Comment by jacknews | Hacker News Reader

Comment by jacknews | Hacker News Reader

  So naturally many fees are collected along the way for such services.

  Moreover, in such a centralized system there is no longer any need for middlemen like banks or credit card companies.

  Some planning documents for CBDCs discuss still including private banks in a “public-private partnership” system. But that’s only because customers love banks so much and because banks would love to keep charging fees

LOL. Indeed, the existing banking system HATES the very idea of consumer central bank money. They would much rather be the choke point, uh, intermediary.

When the CB issues new money, it has to go through the banks. That was fine when communications were slow - the CB dumps money in the bank's CB account, and then the bank distribute it to end users via loans (or more likely 'invest' it to pump up asset prices).

Now that communications are instant, there does not appear to be any need for banks, end-users could interact directly with the CB.

The totalitarian FUD is of course overblown. For a start, CBDC does not mean the end of cash, just the end of the necessity of commercial banks. And in any case, govt is much more accountable than private companies; For example, banks can, and do, cut off classes of users at their sole discretion, whereas govt would be forced to serve all legal actors.

The Canadian government just mandated the freezing of bank accounts for protestors associated with the freedom convoy. Let’s not pretend like the government can’t decide to reclassify what it thinks is legal based on what coloured shirt it’s wearing.

So as govt has the power to seize bank accounts anyway, CBDC would not make any difference at all in this case, it's a question of govt accountability.

The article seems to conflate CBDC with a totally cashless society, which yes, we should probably think through a bit more carefully.

While it could be seen as a conflation in theory, in practice it almost certainly is. The purpose of a CBDC is complete government control over the monetary system, cash cannot remain in existence if this goal is achieved. Many advanced economies have been practically cashless for years, and the friction from phone payments via PCI networks to phone payments with a CBDC app is very little.

The loss of physical cash to the un & underbanked in the US will probably be the reason that a CBDC will not be adopted any time soon, highlighted as a risk in the recent paper. However in all states, CBDC is an inevitability, just as it is inevitable that cryptocurrencies like Bitcoin are used day-to-day as an alternative to the state CBDC.

> So as govt has the power to seize bank accounts anyway, CBDC would not make any difference at all in this case, it's a question of govt accountability.

So because it’s possible we should consent to a system that makes it programmatic and infinitely scalable across the whole population?

You don’t seem to get the implications of government-controlled programmable money.

https://bfsi.economictimes.indiatimes.com/amp/news/policy/di...

It does matter. See things like Operation Choke Point and how much easier that becomes with federal centralization.

This really gets me. These "protestors" were given MULTIPLE warnings over many days to leave the area as this was no longer a simple protest, but had become an occupation of the downtown core. The "protestors" ignored the warnings and thought they were all above the law. The government had every right to do what it did with these people.

I'm 100% for a peaceful protest, but these people went WELL beyond that.

I wonder how MLK Jr. would have fared if America had a CBDC in the 1960s. MLK was arrested a total of 29 times--given multiple "warnings" as you say--and I doubt he would have been as successful in his goals if the government had an effortless ability to suspend his and his supporters ability to transact instead of having to send in violent thugs and dogs. Every protest is an occupation, a riot, if it's on the "wrong" side.

Even if the protestors were engaged in mass murder, that would still not authorise the government to freeze their accounts. It would just mean the government had a good case against them in court.

>Let’s not pretend like the government can’t decide to reclassify what it thinks is legal based on what coloured shirt it’s wearing.

Well it can't given that the rule of law exists in Canada. But if you're telling me that central bank money makes it possible to shut the funding of groups down who stage illegal protests that cause untold economic damage because they don't understand how vaccines work in my book that's the best argument for CBDCs yet.

I'm not exactly sure why I'm supposed to freak out about the fact that the government can declare things illegal. Like, yeah that's it's job, digital currencies aside.

That's not actually how money creation works. Governments never dump new money into banks, and banks don't have any ability to 'distribute' it or lend it out. Quantitive easing was an asset swap (bonds for reserves) that was meant to increase the ability of banks to lend, but it didn't really work in theory and nor in practice, so didn't do anything except for pushing up asset prices because they had reserves and wanted to convert that back into something that gave them more return, so buying up financial assets. It didn't do what it was meant to because generally the banks were never liquidity constrained, lending was more demand constrained.

In general the Government puts new money into the economy by spending, and removes money from the economy by taxation. But most of the money in the economy is created through bank lending (with a corresponding creation of private debt).

Yes, I was using a figure of speech. There is no reason CB can't create the loans directly, rather than necessarily going through commercial banks. It was not realistic before, without instant communications.

> Now that communications are instant, there does not appear to be any need for banks, end-users could interact directly with the CB.

Banks provide a distributed, face to face, customer service workforce. They do some sort of banking work like loans and what not, as well. IMHO, rather than replace banks with a government bank, the right path is to reduce transfer friction (which is happening anyway) and regulate towards mandatory zero cost accounts; zero cost accounts are already there in the marketplace, although with some hoop jumping and not so available if you've got a negative ChexSystems credit report.

Money exists because of debt. Until you can lend money to regular people who often wont pay back you can't replace banks.

Clearly people mostly do pay it back, or it would not be a very profitable business, which it definitely is.

There's no reason CB can't issue loans directly, rather than indirectly through the banks. Perhaps more realistic is a debt market where private enterprise take on loan risk for commission or interest of some kind, but the power to create fractional-reserve money is not a requirement for that.

> a debt market where private enterprise take on loan risk for commission or interest of some kind

Surely this is what banks do right now.

> the power to create fractional-reserve money is not a requirement for that.

If you take a loan from a CB say, then deposit it somewhere, then that money is loaned out again, surely that is fractional banking?

If you really disallow someone who takes a loan from being lent out again. How do you increase the money supply? Say population grows 5% and economic growth means 10% higher GDP - how do you increase money supply to match?

Private lenders would simply guarantee the loan, which would be issue by the CB, creating new money.

> Private lenders would simply guarantee the loan, which would be issue by the CB, creating new money.

That's just fractional reserve banking but with extra steps. Since the private lender is guaranteeing the loan, they have to have an asset for that guarantee.

If a central bank starts giving out loans it is called a state bank. It is no different from a regular bank and there can be many different state banks in a country.

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