Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19

Warning: Function ereg() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 4

Warning: Function split() is deprecated in ..../includes/class_postbit.php(345) : eval()'d code on line 19
Will cryptocurrencies trash cash? 'Fedcoin' could do it
Results 1 to 3 of 3

Thread: Will cryptocurrencies trash cash? 'Fedcoin' could do it

  1. #1
    Join Date
    May 2007
    Location
    Atlanta
    Posts
    9,064

    Default Will cryptocurrencies trash cash? 'Fedcoin' could do it

    Anthony Mirhaydari October 18, 2017

    The cryptocurrency hype train obviously has no brakes. But could it eventually replace cash in the US? According to the thinking of economists cited by the Bank for International Settlements, it just might. And to the chagrin of the anti-establishment types that fueled bitcoin's early rise, it will likely be run by the Federal Reserve.

    Alternatives, such as the US dollar and gold bullion, have faded in stature as prices have fallen all year while bitcoin has pushed near $6,000 over the past week. Both China and Russia are exploring the use of blockchain technology to create their own, state-backed cryptocurrencies. A recent Bank of America Merrill Lynch fund manager survey showed "long bitcoin" as one of the most popular trades on Wall Street right now.

    Initial coin offering activity is red hot, an area we have covered at length recently in light of intense VC interest in blockchain startups. Many show promise, like Tezos, which is trying to decentralize the governance process behind the blockchain. Or Tether, which is trying to refocus interest on cryptos as an actual medium of exchange (vs. the current obsession with speculating for fast gains) by tethering it via a peg to the US dollar and other national currencies.

    But many more stretch the limits of reasonableness. Paris Hilton and Floyd Mayweather have promoted ICOs on Twitter, for example. Others don't really need any further explanation: Dogecoin, PotCoin, TrumpCoin, PonziCoin, and Jesus Coin. Not a bubble, clearly.

    While sentiment has likely come too far too fast, the underlying technology shows great promise. I guess that makes my position similar to JPMorgan Chase CEO Jamie Dimon, who attracted a lot of attention for calling bitcoin a "fraud" while his bank rolled out a blockchain-based system to expedite cross-border payments. This is also motivating the efforts by China and Russia to create a central bank-backed cryptocurrency using distributed ledger technology—all while regulators squeeze out private-market competitors.

    Economist Ed Yardeni of Yardeni Research asks the obvious question: Why would central banks—which derive their power as the centralized gatekeepers of fiat currency creation, check clearing and payment processing—embrace a movement that's primary motivation has been to usurp this power in a decentralized way?

    Part of that, according to St. Louis Federal Reserve president James Bullard, is recognition that the technology has achieved critical mass. Thus, there's a fear of being left behind as the very foundations of banking and monetary policy—intermediation, funds transfers, transactions—rapidly change, not unlike the way the creation of mortgage-backed securities and credit default swaps changed housing finance in the mid-2000s.

    There's another, more self-serving purpose: Central banks could use their own cryptos to put the squeeze on paper currency. Why? To facilitate the use of negative interest rate policy, which has been deployed in Europe and Japan in recent years in half-baked forms. Currently, in Switzerland, short-term interest rates are at -0.75%.

    When another recession hits, especially if one comes soon, a dive to even deeper rates of negative interest would be hampered by the hoarding of cash since banks would charge for deposits (vs. absorbing the cost of negative rates themselves, as they're doing now). This is known by the economics cognoscenti as the "zero lower bound" in that interest rates cannot go much below negative before the traditional functions of deposits, loans and fractional money creation break down. Mattress stuffing ensues en masse.

    The Fed is clearly thinking about it. In testimony to Congress last year, Fed chairman Janet Yellen admitted policymakers "expect to have less scope for interest-rate cuts than we have had historically," adding she would not completely rule out the use of negative interest rates.

    The BIS*—the central bank of central banks—in its latest quarterly review posited that a crypto backed by the Fed "has the potential to relieve the zero lower bound constraint on monetary policy." Any distinction between regular dollars and this new "Fedcoin" could be removed by establishing a fixed one-to-one valuation. Any competition from the likes of bitcoin could be squashed by regulation; not unlike how the private ownership of gold was outlawed in the 1930s when it threatened the Fed's ability to ease credit conditions.

