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> The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, th

> The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, that is, central bank digital currency (CBDC). Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments https://www.clevelandfed.org/en/newsroom-and-events/speeches/sp-20200923-payments-and-the-pandemic.aspx https://www.clevelandfed.org/en/newsroom-and-events/speeches...

jmnicolas 6y ago
What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?
- Barrin92 6y ago
  the most obvious case is that people don't have a bank account or are 'underbanked' in the US that amounts to about a quarter of the population[1]. I think covid has shown what a mess it is to get everyone their relief money. If everyone had a digital account with the FED it'd literally be a few clicks of a button. [1]https://www.cnbc.com/2019/03/08/25percent-of-us-households-are-either-unbanked-or-underbanked.html https://www.cnbc.com/2019/03/08/25percent-of-us-households-a...
- bboygravity 6y ago
  Because central banks have no direct control over regular bank accounts? Regular bank accounts are not held at central banks (yet).
- sippingjippers 6y ago
  I'm fairly noobish at understanding all this stuff, but as I understand it there are severe structural issues with the existing banking system that make a completely new mechanism desirable. For example by depositing cash into traditional accounts, it is also equivalent to providing capital to traditional banks to loan from. It would therefore be difficult to supply cash to end users without also increasing the availability of credit, which may be undesirable for any number of policy reasons.
- muzika 6y ago
  So that they can have restrictions on how the stimulus money could be spent.

jmnicolas 6y ago

What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?

Barrin92 6y ago
the most obvious case is that people don't have a bank account or are 'underbanked' in the US that amounts to about a quarter of the population[1]. I think covid has shown what a mess it is to get everyone their relief money. If everyone had a digital account with the FED it'd literally be a few clicks of a button. [1]https://www.cnbc.com/2019/03/08/25percent-of-us-households-are-either-unbanked-or-underbanked.html https://www.cnbc.com/2019/03/08/25percent-of-us-households-a...
bboygravity 6y ago
Because central banks have no direct control over regular bank accounts? Regular bank accounts are not held at central banks (yet).
sippingjippers 6y ago
I'm fairly noobish at understanding all this stuff, but as I understand it there are severe structural issues with the existing banking system that make a completely new mechanism desirable. For example by depositing cash into traditional accounts, it is also equivalent to providing capital to traditional banks to loan from. It would therefore be difficult to supply cash to end users without also increasing the availability of credit, which may be undesirable for any number of policy reasons.
muzika 6y ago
So that they can have restrictions on how the stimulus money could be spent.