Levine had a funny segment in last week's newsletter: CBDCs. Easy in theory, and we sort of know what they are, right: digital direct liabilities of the central bank (but for retail customers). Right now, all that us regular plebs have access to are bank accounts, which are deposits with commercial banks which in turn hold their reserves at the Fed --- so we only have indirect access to the Fed balance sheet. Or, we can use cash, good ole fashioned dollar-bills, which are direct liabilities of the Fed but unfortunately don't have digital teleportation magic attached to them; they're analog.
Now, the idea of a CBDC is to merge these ideas, possibly/probably using some form of objectively verifiable blockchain. All kinds of bad consequences, even from inside the banking complex (monetary policy gets wacky, financing and funding for commercial banks less stable, you'd enable bank runs rather than protect against etc).
Reader reached out and remarked, akschually style, that the Trump ban bans Fed reserves too?!
That would indeed be hilarious.
A reader emailed me to point out that there is some concern in the market that the executive order prohibits bank reserves. After all, it prohibits CBDCs, and defines CBDCs as: “Central Bank Digital Currency” means a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank.
SOMEBODY GO SUE.
Very funny. Trojan horse/backdoor way of abolishing the Fed?
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