The benefits of technology, digitalization and ease of transactions are already there. The most important thing to remember is that central bank digital currencies are unnecessary.
#Currencier full#
With such a track record, no one should defend a measure that would allow them to take full control of the entire financial and monetary system. Central banks have never prevented a bubble, elevated levels of risk-taking and excess debt nor recognized inflationary pressures.
You cannot start an experiment of such caliber when the independence of central banks has been questioned for many years and there is ample evidence of policy actions that fail to recognize the risk of elevated inflation in asset prices and consumer goods. Hyperinflation and full government control and financial repression.Ĭentral bank digital currencies are an unnecessary and terrible idea. A digital version of the French Assignats. Guess what would happen? The complete monetary financing of all government spending driving the currency to hyperinflation in a few years and the obliteration of the private sector. Now imagine if there was only one account, one central bank and the government. With an increase in money supply that exceeded 20% in a year, we would be suffering close to 20% levels of inflation as the limits to the transmission mechanism are destroyed. Even worse, when the central bank makes the mistake of printing way too much money as they did in 2020 the impact on consumer prices would be direct. The entire privacy system and monetary limit mechanism would be eliminated. Furthermore, with increasingly political central banks, they may even penalize those who spend in a way that they deem inappropriate of benefit those that do what they recommend. It can make the currency fungible to avoid the ludicrous but often repeated “problem” of “excess savings”. The central bank would know exactly what you use the currency for, how much you save, borrow, and spend and where. As such, it is surveillance disguised as money. Now imagine for a second if that transmission mechanism was direct and had only one channel, the central bank itself.Ī central bank digital currency would be issued directly to your account within the central bank. The only thing that saves citizens from much higher prices is the fact that the transmission mechanism of monetary policy is independent and diversified. With quantitative easing there are a number of limits that stop inflationary pressures: as the transmission mechanism of monetary policy is the banking channel, it is our demand for credit what puts a break on inflationary pressures.
This has happened in a world where the excess in money supply growth has a number of back-stops and limits that prevent a massive increase in consumer prices through the destruction of the artificially printed currency. However, central banks have lost a significant amount of an already low credibility by first ignoring the inflation risk and later using the base effect and transitory excuse, only to react late and slowly. Now, governments and statistical bodies are tweaking the calculation of CPI to disguise the loss of purchasing power of the currency and central banks had to hike rates after the disaster created in 2020, when the massive increase in money supply went to finance bloated government spending and created the mess we live today.Ĭentral banks know that inflation is a monetary phenomenon and that is why they are hiking rates and tightening as fast as governments allow them. The monster inflation we have endured these years first arrived through asset inflation and then through consumer prices. The same can be said about all other, from commodities to demand and my favorite, “supply chain disruption.” More units of currency going to the same goods and services. However, the fact is that there is no such thing as “cost push inflation” or “commodity inflation.” Inflation is not an increase in prices, it is the destruction of the purchasing power of the currency.Ĭost-push inflation is more units of currency going to relatively scarce real assets. There are many excuses often used to explain inflation.
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