This is a mobile optimized page that loads fast, if you want to load the real page, click this text.

Central Bank Digital Currencies: CBDC

Jump to new

greggles

I'll be back!
Joined
28 July 2004
Posts
4,491
Reactions
4,587
I've been hearing a lot recently about digital versions of national currencies being planned by various governments around the world. The Atlantic Council has a CBDC tracker where you can find out more about the current status of CBDCs in various countries around the world: https://www.atlanticcouncil.org/cbdctracker/

My initial gut feeling is that governments are embracing CBDCs for two main reasons: to help recover lost tax revenue by tracing more transactions that would otherwise be invisible to the authorities and to effect more oversight and control over personal and corporate finances. Both of these purposes give me great cause for concern, especially when it comes to the issue of privacy. Cash gives us a certain anonymity that a CBDC will remove by creating records of all electronic transactions that would have otherwise been anonymous if cash had been used.

Will people turn to other forms of hard currencies such as precious metals if CDBCs are introduced? I confess to having started to buy some silver and gold bullion as a backup in case of government overreach into the financial affairs of ordinary citizens. Cash in its current form seems to be on the way out.

This is just a starting point for further discussion. My knowledge is fairly limited so I am interested in hearing the thoughts of others on CBDCs and related issues.
 

Isn’t the current currency basically already operating as a digital currency? I mean sure there might be $100 Billion Australian dollars sitting in vaults, and some people still carry some of it around and spend it.

But, with the vast majority of transactions now happening using eftpos and bank transfers, can’t we already basically say our currency is basically digital, and the $100 Billion or so of cash is almost obsolete.

What real difference would it make if we switched the hard currency sitting in vaults for digital currency in a digital vault? We would still probably just still use credit cards and eftpos, and have accounting amounts move around accounts registering transactions, while the new “digital currency” just sits idle is a hard drive instead of a vault.
 
My gut feeling is that a new reserve currency will be developed, I think it will be digital and be reflective of a basket of currencies. IMO the developing world (BRICS), have had a gutful of the U.S using its reserve status as leverage to look after its self interest.

Whether individual countries go digital currency I have my doubts, but I can see a standard reserve currency being developed which all major trading countries are pegged to and it would make sense to have that in digital form so that it can be tracked and the other currencies benchmarked to it in real time.
As VC says with the advent of electronic funds transfer, our systems for most intents and purposes are digital. I can see the denomination of the notes in circulation dropping, to make cash transactions more difficult, but going full digital would hardly be worth the bother, for a lot of countries IMO.

I think the U.S money printing machine, has given countries that carry U.S dollars as a backup to their currency, the absolute $h!ts.
To have a reserve currency that each countries currency is pegged to and is a true reflection of the strength of their economy will make everyone but the U.S happy, whether the U.S agree or not is another thing though.


What happens if USD is not reserve currency?


For the U.S., it would likely mean less access to capital, higher borrowing costs and lower stock market values, among other effects. Having the world's reserve currency has allowed the U.S. to run large deficits in terms of both international trade and government spending.

 
i see Central Banks having more power , and as power corrupts i would expect more corruption , imagine an open ledger system where any interested citizen could track every cent spent/lent/granted by Government .. of course it is a pipe-dream , so why would you trust a system that distrusts you

if you avoid CBDCs where possible , where do you go tangible commodities/consumables swap services between like minded citizens ( i'll fix your car if you paint my bedroom , or something similar system )

.... but governments are too big already and bursting with self-importance , governments CHOSE this fate ( not just naive politicians )
 
Last edited:
Value Collector said:
just sits idle is a hard drive instead of a vault.
Click to expand...

hard drives , fail and/or become obsolete ( and can be destroyed )

imagine you need a 30 year old computer to access the funds you squirreled 30 years ago ( when you need it in 2050 )

now obviously by 'hard drive ' you mean a USB or SSD device but backward comparability could still be an issue at the time your funds are needed

extra questions ... will it accrue interest , or just inflate away into small change ( they may even have made THAT CBDC illegal/obsolete between accumulating it and using it ( they have already made gold illegal for citizens to own at various times and places in history )

currencies and governments rely on trust .... do THEY trust you ??

if the answer is no , then societies will form to circumvent ( just like the origin Mafia did ) to get things done
 
When I say “hard drive”, I don’t mean an actual thumb drive or something like that, it would be a data centre type thing. But, either way the actual transaction would just be accounting movements on the banks accounts, not actual movements in the currency physical or digital.
 
The biggest thing stopping a global currency developing is that many countries like the USA for example will not want to give up the ability to “print/create” dollars to pay off their debts.
 
that's the theory , but in the heat of action spinning rust has it's longevity/reliability issues , as does data stored on blue-ray/DVD the most reliable store of data is tape , it can be painstakingly slow but the data can be retrieved ( even by swipe card readers depends on how patient you are )

and at server end of town ,, you have RAID , multiple hard drives working if symphony at their best they are gorgeous , they even have strategies in one or two discs fail in action , the more hard discs you have the better chance one or two will fail .. or the telco falls over ( for a day or longer )

digital eventually relies on electricity or magnetism to transfer data

for all it's flaws gold ( or top quality diamonds/gems ) hold wealth storage power because all they need is a willing buyer/trader
 
Value Collector said:
The biggest thing stopping a global currency developing is that many countries like the USA for example will not want to give up the ability to “print/create” dollars to pay off their debts.
Click to expand...
you can only pay off your debt , if the other party accepts your payment ( the US could easily become the next Zimbabwe , if overseas lenders only loan/accept repayment in Rupees , Dinar , Yuan , Pesos whatever they have to lend you )
 
divs4ever said:
you can only pay off your debt , if the other party accepts your payment ( the US could easily become the next Zimbabwe , if overseas lenders only loan/accept repayment in Rupees , Dinar , Yuan , Pesos whatever they have to lend you )
Click to expand...
Most of Americas debt is held as bonds, which are payable in American Dollars.

