Banks Are Starting To See The Threat Of CBDCs
Central Bank Digital Currencies, or CBDCs, is a misleading name. The idea conveys that this is driven by the bankers but it really is not. Instead, as stated all along, this is being pushed by governments politicians and bureaucrats.
The idea is that governments need to involved with Money 2.0. We see the success that cryptocurrencies have and governments are not about to be left out of the process. Especially since the implementation of a CBDC gives them much greater control.
Of course, this idea is being sold as a way for governments to get people money quickly and efficiently when situations warrant like with COVID-19. Do not buy into this crap. They always put a nice bow on the package that is going to blow up in your face.
If they can put money into an account, they can take it out. How about instantaneous taxation? Why should the government wait for any money. Anything that enters an account can be instantly taxes, with the money deducted from the account.
Or what about negative interest rates? We know how well they worked in Europe for the past 7 years. The economy keeps sliding deeper into the abyss so obviously the negative rates do not achieve the intended purpose. Of course, most banks haven't being rolling the rate over to customers since they know people would pull their money out.
Have no fear, the government, with a CBDC could simply turn around and take what is needed. Why not take 2% of any money in an account at year end. Spend it or lose it. After all it is good for the economy.
Does anyone it is a good idea to have nothing between a politician and your money?
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Of course, the bankers lose in this instant too. This is always a point that not many are talking about.
The idea of a cryptocurrency is that banks are not needed. Under the present system, people have to store their money somewhere. Thus, a bank allows people to send, store, and receive money. What is placed there is called "deposits".
These deposits are then lent out, at a higher rate than the banks pays the depositors. It is how the bank makes money. It is a rather simply concept. There is also the ability to leverage since we have fractional reserve banking.
What happens once a digital wallet is introduced is this all goes away. There is no reason for people to put money in a bank since it is a digital currency. Hence, the bank loses the deposits that it now enjoys.
This will cut out a major source of many banks funding. Local banks that offer lines of credit to small businesses and originate mortgages would find themselves having issues. In fact, they are not needed.
It appears that some analysts might be waking up to this plight.
“While central banks’ CBDC initiatives are not intended to disrupt the banking system, they will likely have unintended disruptive consequences,” Morgan Stanley’s Ahya said. “The more widely digital currencies are accepted, the more opportunity for innovation and the greater the scope for disruption to the financial system.”
There is another factor in this that could be problematic for Wall Street banks. If the government goes down this path, it is likely that Institutional Banking will take a hit.
After all, with a CBDC, the government is in control of the money supply. Nobody thinks for a second that this will be permissionless. It will be controlled and they will determine how much things are funded.
The challenge with this is it basically whacks what is left of the bond market. Granted interest rates have crushed bond markets all over the world and the US is no exception. That said, the bonds do need to be peddled and this is where bankers enter the picture. They have the contracts and the ability to move billions of dollars in bonds. They are trading in large amounts every week.
It is not a giant leap to believe that this step in the process can be cut out. The problem with bonds is they need to be sold. People have to have confidence in the government to keep buying. For the U.S., this has not been a problem. It has become an issue at times in Europe. This is why the ECB was looking at perpetual bonds, ones that only paid interest and never expired.
CBDCs would skip this entire step. Politicians are not going to stop spending and the central bank is a thorn they do not need. CBDCs give them all the access that they want. They control the money while being able to monitor everything that takes place. If they do not like what you are doing, simply freeze the wallet like Twitter does an account.
It really is no different.
The banks are starting to understand how the goal is to take over whatever is private. Governments, or more specifically politicians and bureaucrats, are against anything not under their control. They believe the continued expansion of government and their power is what will fix things.
CBDCs are another weapon in their arsenal. If anyone thinks that any government is going to behave any differently than China with this technology, they are a bit off the reservation.
Politicians, no matter what the country, all love power. They believe they are entitled to it and will stop at nothing to take it.
The power of cryptocurrencies is going to be usurped, if they get their way, into something they control completely.
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