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Partly basing it on other discussions around it: https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/ https://blogs.imf.org/201

by ericd 5y ago

Partly basing it on other discussions around it: https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/ https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-nega... And yes, the article absolutely does mention it: "CBDC Public Policy Rationale Advocates of CBDCs suggest that they are necessary, certainly useful, in addressing multiple issues emerging across the global financial system of late. These issues include: ... Zero-lower bound interest rates (i.e., negative interest rates) – the existence of physical cash results in the severe curtailment of the ability of central banks to lower official interest rates below the zero bound (i.e., implement negative nominal interest rates) given the risk that citizens are likely to withdraw from the financial system by hoarding physical cash if negative nominal interest rates are implemented[12]. " If that's part of the rationale, what do you think is implied about the continuing existence of physical cash?

crazygringo 5y ago
The article you're linking to explicitly talks about cash being preserved: > The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. So considering they're going to all the trouble of defining an exchange rate, what I think is implied about the continuing existence of physical cash is... that it will continue to exist. The goal here is very explicitly about making negative interest rates workable, not eliminating cash.
- ericd 5y ago
  You’re right, the article I linked to is more about how to eliminate a pesky attribute of physical cash, not the physical manifestation itself (which I’m frankly less concerned with). My initial comment was mostly meant to be about the removal of physical cash as an alternative to something with a negative nominal yield, which a dual currency does accomplish, it would no longer be an alternative. But separately, I do think the eventual intention is to also get rid of the physical manifestation entirely, with a dual currency as a way to ease toward that.

by ericd 5y ago

crazygringo 5y ago

The article you're linking to explicitly talks about cash being preserved: > The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. So considering they're going to all the trouble of defining an exchange rate, what I think is implied about the continuing existence of physical cash is... that it will continue to exist. The goal here is very explicitly about making negative interest rates workable, not eliminating cash.

ericd 5y ago
You’re right, the article I linked to is more about how to eliminate a pesky attribute of physical cash, not the physical manifestation itself (which I’m frankly less concerned with). My initial comment was mostly meant to be about the removal of physical cash as an alternative to something with a negative nominal yield, which a dual currency does accomplish, it would no longer be an alternative. But separately, I do think the eventual intention is to also get rid of the physical manifestation entirely, with a dual currency as a way to ease toward that.