Converting to a cashless society —something long opposed by those dedicated to privacy and ethical, democratic monetary principles — was seriously discussed Sept. 13 by the Brookings Institution, a well-connected D.C. “think tank.” The program focused on India-born Cornell University Economics Prof. Eswar Prasad, whose new book, “The Future of Money: How the Digital Revolution is Transforming Currencies and Finance postulates that “the world is approaching a tipping point where cash phases out and digital currencies reign supreme,” according to a Brookings announcement.
The globalist Financial Times’ US Managing Editor Gillian Tett moderated a panel on digital currency regulation that included Stanford University economics Prof. John B. Taylor, who’s the Advisory Board chair of the Dallas Federal Reserve’s Globalization and Monetary Policy Institute; he was joined by Swedish central banker Cecilia Skingsley and Mr. Prasad, among others.
While the use of cash already is diminishing, especially in advanced economies, Prasad did observe: “There are certain vulnerabilities that we may not even know about at this stage that should give us some pause.” Yet, a major perk of this futuristic digital infrastructure is the considerable potential he feels it has for “democratizing” finance.
For central banks to stay in the game amid an all-digital monetary system—so that the digital replacement for US Federal Reserve Notes (and presumably US coinage) can still be considered “Fed-issued money” — then Central Bank Digital Currencies, or CBDC’s, would have to be rolled out. These were recently described by the New York Times as follows: “A central bank digital retail currency is, basically, electronic cash. Like a cryptocurrency such as Bitcoin, it is data-based and doesn’t exist in the physical world, but the similarities end there. Unlike cryptocurrency, it is backed by a government, meaning it is likely to be more universally recognized as … something you can use broadly to buy goods and services and to pay taxes.”
While Prasad conceded that every cashless transaction will “leave a digital trace,” he claimed that he doesn’t foresee any problems that cannot be “managed.” The Brookings Institution’s David Wessel interjected, however, that a likely reaction to developing CBDC’s is that “the Federal Reserve could impose negative interest rates,” which might derail CBDCs.
Negative interest rates, a highly unpopular policy which, around 2013, made big headlines when it reduced the accounts of bank customers in Cyprus, means a loss of money for depositors since, under such rates, customers pay the banks a storage fee to hold on to their money—rather than earning interest on savings.
Sweden is floating a CBDC test run called the “eKroner” that supposedly is being well-accepted and seems destined to replace Kroner notes and coinage. Skingsley said that, under the eKroner, Sweden’s central bank, the Riksbank, “can maintain its role in history into the future” and attach its stamp of authority to an official digital currency just as it has done with notes and coins.
Taylor noted that America’s private central bank, the Federal Reserve, under cautious chairman Jerome Powell, might take five years to implement a CBDC. Powell did say that the Fed would not make such a fundamental change without an act of Congress.
Due to recent COVID-inspired stimulus checks issued to the population, Congress might accept such a measure.
However, economics author and lecturer Oliver Heydorn, who writes at socred.org, disagreed with Prasad’s more casual view on privacy and took issue with the overall cashless concept: “The great danger with a Central Bank Digital Retail Currency, especially if it replaces cash and coin, is that the inherent lack of privacy under such a system also implies a transfer of control from the individual citizen to the state. Indeed, it puts the Central Bank owners in the position where they can impose conditions or outright refuse a citizen’s access to the economy by freezing that person’s digital bank accounts, thereby denying him access to money.”
This is a crucial issue around which Americans from the left, the center and the right, including populists, can find common ground to seriously reflect on whether going cashless would be a wise move—before it’s too late to turn back.
Mark Anderson is a veteran journalist who divides his time between Texas and Michigan. Email him at truthhound2@yahoo.com.
From The Progressive Populist, October 15, 2021
Blog | Current Issue | Back Issues | Essays | Links
About the Progressive Populist | How to Subscribe | How to Contact Us