“Digital Corrections – will crypto save capitalism, and the FED ?”

 

The FED has no way of re-balancing or raising rates without crashing the markets. The FED doesn’t want to take the blame. Not again. Even though the markets are crying out for a correction.  There is no discipline. The level of incontinence is unprecedented. QE has got to stop. But how? One would like new tools for damage control at one’s disposal.

Then there are all these top money brains in “we must save capitalism now” mode. One is considering the previously unmentionable: money. One is toying with a serious re-think.

Thirdly one can see that Henry Ford moment coming. With digital central bank money tuning up to a race with China, certain questions will be near impossible to avoid. Same with fending off commercial digital currencies. Imagine bitcoin actually had a decent payment system?

Veiled value talk is wafting from the unprecedented practices of mixing fiscal and monetary into creative credit cocktails. De facto direct financing keeps reshuffling its covers but indignant resistance against systemic obfuscation can only grow. Sooner or later the Magic Money Tree may yet have to be unveiled. Not as MMT’s stately incontinence. Nor the Fed’s balance sheet. But the banks’ crediting accounts.

Loans creating savings? OMG. No more savings & loans?

Ur-Post-Keynesian 101  has crept into The Economist.

The money brains got there some time ago and are intent on using this monetary moment for some creative disruption of the capitalising core. Use the crash for a systemic correction. Say no more.

Watch out for the FED’s digital debit account coming to your cash screen soon – with or without some of the bells and whistles that could be played as options to more or less re-shuffle the whole system into digital fintech diversity? 

Just the follow the money…

see also > ALTernative currencies




KitcoNewsYouTube  7/5/2021  While inflationary fears are picking up, the markets have not demonstrated a readiness to accept higher interest rates. In fact, rising nominal treasury yields over the past few months have, on several occasions, prompted market selloffs.

Roubini corners Fed

This predicament puts the Federal Reserve in a tough position, said Nouriel Roubini, CEO of Roubini Macro Associates and professor at the NYU Stern School of Business, because should the Fed raise interest rates to try to control inflation, the market may see a return of 2013’s “taper tantrum”. “Either the Fed, at that point, keeps on saying things are temporary, inflation expectations start to rise, they control the short end of the yield curve, but then long rates can rise in nominal and real terms, that’s one risk. Then, inflation gets out of control. Or, like in 2013, they have to backpedal and say no, there is a problem with inflation and we have to start tapering sooner than we said, we need to start raising rates sooner than we said, and we could have a repeat of what happened in 2013,” Roubini told Michelle Makori, Kitco’s editor-in-chief.


Cashing in on blockchain technology

wolrdfinance.com  2016


 

cointelegraph.com/   17/4/2021  You can’t talk about blockchain and not bring up CBDCs and stablecoins  –  Economies are currently experiencing the development of brand new ideas around CBDCs, stablecoins or private digital currencies.    by  Steve Billinghurst

There is continued significant interest in central bank digital currencies, or CBDCs, at this time — not from the blockchain and crypto community but actually from a core group of some of the most influential central banks, including the Bank of England, the Swiss National Bank, the European Central Bank, the Bank of Japan, the Bank of Canada, the Swedish Riksbank and the Bank of International Settlements.


bloomberg.com-video  10/4/2021 The Race to Develop a Central Bank Digital Currency – Wall Street Week – Central banks are exploring their own digital currencies as a way to fight off potential financial exclusion.


moneyweek.com  8/4/2021 Central banks are rushing to build digital currencies. What are they, and what do they mean for you? As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But central bank currencies are very different beasts to cryptocurrencies, and have much more far-reaching consequences, as Saloni Sardana explains.

… “… as Cuy Sheffield, head of cryptocurrency projects at global payments company Visa points out: “Central bank digital currency… is one of the most important trends for the future of money and payments over the next decade. Regardless of anyone’s personal views of whether it’s good or bad, the reality is that global interest in it is not going away. [CBDC’s will have] major implications for privacy, monetary sovereignty, geopolitics, and financial inclusion, as well as global adoption of crypto dollars and bitcoin.” So ignoring digital currencies altogether is likely to be a mistake for central banks at a time where economies are becoming cashless and the pandemic has created a clear bias towards digitised payments.