    If this sounds crazy, remember that the "dollar" already largely exists as a digital construct moved electronically between the Fed, reserve banks and commercial banks. Bill pay and ACH wire transfer services use electronic settlement. The current share of the money supply that's in paper currency form is only about 11%.

    Fedcoin, or whatever they decide to call it, would enable widespread digital peer-to-peer payments and money transfers. Properly structured, it provides a best of both worlds: A level of anonymity and widespread acceptance that cash provides with the efficiency and security of blockchain. Negative interest rates could be built into the blockchain's ledger, slowly eroding the Fedcoin's value, encouraging the frantic spending the Fed desires while penalizing savings.

    This potentially eliminates the need for large paper bills, potentially giving the kiss of death to the $100 and maybe the $50; not unlike the $1,000 and higher denominations killed by the Fed back in the 1960s. Anyone remember the $10,000 bill with Chief Justice Chase? Last year, the European Central Bank announced it would phase out the €500 note, ostensibly to combat illicit activities like drug dealing but perhaps sounding the death knell for cash money.

    All of this is catalyzing change.

    Sweden's Riksbank is studying the viability of an e-krona for retail payments amid a steady decline in demand for cash over the past decade amid the rise of Swish, a mobile payments app developed by Nordic banks. Ecuador has dinero electrónico. Russia is launching the CryptoRuble. The United Kingdom's Home Office told Her Majesty's Treasury that there are benefits to issuing a state-backed digital currency. Estonia is looking at launching the estcoin.

    Digital retail money transfer systems already exist but aren't yet prolific in the US. Zelle is like Swish, backed by more than 30 US banks and both Visa and Mastercard. Tech giants like Apple and Facebook have unveiled peer-to-peer money transfer services. Venmo, run by PayPal, is another. All of those depend on closed ecosystems to work, are centralized, and thus increase the risk of a bank-run-type event or security breach. Mt. Gox anyone?

    Paper and coins are archaic, inefficient and oh so analog. The future of money is coming. My bet is that even if it's in an ethereal, digital form, it will have "Federal Reserve Note" somewhere on its 1s and 0s.
    I'm a proud member of Eggshellman's Liar, Shill, and bully club and a new member of the Super Jew Defense League!!!

  2. #2
    Join Date
    Dec 2008
    Location
    Zionot, Squashkenazi
    Posts
    11,223

    Default

    There is no way they'll stop using cash.
    How else could the "deep state" kabbal sell their heroin?
    "I foresee little future in 'the price of silver', I see a huge future for 'the price in silver'." - heartbone
    "The truth is called hate by those who hate the truth." - K

  3. #3
    Join Date
    May 2007
    Location
    Atlanta
    Posts
    9,064

    Default

    Quote Originally Posted by silverheartbone View Post
    There is no way they'll stop using cash.
    How else could the "deep state" kabbal sell their heroin?


    That's a pretty "deep" conspiracy theory, but I wonder how many hundreds of billions if not into the trillions it would take to replace everything left that is still using coins and bills to operate?

    You might think not many Coke machines left that do not take a credit card, but how many millions of parking meters are there from coast to coast that still rely on coins to operate?

    Not a single lottery machine that takes credit cards in sight, it's not as simple as some might think.

    It's was one thing to convert a machine to except dollar bills versus coins only, but try replacing all these to accept a credit card with internet connections and your in a new ball park, probably forcing many small vending machine suppliers out of business.

    I can't say I've actually seen one myself, but word has it, many businesses offer certain female necessities for sale in their restrooms and probably requiring coins.

    I'm afraid some things would just disappear from existence rather they would be needed or not such as the pay telephone, just no longer practical to provide at any reasonable cost.

    I'm old and maybe the world has already evolved passed a BYOCELLPHONE to a BYOTAMPAX and I don't know it, it's not my thing and never has been, but it's the thought that counts!!!
    Last edited by valerb; 24th October 2017 at 16:53.
    I'm a proud member of Eggshellman's Liar, Shill, and bully club and a new member of the Super Jew Defense League!!!

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •