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> These “govcoins” are a new incarnation of money. They promise to make finance work better but also to shift power from individuals to the state, alter geopoli
by SturgeonsLaw 5y ago
> These “govcoins” are a new incarnation of money. They promise to make finance work better but also to shift power from individuals to the state, alter geopolitics and change how capital is allocated. They are to be treated with optimism, and humility.
Not sure I would describe a power transfer from individuals to the state as a cause for optimisim, but hey, this is The Economist.
- noxer 5y agoThese CBDS dont shift power it just makes things faster on a technical level because they can be moved p2p. Its central controlled but it doesn't need the centralized technical infrastructure. The money private person uses is unlikely to be replaced by CBDCs and also that money is already digital for the most part.
- reedjosh 5y agoIt completely removes privacy that physical cash allows. It also allows for a true negative inflation rate. Imagine being unable to remove your cash from an account that earns negative interest. Digital currency enables this. And _does_ massively shift power away from the individual.
- kqr 5y agoWait, why would digital currency remove physical bank notes? They could still exists, just be liabilities of the central bank rather than private banks, right?
- headmelted 5y agoThe thinking is that as we’re rapidly going cashless anyway, the existing inventory of cash will diminish as it’s banked and removed from circulation. This is happening already, but is expected to accelerate over the next few years.
- kqr 5y agoI agree completely (and for the record I think that's awful -- I've switched to the only bank left in my country that still deals with bank notes) but that's a problem regardless of the status of CBDC as far as I can tell.
- razius 5y agoIt's forbidden by law to carry or pay with more than a very small amount of cash, that plus very high fees for depositing or taking out cash.
- headmelted 5y agoThis. That said, and I know I’m going to get hassle for this, I’m still struggling to be against it (as long as I’m still able to spend the money on other assets as it’s obtained - on the basis that the government can’t freeze what isn’t there). There are whole classes of crimes (financial and otherwise) that this would make completely infeasible.
- ballenf 5y agoAnd just think of all the things that will be turned into crimes once people lose the ability to rebel. Cash is a check on centralized power. An important one.
- razius 5y agoIt's so much more: "The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start." https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118 https://www.wsj.com/articles/china-creates-its-own-digital-c...
- trompetenaccoun 5y agoThis isn't true. Firstly in a totalitarian state they can already freeze your assets at will. Chinese banks regularly do this and there's nothing the victims can do about it. Secondly, although unlikely that states will do so, it's perfectly possible to design CBDC to be privacy preserving. What digital central bank money actually does is shift power from private banks to the central bank. It also gives those who want to hold large sums of cash more security as they will be able to directly hold the actual currency instead of private bank credit money which is uninsured at large sums.
- bob33212 5y agoThe freedom that will be provided by a "decentralized database" is commonly overestimated by pro crypto crowd. It is true that the government cannot edit the ledger. But they can take your things and put you in jail.
- ngcc_hk 5y agoYou can still sort if using paper or gold or Bitcoin especially if many have relatives outside of the system. But if the all economical activities are in the central bank I am not sure you can have the private part of all these non-government activities. Not to mention mining the details of your transactions are so much easier and social credit system is so much enforceable. The article mentioned of Norway is a good case illustrated someone beyond this line of thinking. But once the central Gov can control all, can even democracy survived one wonder. The decentralised part is the key assumption in democracy.
- lottin 5y agoWhat? Democracy is predicated on the consent of the governed, and the accountability of public institutions, not decentralisation.
- trompetenaccoun 5y agoIt's all a question of politics. Based on what I see there is no doubt that digital currencies are coming. Governments are not going to just give up their currency monopoly, so the only logical consequence is central bank digital currency. But how will it be implemented, that's the question. Digital cash is perfectly feasible, just look at something like Monero. They could build in a central bank fiat lever if they want to, so that they can inflate at will, while still preserving privacy, security, and accountability. Will this happen? I doubt it. Because the trend goes to ever more authoritarianism. But it could be easily implemented if there were a will to do so. And again, we don't need digital currency for the government to turn against the citizen, many governments around the word manage perfectly fine without it already. Private banking isn't immune to the law. Instead of being scared of regulation, the citizens should lobby for the right regulation. The current financial system already discriminates against us and only aids the wealthy.
