Pushing for a global currency.
May 26, 2020
CBDCs just got real. The idea of a central bank digital currency, a couple of months ago, felt like a distant dream. But, now it’s more than real as countries are now rushing to create a digitized version of their national fiat currency.
The market has become highly diverse too. We have come a long way from Bitcoin to a plethora of options that Satoshi’s creation enabled. We have learnt about how digital currencies challenge the traditional definition of money, the role of central banks, and the financial intermediation model. We are talking CBDCs now.
Most central banks today are either actively engaged in researching about CBDCs or are actively pursuing its development.
So, what is a CBDC exactly? Despite a dozen reports published, there is no set consensus on its definition yet. In short, a CBDC is a digital form of fiat money that has centralized control. And while CBDCs were on everyone’s mind for a while, it was Facebook’s Libra announcement that threw a spanner in the bolstering of its work.
Expanding on the scope of CBDC, one of the value propositions of it, though not explicitly mentioned, is the cross-border angle. And as proposals regarding the same become more concrete, especially with a digital form of cash, the ease of its circulation will dramatically increase. This dimension is what needs exploration. First up, the Chinese CBDC, christened ‘DCEP.’
The Chinese Expedition
Long before the Bank of England released a working paper on CBDCs, it was China that began working on it. Since 2014, precisely. It isn’t surprising that China was not happy with the US Dollar’s role as a global reserve currency. In a bid to extend its reach, China expanded cross-border trade RMB Settlement project, focusing initially on the Hong Kong market in 2009.
Six years later, the Renminbi [RMB] received the status of ‘reserve currency’ from the International Monetary Fund [IMF]. The RMB was added to the IMF’s ‘Special Drawing Rights’ basket a year later in 2016. Special Drawing Rights or SDR is essentially an international reserve asset created by the IMF in the year 1969 to supplement its member countries’ official reserves. This was an important milestone in the integration of the Chinese economy into the global financial system.
In fact, it even surpassed the U.S to position itself as the world’s largest goods trader in 2014, a title that the U.S had held for decades.
“So, what is a CBDC exactly? Despite a dozen reports published, there is no set consensus on its definition yet.”
Well that sounds marvy. I buy durable goods, seed, food that can be stored and ammo. I save scrap metal and such. Still looking for the right real estate, but speeding up the search.
I thought this was a piece on cheap 60’s wine.
Screw the bankers. The new international monetary unit could be based on energy: The Joule
1 Joule = Newton · second = 1 kg · m²/s²
We can all relate to this (especially, screwing the bankers). Wikipedia has a nice summary:
One joule represents (approximately):
The kinetic energy of a 2 kg mass traveling at 1 m/s.
The energy required to lift a medium-sized tomato up 1 meter (3 ft 3 in) (assume the tomato has a mass of approximately 100 grams (3.5 oz)).
The energy required to accelerate a 1 kg mass at 1 m⋅s² through a distance of 1 m.
The heat required to raise the temperature of 1 g of water by 0.24 °C.
The typical energy released as heat by a person at rest every 1/60 s (approximately 17 ms).
The kinetic energy of a 50 kg human moving very slowly (0.2 m/s or 0.72 km/h).
The kinetic energy of a 56 g tennis ball moving at 6 m/s (22 km/h).
The amount of electricity required to light a 1 W LED for 1 s.
The food energy (kcal) in slightly more than half of a sugar crystal (approximately 0.102 mg/crystal).
A kilowatt-hour is 3.6 megajoules.
So, here’s the question: Would one Joule of energy cost more – or less – than one Joule?
@Ollie Hominin:
More, of course, for two reasons.
— The control of exchange media will be hijacked by govt, and govt always gets its vigorish.
— More practically, the storage, transfer, and management of monetary Joules will consume energy Joules.
Crypto always seemed like a hi-tech Ponzi scheme to me, and I have no interest in it. However, I can see the banks and the politicians wanting to get in on it, and I can see a time (not too far away, probably), when wages will only be paid in government-issued (and government-controlled) crypto. I can even see them outlawing other forms of currency (or even barter) in order to maintain that control.
President Thomas Jefferson was so right on…But what does it matter. Wisdom isn’t pop culture. Too bad…
All the better to control the slaves, serfs, and peasants.
Back to the Barter system.
How many chickens for a set of tires.
Serfdom was the status of many peasants under feudalism, specifically relating to manorialism, and similar systems. It was a condition of debt bondage and indentured servitude with similarities to and differences from slavery,
RIPPLE?!?! 😮
Oh Lawd, ‘Lizabeth – it’s the BIG one! I can FEEL it! 😛
The Constitution of the U.S. (I.8.5) says,
There’s nothing in there about paper currency, much less about fiat currency, and even much more less about any stinkin’ central bank.
Murray Rothbard’s 1963 classic What Has Government Done to Our Money? is just as great a read today as it was almost 60 years ago. Very highly recommended (and it’s free to read at mises.org.
Centralized is the real draw for bankers.
Crypto or digital currency is easier to keep track of and control.
China is showing us how it’s done with their social scoring.
It will be the same type of platform.
No thanks.
“In short, a CBDC is a digital form of fiat money that has centralized control. ”
IOW, credit.
I don’t know about IMF or central banks, but me & Cornpop shared a bottle of Ripple once.