Also, most of Americas Debt is held by Americans, who probably would never object to being paid in American dollars.

If a bond holder had the choice of either being defaulted or having their debtor print more cash to pay them back, they will choose to accept that freshly printed cash.
 
I am not sure you get my point, but either way physical cash could burn in a fire too.
 
Value Collector said:
The biggest thing stopping a global currency developing is that many countries like the USA for example will not want to give up the ability to “print/create” dollars to pay off their debts.
Click to expand...
I don't mean a global currency that you, me and everyone else uses, same as we don't use the US dollar, we use the Australian dollar, but it as with most floated currencies is valued against the U.S$ which gives the relativity.
I think some countries, especially China are very unhappy about that situation and just my opinion but I think eventually a World benchmark currency, that is valued by some formulae will be formed and each currency will be valued against that standard.
At the moment the U.S has a lot of control over the value of other currencies.
Just my thoughts.
 
well this former debt -buyer ( almost completely ) declines to buy anymore debt instruments for an extended period , now if others want to step in and buy what i rejected , good luck to luck

some need to sell more debt to repay previous borrowing ( and sometimes just to pay the accruing interest ) ... and i ain't buying

the reward is not adequate for the risk taken ( imo ) why would i buy debt paying a 5% coupon ( interest payment ) when real inflation ( currency devaluation ) might be above 9%

but if others feel safe doing so .. best of luck
 
A lot of institutions are forced to buy government debt, for example insurance companies, pension funds etc. not to mention that given that only $200k or so of bank deposits is covered by the government guarantee, anyone with $10’s of millions or Billions that wants to sit out of the market for a while is basically forced to buy USA government bonds.

Warren Buffett for example is sitting on $150 Billion in bonds at the moment, not because he thinks it’s a great investment, but because he is waiting for an opportunity to buy something else, he can’t just put that $150 Billion in a bank, because just when he needs the money they might default on him.

Also, the interest rate is determined by the market, so if you stop buying the interest rate rises until some one is attracted and buys.
 
yes i was buying MBLHB around 62 cents in the dollar ( for hybrids with a face value of $100 ) sadly Macquarie decided to redeem them when the BBSW rates looked like they had an up-ward trajectory ( so much for my plan the ride the rate hikes that had to come )


now i admit Macquarie are a slippery barrel of fish , but they stay out of real trouble better than most , but most governments can't control their spending

now Warren is free to invest where he chooses , but i don't except big inflows of cash into my war chest , so i need a different strategy

BTW distressed companies beg Warren for a special lifeline rather often , i have to find my own deals

and given the fragility of many national government i will be looking for at least 14% ( per annum ) for a 5 year or longer security

otherwise i may as well front ( buy essentials early ) inflation and roll my eyes at CPI figures
 
sure i will be labeled a hoarder , or prepper or such misused name , but i can put a cruel sneer to the phrase 'trustworthy government ( and use my stuff at 2019 prices )

let the 'thought police try to combat 'tone ' ( that will cost them an extra fortune for all those consultants and psychologists )
 
Value Collector said:
What real difference would it make if we switched the hard currency sitting in vaults for digital currency in a digital vault?
Click to expand...
Privacy and reliability.

I don't make any purchases I wish to keep secret but for those who do cash does give that option of maintaining privacy.

I'm not thinking of criminal activity there. Just things like sex workers, gambling, these days even the legal drugs (alcohol / cigarettes) some people might not want any record of them purchasing. They're doing nothing wrong, so strictly speaking have nothing to hide, but depending on their occupation that sort of data could be problematic in the wrong hands.

That plus reliability. Next time Optus, Telstra or Vodafone crashes or the power fails, cash still works.

As for the USD, well it's one of those things where in my view the writing's on the wall. The details of how it unfolds, and when, aren't clear but the writing's on the wall that the system as it stands is going to end at some point.
 
I understand what you are saying about sex work and gambling, but this thread is about replacing the cash system with digital currency.

wouldn’t the digital currency leave a trail of the sex workers and gambling houses one has been using? Perhaps even a permanent public record?
 
Value Collector said:
wouldn’t the digital currency leave a trail of the sex workers and gambling houses one has been using? Perhaps even a permanent public record?
Click to expand...
That's my point.

I'm not making a moral judgement but there'd no doubt be people who spend money on such things who wouldn't be at all happy with any kind of "paper trail" existing.

That's easily done with cash, there's no record of where the money went, but in the case of electronic payment it's hard to imagine no record of any sort is being created and especially not with a centralised government system.

For the average random individual that may be of no concern, but there are no doubt people who'd be extremely uncomfortable with the potential that someone else is able to find out the details of all their spending. Eg politicians, media people, celebrities, even someone like senior police or a school principal might not be too keen on having all their activity traceable.

I'm not passing a moral judgement there, personally I'm pretty broad minded, but I can see many having objections to the option for privacy being taken away.
 

It's slightly different in that a CBDC would be newly issued currency rather than existing currency in a digital form.

Lots of interesting resources at the below RBA link.

Central Bank Digital Currency

www.rba.gov.au
 
You must log in or register to reply here.
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more...