- exceptione 5y ago"It also allows for a true negative inflation rate. Imagine being unable to remove your cash from an account that earns negative interest." Negative inflation is deflation, so you money is getting worth more. From a consumer point of view that would be a win.
- imtringued 5y agoFrom a consumer point of view it is a win, but you have to earn the money in the first place and that means over time your employer will have to cut your wages in nominal terms, because your real wage is going up year by year. Employers would demand deflation adjusted wages or just fire their overpaid employees. Deflation is also a win for people who have inherited their wealth a long time ago, because they have to do absolutely nothing to protect their wealth. It's basically rent seeking but this time it is with money. There is another problem, the real value of debt grows over time, which makes it harder to repay debts. However, I will admit one thing, occasional deflation spikes are not a bad thing, if they are followed by inflation that meets the 2% target.
- Infernal 5y agoI believe this was just a typo, or a braino - from the context I assume the author meant a "true negative interest rate".
- lozf 5y agoRight, a case of use it (potentially only at approved retailers / service providers) or lose it (your stash depletes as you "save" it).
- reedjosh 5y agoAnd there's no reason unspent money couldn't just become a tax. So, a negative interest rate from your perspective, but a revenue stream to govs. At that point, good luck ever having enough sovereignty to retire unless the Gov sanctions it.
- lozf 5y agoDon't forget censorship -- the ability to restrict people to only spending their UBI / "benefits" only at (e.g.) approved food and clothing retailers.
- noxer 5y agoPhysical cash isn't replaced by CBDCs so it can not removed anything from physical cash. >It also allows for a true negative inflation rate. Already possible and has nothing to do with CBDCs >Digital currency enables this. And _does_ massively shift power away from the individual. No, you are completely misinformed what these CBDCs actually are and do. It simply a central bank "dollar" that isn't tied to an account at the central bank. So 2 banks can transact them between each-other without the need to change balances of their central bank account (balance sheet). Its p2p fiat. Issued by a central bank but does not need the central bank in between every transaction. It reduces fiction in the technical system. Its purely technical it has zero effect on how people use money or whos in power. (the issuer has the controller/power which is still the central bank) CBDCs Explained: https://cinnamon.video/embed?v=557927432749843622 https://cinnamon.video/embed?v=557927432749843622
- legutierr 5y agoWith CBDCs available to consumers, why would any normal person open a bank account? Most people have bank accounts in order to receive and make payments electronically. Most people (and many businesses) pay for this privilege through high fees; at best, they receive paltry or no interest. CBDCs, if widely adopted, will drain most (if not all) banks of deposits, and thereby trigger a banking crisis. Either that, or banks will have to immediately cut fees and start paying meaningful interest, which will make many banks unprofitable, instigating a banking crisis. Given that many central banks are prudential regulators of commercial banks, and are tasked with preventing banking crises, it seems very unlikely to me that CBDCs will be released to consumers. Not because they wouldn’t be revolutionary, but because they would be too revolutionary.
- kwere 5y agoItalian perspective here: deposit and checking accounts are in europe a nuisance in the actual monetary system, getting them replaced would not ruin big banks, smaller ones will probably fell it.
- legutierr 5y agoAre you saying that banks in Europe would prefer not to accept any deposits at all? In the US, banks do often try to justify high fees by pointing to the relatively high cost of administering small accounts. But those accounts are still profitable for the banks because of the fees—they don't actually want to give up that revenue. And CBDCs don't just threaten banks' consumer banking business. Although my previous comment was focused primarily on consumer account holders, similar incentives exist for businesses. Any business that has bank account balances in excess of the FDIC insured amount is extending credit to its bank. Yes, banks tend to be trustworthy, but the 2008 crisis showed us that even the largest institutions can fail, and then you are just hoping that the US government stands up and covers more than what the FDIC is obligated to. As a business owner, it wouldn't be a difficult decision to shift all my bank balances over to CBDCs, provided that the physical security and anti-fraud risk could be sufficiently covered. I would much rather have 100% of my risk exposure be to the US government, rather than to a bank that may or may not be backed by the US government if the shit hits the fan. Banks today are unable to offer interest rates that would compensate for that risk differential. I am also confident that a CBDC would be easier to use and more flexible from a user experience perspective than my bank's current systems. All this is to say that we would all hear a giant sucking sound emanating from banks' balance sheets if CBDCs were introduced, not only because people would be closing their consumer accounts, but also because businesses would be withdrawing funds from their business accounts. Yes, there are accommodations and affordances that can be made to keep the banks in the game somehow, and there are "bank-like" roles to be filled in a crypto economy. However, banks today would find it difficult and disruptive to make that shift, and many wouldn't be able to make that shift at all. Banks would go out of business. Big banks would go out of business, and that is the last thing that any central banker wants to have happen. The fact that by introducing a CBDC a central bank itself would be the direct cause of bank failures makes the whole concept quite dubious, in my mind.
