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A consumer-accessible digital dollar that works the way the article describes—with consumers and businesses holding accounts directly at the Federal Reserve—wil
by legutierr 4y ago
A consumer-accessible digital dollar that works the way the article describes—with consumers and businesses holding accounts directly at the Federal Reserve—will amount to a nationalization of much of the consumer and commercial banking industries.
What business could possibly justify keeping a bank account when bank accounts are insured only to $250,000, and digital dollars are backed by the federal government to an unlimited degree?
What consumer will keep their bank accounts open, paying monthly maintenance fees and high transaction fees, when a free or low-cost option is available instead?
If the Fed’s digital dollar is actually worth using, businesses and consumers will withdraw their money from bank accounts en masse to move that money into cheaper and safer federal reserve accounts.
In other words, the introduction of a Federal Reserve digital dollar will result in a massive bank run the likes of which are almost unimaginable, simultaneously across the entire sector. Even if a substantial number of bank customers initially choose not to move their money, enough will choose to do so to make the operation of many (if not most) banks economically unviable. More than one bank will fail, which will cause real pain felt by ordinary people. The banks that don’t fail will effectively transfer much of their business over to the Federal Reserve.
Janet Yellen’s justification for this initiative is that payments today are too expensive. She may be right.
Who here, though, thinks that the solution to that pricing problem is a disorderly nationalization of the United States banking system, as well as that of much of the world, by the United States government?
Who thinks that the risks of a disorderly restructuring of the entire banking sector are worth it? Is there not some other way to achieve the same goals?
- freeone3000 4y agoCounterpoint is that banks are predatory on consumers. i If their profitability relies on fees extracted from depositors for the privilege of letting them buy and sell, then they should not exist.
- anon291 4y agoI'm sorry no. Banking provides a lot of services beyond accounts. The last thing we need is government deciding which business gets loans. They'll soon be analyzing your social media before loaning you anything.
- freeone3000 4y agoHas there been any indication of the federal reserve replacing loans? This looks to replace checking and savings accounts.
- anon291 4y agoHow would banks make loans if not for taking deposits?
- freeone3000 4y agoMuch as they do now: by grouping loans by creditworthiness and selling them as bundles to investors.
- deleted 4y ago[deleted]
- starkd 4y agoTo demonize a whole industry like that is an unfair statement. Perhaps predatory in certain instances, but no more than any other industry. But to endorse a wholesale dismantling is irresponsible.
- daniel-cussen 4y agoWell no because this is banks, so some amount more than other industries. It totally depends on their rates, how much they deserve to be demonized. Like in Chile they exponentiate their borrowing costs to the 18th power onto their debtors. So let me explain: if you borrow at 10%, and double the interest, what do you get? Well the critical thing is time, patience, so doubling the interest means allowing half the time to pay back. So in fact the interest is 1.1, not .1, bankers should never add one or subtract one. You take that 1.1 and you square it, that's double the interest, get 1.21. Just as like, the banks take 1.01 international rates and exponentiate them to the 18th power to get 1.2 percent rates, what the market will bear...sort of, haven't borne it very happily recently. Lots of violence.
- legutierr 4y agoThis is a revolutionary sentiment that may be felt by some people— but you would not expect the United States Treasury and the Federal Reserve embrace these ideas. If you believe that the banking industry is predatory, you shouldn’t hope for a disruption like this. The US banking industry is among the most competitive in the world, with thousands of institutions competing for your business. If you don’t like the fees charged by the big banks, you can find a credit union or community bank that will give you a better deal. If a digital dollar is released, it is these smaller institutions that will be most affected—along with consumer choice. If the U.S. Treasury and the Federal Reserve intend to undertake a revolutionary restructuring of the U.S. banking sector, they should do so in an orderly fashion, engaging in a democratic process with full disclosure of the implications of their policies.