Another impact of CBDCs could be the US dollar losing its crown as the world’s reserve currency now that China has launched its digital yuan, analysts at investment bank JPMorgan say in a note. “There is no country with more to lose from the disruptive potential of digital currency than the United States. This revolves primarily around US dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages”, the analysts say.”


TED.com-video   2016  How the blockchain will radically transform the economy | Bettina Warburg   Say hello to the decentralized economy — the blockchain is about to change everything. In this lucid explainer of the complex (and confusing) technology, Bettina Warburg describes how the blockchain will eliminate the need for centralized institutions like banks or governments to facilitate trade, evolving age-old models of commerce and finance into something far more interesting: a distributed, transparent, autonomous system for exchanging value.

 


capx.co/  33AD  4/2021  Economics lessons from Emperor Tiberius    By Dr George Maher

To tackle the ever-expanding number of creditors, Tiberius injected 100m sestertii ($2 billion) into the economy to make interest-free loans available for the most heavily indebted. Prices stabilised, while wealthy Roman creditors had their assets confiscated and faced sanction by the senate. The Romans learned that tax-and-spend was vital to survival.

The financial crash of AD 33 and the Great Recession of 2008 both saw the use of quantitative easing. The US’s Troubled Asset Relief Program (TARP) saw $800 billion pumped into the banking system through tax increases. Both Tiberius and the Bush administration, which oversaw the worst of the recession, enacted bold tax cutting agendas with neither raising taxes. Similarly, the UK’s £37 billion bank rescue package followed Tiberius’ footsteps with a £250 billion debt guarantee scheme.  Both the US and the UK responded by cutting interest rates and expanding their bond-buying programmes (known as quantitative easing). A similar response by Tiberius highlights the parallels in handling between the two crises.

While the looming Covid crash may not exactly replicate that experienced in AD 33 or AD 2008, it seems wise to learn from the Romans and not treat their troubles as hollow warnings. A common misperception is that the Roman Empire collapsed because barbarians rampaged it. It did not. It collapsed because of economic failure, which left the door open for barbarian invasions.


 

bloomberg.com    7/4/2021  The Swedes are learning that their once pioneering vision for a central bank digital currency might take a lot longer to enact than initially thought – Swedish Central Bank Reveals First Study of Digital Currency  By Rafaela Lindeberg and Ott Ummelas

The Riksbank just published the results of the first phase of a pilot project into what is essentially the most advanced exploration of a post-cash era to be undertaken by a major, western economy. It says the rapid pace at which cash is disappearing presents “potential problems” that a digital currency controlled by a central bank can address. … 

“The motivation for introducing a central bank digital currency may change as policy makers explore the issue. Simply introducing a complement to cash for retail transactions may not make much of a difference in the economy. Using wholesale CBDCs in cross-border transactions has the potential to raise efficiency. Employing new digital tools for policy purposes could really alter the macroeconomic playing field. The bigger the step, the more thought it’s likely to require. Expect that to take time.”  – Johanna Jeansson, Scandinavia economist –

 


coingeek .com  3/4/2021 Germany’s federal bank tests blockchain payment system sans CBDC    by Ed Drake

The Deutsche Bundesbank in Germany has successfully tested a blockchain-based settlement interface for electronic securities. The test bridges the gap between mainstream finance and blockchain technology without relying on a central bank digital currency (CBDC).  Developed in partnership with Deutsche Börse Group and the German Finance Agency, the test demonstrates that the platform relies on two software modules which connect the existing payment system with digital ledger technology (DLT). To demonstrate the technology, the test issued a 10- year government bond using DLT along with trading in primary and secondary markets settled in the same system.

Germany’s federal bank tests blockchain payment system sans CBDC


 

bloomberg.com   7/4/2021   Should PayPal Be Worried About Your Country’s Central Bank? – Digital currency issued by nation states may cut out the middleman. But would that change the world for the better — or the worse?  By Andy Mukherjee


theblockcrypto.com    31/3/2021   Eastern Caribbean Central Bank publicly launches new digital currency   by MK Manoylov
 
The Eastern Caribbean Central Bank (ECCB), located in the country of Saint Christopher (St. Kitts) and Nevis, publicly went live with its central bank digital currency (CBDC) DCash on Wednesday.  Countries such as RussiaChina, and Japan have been testing a central bank digital currency (CBDC) as part of a wider arc of development, as previously reported and explored in a past research report from The Block on the subject. Until today, only one central bank has gone live with a CBDC, the Central Bank of the Bahamas’ Sand Dollar.  The head of the Bank of International Settlements said Wednesday that if implemented correctly, CBDCs could help reduce “long-standing” issues in the payments sector.  The launch of the ECCB’s DCash is notable because it’s the first example of a central bank within a currency union to go live with a CBDC.