- AbrahamParangi 5y agoBig "Get ready to eat bugs!" energy.
- sanchostache 5y agoWhat website am I on? I'm surprised to see aversion to big centralized government on HN of all places. I always imagined your average HN user to be not far off from your average Redditor.
- reedjosh 5y agoI love you for this comment. I'm just picturing those that don't know the meme reading this. Edit: wow, that google search is ugly.
- tablespoon 5y agoCan you link to the meme?
- reedjosh 5y agoI've only ever really heard it, which is probably why it's hard to google. Basically the elite overlords of society want us eating bugs like good little slaves, but that doesn't really do the meme justice.
- imtringued 5y agoYou will live in ze pod You will eat ze bugs You will own nothing and will be happy
- idclip 5y agoYoure right in ways my control of the english language fails to formulate into words. The most important digital currencies are those that empower to the people. Not fund wars and beaurocracies.
- NicoJuicy 5y agoI got the impression that the theory was that the power was the individual. But in practise it's 65% Chinese miners? And most people use cloud wallets and you know what they say: Not your key, not your crypto.
- kkoncevicius 5y agoI didn't get this part: > I got the impression that the theory was that the power was the individual. But in practise it's 65% Chinese miners? Are Chinese miners not individuals? China has the largest population, so it's only natural that it will also have the largest fraction of miners.
- NicoJuicy 5y agoThe ones mining are corporations, not individuals. A lot of people seem to have a short memory: https://en.m.wikipedia.org/wiki/GHash.io https://en.m.wikipedia.org/wiki/GHash.io
- gruez 5y agoThe control that miners exert is much less than governments have over fiat. Miners only control transaction inclusion and ordering, but can't uniliterally change the emission rate. Governments on the other hand can do all of that.
- Bellamy 5y agoDo you trust government or private banks more?
- deleted 5y ago[deleted]
- reedjosh 5y agoWhy should we be forced to chose?
- ben_w 5y agoFor the task of keeping money in an economically useful state over time? Generally the government, but it depends on the country. Banks have a profit motive and therefore keep trying to do things which value instant reward over stability. Governments (when not corrupt) are motivated by the actual success of the nation as a whole rather than individual sectors. They mostly only need to care about short-term wins for elections.
- kqr 5y agoFurthermore, if there's any branch of government that to me seems to be populated by actually intelligent people, it's the central bank.
- sofixa 5y agoNot everywhere, but that does seem to generally be the case, and when it isn't, it's pretty obvious - e.g. Turkey.
- kwere 5y agoerdogan selfappointed himself as central bank manager, do not undermine the work of the actual experts
- imtringued 5y ago
- 0xfaded 5y agoThe Economist is pro-market but, from my interpretation, advocates for systems of governance that yield a reasonable compromise between capital and society (which is the mechanism that allows for private wealth to exist in the first place). Fiscal policy is a tool in a larger toolbox. I agree that it’s not currently being used well, particularly in the Eurozone where a zero-sum game is played out between the “export based economies” and the “economies screwed over by the export based economies but are stuck with a currency they don’t control”. My hope is that more effort is put into society building, and a versatile toolbox is needed.
- elevenoh 5y ago>The Economist is pro-market I'd say the Economist is pro incumbent-centric market
- simonh 5y agoAre you reading the same paper? They rail against the power of incumbents all the time, what they really advocate for is competition. Take these last few sentences in an article from last November on the impact of the pandemic: https://www.economist.com/leaders/2020/11/26/will-big-firms-benefit-from-the-covid-crunch https://www.economist.com/leaders/2020/11/26/will-big-firms-... "Yet the rapid changes that have been forced on many industries are leading to innovation that will outlive the pandemic—and in some cases are leaving incumbents less mighty than before. Consumers and trustbusters alike must hope that these newly competitive parts of the economy remain hotly contested long after the pandemic abates."
- andrepd 5y agoState control isn't in itself oppressive or liberating. It all has to do with what kind of state controls that power. A well-functioning democracy, with a high level of participation and engagement, of subsidiarity, a free and diverse press? Or an oligopoly? Look no further than state control of resources (in this case oil) in the two countries Norway and Venezuela. Same idea (state controls oil revenues) and two vastly different results. Because one is a democracy and the other bought public support by social programs spending to prop up his cronies' assault on government wealth. So yes, ideal thing would be democratic control over capital and means of production. That's better than the current effectively oligarchic control where a small elite disproportionally holds unaccountable and opaque power. However, that's probably still better than an authoritarian government control.
- justicezyx 5y ago> power transfer from individuals to the state" This statement is very short, but it is full of unsubstantiated implications: 1. To have such a transfer, there must be powers to individuals in the first place. But currency in its modern sense has never been "individual power". It's a common denominator of value transfer, and a measurement of credit. No individuals can possess such thing. It's inherently social and community based. 2. The power has always been within the government. It was somewhat stolen by the capitalist moguls, who, including other pro-market deeds and statements, have managed to turn government into the foundation of monetary power, but deprives the government from exercising actual control over it. For instance, government forced taxpayers to bail financial institutions, but are powerless to fundamentally alter the behavior of the financial system. 3. Transfer, no, these type of social-economic dynamism can never been reasoned using the English word "transfer". It's more like social engineering, of adapting people's perception, setup societal, and business organizations, and laws to match that design. You and the economist are basically on the same camp, but arguing a superficial issue that doesn't even matter. The goal is always make government become the safety net of the actually powerful entities, and ensnare the whole population to surrender the majority of their freedom for the enrichment of the few.
- mpweiher 5y agoI think you're misreading it. >> They promise to make finance work better That's the good part. ("better") >> but also to shift power from individuals to the state That's the not so good part. Note the "but".
- legutierr 5y agoWould govcoins/CBDCs shift power from individuals to the state, or from the banks to the state? (I'm assuming you don't count the banks among the individuals you are referring to.) Given the nature of bank regulations today, I don't think that the power-relationship between individuals and the government will change substantially with the introduction of CBDCs. Even today, governments set policies as to what kinds of accounts banks can keep open, and what type of business bank customers are permitted to transact using their bank accounts. Banks are required to report potentially suspicious activity surreptitiously to law enforcement agencies, and are required to disclose their customers' information and activity to the government when asked. I'm not sure how much more power individuals would be giving up. What will change, however, is that banks would find it difficult to operate once a CBDC has been introduced in a country. Consumers would prefer to receive and make payments through an electronic system that charges lower fees. Businesses would prefer to hold their cash assets in a flexible medium that is fully backed by the central bank, rather than having to worry about extending credit to a commercial bank (which could become very risky after the introduction of CBDCs). Bank balances would be transferred to CBDCs on a massive scale, putting many banks in financial peril. An argument might be made that CBDCs would speed up the demise of physical cash—which I wouldn't entirely disagree with. That is, however, a question pertaining to the slope of that particular trend line, not its general direction. The current banking system is already pushing us towards giving up cash; the pressures that are preventing physical cash from being eliminated are largely cultural and political, not economic or infrastructural. CBDCs' effect on the politics and culture of physical cash will at most be general and incremental.
- deleted 5y ago[deleted]
- wolverine876 5y ago> Not sure I would describe a power transfer from individuals to the state as a cause for optimisim, but hey, this is The Economist. The Economist has been possibly the leading voice for free market capitalism since the mid-19th century. If it has any mission, that's it.
- antonvs 5y ago> They are to be treated with optimism, and humility. Good grief. I can only hope this was just a poor grasp of English on the part of the author, not actually intended as an imperative.