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"Will the federal reserve issue a digital dollar"? WTF is that nonsense? We already have that in the form of bank accounts. At least for banks that are partic

"Will the federal reserve issue a digital dollar"? WTF is that nonsense? We already have that in the form of bank accounts. At least for banks that are participating members of the federal reserve system, the legal definition of reserves consists of their account balance with federal reserve banks, "vault cash" (including cash stored off premises but sufficiently close that it could be rapidly retrieved), plus cash traveling to or from a federal reserve bank. Which means the digital account balances of member banks are legally dollars, and while I'm not sure they qualify as legal tender, no member bank is likely to reject a balance transfer as debt payment in favor of insisting on having a parade of armored trucks delivering federal reserve notes. If one is talking about the federal reserve offering some form of digital money that regular people can access, well bank account balances serve that just fine. If one wants something like a federal reserve-backed crypto-dollar, well that seems unlikely to happen. The problem is that it would compete with ordinary banks. You know those same banks that are the members of the federal reserve banks. Yeah, they would be none-too-happy about such a system unless it somehow let them get their cut. Those same banks could negatively impact the federal reserve system in a wide variety of ways, like choosing not to deposit reserves, and just keep reasonable vault cash stocks and invest the rest.

rfd4sgmk8u 5y ago
Its not nonsense at all! Bank accounts are private money, and their contents is magic'd out of nowhere through fractional reserve banking. They do not serve the purposes of a central bank digital currency. Interest rates are set by the banks, based on Fed rates. What is being proposed is a direct to consumer pseudo-crypto dollar, think USDC/USDT but issued by the Fed. This will likely happen in the next 5 years. Several other nations have progressed on this path now, including China. It does not compete with private money in banks. This would give the Fed direct ability to implement negative interest rates, literally taking the dollars out of your pocket. I would add that CBDC are dystopia through technology -- complete visibility of all transactions and demurrage / negative interest rates. I would recommend swapping as much fiat currency for Bitcoin as you are comfortable. Using private cryptocurrencies such as XMR and ZEC allow one to mask the transaction graph and amounts also.
- jsmith45 5y ago
  Such a system would very much compete with deposits in banks, given that savings account interest rates are already effectively zero. So why would a person give their money to a bank instead of keeping it in their DigitalDollars wallet? They would have no reason to do so, unless keeping their money as DigitalDollars was somehow worse. If keeping money as DigitalDollars is worse, then nobody would want to have them except possibly briefly for transactions, making it more of a payment network than a currency, and pretty ineffective as a monetary policy tool. Plus I have zero confidence that the Fed would be able to competently implement such a system to get the benefits they want. they would end up with a system that is somehow slower, less reliable, more fraud prone and more expensive than paying with a debit card.
- perl4ever 5y ago
  >their contents is magic'd out of nowhere through fractional reserve banking Could you ELI5 what is the connection between fractional reserve banking and creating money? Does the following mean that all banks can create infinity money out of zero deposits? "As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions." https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm Also, a direct to consumer crypto dollar sounds exactly like giving individuals accounts at the Fed, the same type of account banks currently have. Except more crypto-ey. Why, if the Fed has refused to let people bank with it directly, would they change their mind? Someone actually thought recently of opening a bank that would literally stash all deposits at the Fed, and the Fed didn't like that, presumably because they feel it would undermine the regular banks.
  - landemva 5y ago
    Accounts at the Fed will not be a crypto like bitcoin, etc. It will be a one party ledger fully controlled by the Fed. One mistake or court order and you are cancelled and done.
    - 5y ago

rfd4sgmk8u 5y ago

Its not nonsense at all! Bank accounts are private money, and their contents is magic'd out of nowhere through fractional reserve banking. They do not serve the purposes of a central bank digital currency. Interest rates are set by the banks, based on Fed rates. What is being proposed is a direct to consumer pseudo-crypto dollar, think USDC/USDT but issued by the Fed. This will likely happen in the next 5 years. Several other nations have progressed on this path now, including China. It does not compete with private money in banks. This would give the Fed direct ability to implement negative interest rates, literally taking the dollars out of your pocket. I would add that CBDC are dystopia through technology -- complete visibility of all transactions and demurrage / negative interest rates. I would recommend swapping as much fiat currency for Bitcoin as you are comfortable. Using private cryptocurrencies such as XMR and ZEC allow one to mask the transaction graph and amounts also.

jsmith45 5y ago
Such a system would very much compete with deposits in banks, given that savings account interest rates are already effectively zero. So why would a person give their money to a bank instead of keeping it in their DigitalDollars wallet? They would have no reason to do so, unless keeping their money as DigitalDollars was somehow worse. If keeping money as DigitalDollars is worse, then nobody would want to have them except possibly briefly for transactions, making it more of a payment network than a currency, and pretty ineffective as a monetary policy tool. Plus I have zero confidence that the Fed would be able to competently implement such a system to get the benefits they want. they would end up with a system that is somehow slower, less reliable, more fraud prone and more expensive than paying with a debit card.
perl4ever 5y ago
>their contents is magic'd out of nowhere through fractional reserve banking Could you ELI5 what is the connection between fractional reserve banking and creating money? Does the following mean that all banks can create infinity money out of zero deposits? "As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions." https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm Also, a direct to consumer crypto dollar sounds exactly like giving individuals accounts at the Fed, the same type of account banks currently have. Except more crypto-ey. Why, if the Fed has refused to let people bank with it directly, would they change their mind? Someone actually thought recently of opening a bank that would literally stash all deposits at the Fed, and the Fed didn't like that, presumably because they feel it would undermine the regular banks.
- landemva 5y ago
  Accounts at the Fed will not be a crypto like bitcoin, etc. It will be a one party ledger fully controlled by the Fed. One mistake or court order and you are cancelled and done.
  - 5y ago