 

Venezuela replaces national currency with bitcoin


kitco.com    6/4/2021  Steve Hanke, professor of Applied Economics of Johns Hopkins University, said that this change reflects a change in attitude from the world’s largest central bank on the importance of looking at money supply.  “Chairman Powell has very explicitly claimed that money doesn’t matter in recent testimony. He’s basically said that money and the measurement of money doesn’t really matter because it’s unrelated to inflation,” Hanke said.

These money supply series have been published since the 1970s, and the fact that the Fed has changed the publishing frequency on M1 and M2 money supply from weekly to monthly demonstrates a change in worldviews, Hanke said.  “In principle, they don’t think [this data] is important. They want to deep-six the monetarists, basically and push them off to the sidelines. They want to bury Milton Friedman once and for all and be done with it, and their preference would probably to not report any monetary statistics,” he said.


thetimes.co.uk   30/3/2021   We’re being gaslit by our economic masters over the magic money tree    by Philip Aldrick

Charles Goodhart, a founding member of the Bank of England’s rate-setting monetary policy committee, is everything you would expect of an academic economist. Measured, restrained, contextualised. Which is why his comments to the House of Lords economic affairs committee this month were so alarming.

“We are in a very weird world where we are actually undertaking helicopter money; we are following exactly the precepts of modern monetary theory, otherwise known as the magic money tree; and at the same time . . . claiming that we are not doing it. We are doing what we claim we are not doing,” he said.


 

carnegieendowment.org  12/2020 Foreign Saving Gluts and American Financial Imbalances   by Michael Pettis

The idea that trade imbalances are more likely to be the result of credit imbalances than of savings imbalances ignores the role of savings imbalances in creating credit imbalances. When a surplus country demands to be paid for its trade surplus with claims on American assets, the U.S. economy must adjust to create these assets—and one of the most common ways it does so is by expanding credit.

… I sent out a rather long tweet in response to a very good article in the Economist called “Why It Is Misleading to Blame Financial Imbalances on a Saving Glut.” I later received a lot of positive responses asking me to expand my discussion further. … The Economist article illustrates just how much confusion there is over the accounting identities that describe the balance of payments. The piece starts out by reminding readers of a reference Ben Bernanke made in 2005, when he was chair of the Federal Reserve, to a “remarkable reversal in the flows of credit” to emerging economies, particularly in East Asia. These countries had begun to save more than they invested at home, morphing into a “net supplier of funds” to other parts of the world. He called this a “saving glut.”

The article then cites a number of economists, including Michael Kumhof of the Bank of England and Andrej Sokol of the European Central Bank, who were dissatisfied with the concept and called for, as the Economist put it, “a careful distinction between flows of saving and flows of finance. … The two are not the same,” they continued. “They need not even move together. The implication is that Mr. Bernanke may have got things the wrong way around.” …”


 

ineteconomics.org    08/2020  “Savings Glut” Fables and International Trade Theory: An Autopsy    By Lance Taylor

“A “global saving glut” was invented by Ben Bernanke in 2005 as a label for positive net lending (imports exceeding exports) to the American economy by the rest of the world. However, there is a more plausible explanation for the persistent trade imbalance between the US and its major trading partners.  The structure of the US economy began to shift markedly 40 or 50 years ago. The profit share of income grew across business cycles at 0.4% per year, or by more than 20% (that is, by eight percentage points) over five decades. Driven by rising profits, the size distribution of income shifted strongly toward households in the top one percent. The economy became increasingly dualistic, with big employment increases in low wage/low productivity sectors.  … Foreign trade was part of this transformation. …”

INET has published a response by Andrew Smithers to Taylor’s working paper, as well as a rebuttal from Taylor.



see also  ALTernative currencies

GaiaMoney YouTube

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: