDC’s. Second, there are many legal hurdles like “Legal Tender” and “Payment of Taxes” considerations. Third, for a hoot, you could just hire everyone in the USA reaching maximum-employment and pay them with CBDC’s and just get us to where we are seemingly going anyhow…complete Statism.
Question #5. How could a CBDC affect financial stability? Would the net effect be positive or negative for stability?
Comment: LOL, financial stability, ya’ll would probably starve if you had to deal with a positive-to-positive business transaction. Trenchard and Gordon would have had your liver for trying these carnival tricks. With the statement of “digital liability of a central bank” you have demonstrated you have not the foggiest notion of what “financial stability” entails. Look up “over-trading” and what Adam Smith had to say about that topic. If a country or a person has to go into substantial debt to support their trade…they are “over-trading”…living beyond their means.
Question #6. Could a CBDC adversely affect the financial sector? How might a CBDC affect the financial sector differently from stablecoins or other nonbank money?
Comment: Let’s see, how about complete Statist control over all our lives.
Question #7. What tools could be considered to mitigate any adverse impact of CBDC on the financial sector? Would some of these tools diminish the potential benefits of a CBDC?
Comment: Tangible assets. Yes, they would make the CBDC irrelevant.
Question #8. If cash usage declines, is it important to preserve the general public’s access to a form of central bank money that can be used widely for payments?
Comment: Yes, we are all aware of the trend, however I think you have jumped the shark. How much of the digital world depends on the internet and communication network? And what is the precedence of Tyrants and War to those things? Tyrants and War destroy comms as their first objective…and there goes your cyber-based CBDC.
Question #9. How might domestic and cross-border digital payments evolve in the absence of a U.S. CBDC?
Comment: No doubt ya’ll could give us some clue on that….it is not like the IMF SDR or something more mundane like “Western Union” is not already handling that.
Question #10. How should decisions by other large economy nations to issue CBDCs influence the decision whether the United States should do so?
Comment: Not at all…besides the sovereignty of the USA being an issue…we need to address the sheer immorality of what you are doing with the Federal Reserve Note.
Question #11. Are there additional ways to manage potential risks associated with CBDC that were not raised in this paper?
Comment: Yes, mandate that the ONLY way the U.S. Government can raise funds is from taxes. No more issuing Bonds….if the U.S.G. wants to finance what it does honestly…let them get the funds from the people. That is one of the most common misconceptions of modern-day Patriots… WE ARE PRO-GOVERNMENT AND PRO-TAXATION. We want our government to be fully transparent and moral…and we want to be taxed honestly…we don’t want to be snookered and indentured with unrepayable debt…if what the USA is currently doing year-by-year means we would all be taxed at a rate of 70% then “By God” do it…and let the consequences be shown to a Candid World. Of course, if the government taxed us only 1% that would be fine too.
Question #12. How could a CBDC provide privacy to consumers without providing complete anonymity and facilitating illicit financial activity?
Comment: Therein lies the rub; that is not your concern; you are not prosecuting attorneys or police. “The Fable of the Bees” or “The Grumbling Hive” (circa 1706) spotlighted the fact ANY monetary system will have a percentage that is spent on vice and sin…having a CBDC will not do away with that trait unless ya’ll are planning on turning into complete Totalitarian pieces of work. Talk about a scary power, when the government can impugn the “Pursuit of Happiness” by calling it “Illicit Financial Activity”. If we were in China and I wanted to donate some CBDCs to the local chapter of the wicked “stretching” club of Falun Gong…could I expect a visit from the police?
Question #13. How could a CBDC be designed to foster operational and cyber resiliency? What operational or cyber risks might be unavoidable?
Comment: Tangible does not mean cyber…that is the short answer. All cyber is is a quick way to exchange information. You could invest in a country wide Pigeon Post program to offset the cyber world being infringed; it worked for the Muslims during the Crusades and the Allies in WWI; double down on this approach as sort of a community/religious outreach to Muslims. Hey, what the heck, since the Federal Reserve is supposed to be aiming for maximum-employment, with the creation of a nationwide Pigeon Post you could provide “operational resiliency” and “maximum-employment”.
Question #14. Should a CBDC be legal tender?
Comment: No, the premise is absurd, if the CBDC is a “central bank liability”…and “legal tender” is a phrase pertaining to paying debts, then, using CBDC’s to pay debts is just shucking-n-jiving, using debt to pay debts. And that is not good business. Read Alfred Crozier’s “U.S. Money vs. Corporate Currency”. The CBDC will be a Corporate Currency…and all We the citizens of the USA will be doing is working for the “Company Store”.
Question #15. Should a CBDC pay interest? If so, why and how? If not, why not?
Comment: Sure, why not? 100% interest on a weekly basis; and have prices inflate 100% every week too. Who cares? Let’s run this baby out. You will be able to tell “who cares” by how many people out of 330 million “stakeholders” in the USA take the time to comment on these questions. Not a pretty picture.
Question #16. Should the amount of CBDC held by a single end-user be subject to quantity limits?
Comment: Seriously, right in front of our faces in real-time, you are strangling our ability to acquire property and store value? That is my first reaction.
But in fact, this question spotlights a fundamental problem with any organized monetary system…and that is, “If you give ten people in a room equal amounts of money it is only a matter of time before one person controls 90% of the money.” THAT is just the symptom though, especially since I fully appreciate the trickle-down effect from those who are “good with money”, the PROBLEM is that when positions of power can be influence if not outright purchased by the 10% of people who control 90% of the money occurs…THAT is the problem.
And quit your lying, in no way shape or form do you mean everyone will be subject to quantity limits of CBDCs. It would only be a matter of time before there were “Classes” (e.g. Social Credit Scores) whose quantity limits were higher. Any quantity limit you instituted for the rich and famous would also have apply to blue-collar workers…and any quantity limit to accommodate the rich and famous would render it moot for the vast majority of the population.
Question #17. What types of firms should serve as intermediaries for CBDC? What should be the role and regulatory structure for these intermediaries?
Comment: Red Coats, Gestapo, Stazi, Ustase? Just some suggestions. Their names proceed them.
Question #18. Should a CBDC have “offline” capabilities? If so, how might that be achieved?
Comment: No, they should not. Unless, of course, you took the Pigeon Post seriously in an earlier comment.
Question #19. Should a CBDC be designed to maximize ease of use and acceptance at the point of sale? If so, how?
Comment: No, the CBDC is a really bad idea. The Federal Reserve Note is bad enough. Clean up your mess and restore a sense of values to the USA…Repent!
Question #20. How could a CBDC be designed to achieve transferability across multiple payment platforms? Would new technology or technical standards be needed?
Comment: I suspect not; “transferability” in an eCommerce and digital environment is a technical detail.
Question #21. How might future technological innovations affect design and policy choices related to CBDC?
Comment: Maybe the Mark of the Beast with a CBDC RFID chip installed in us. What could go wrong?
Question #22. Are there additional design principles that should be considered? Are there tradeoffs around any of the identified design principles, especially in trying to achieve the potential benefits of a CBDC?
Comment: This a really bad idea leading to Statist control over people. Stop it. Roll up the Federal Reserve and ya’ll go get real jobs.
The Fed Just Asked for OUR Feedback on a CBDC
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