Yes, they are indeed ‘damned if they do and damned if they don’t’! If inflation rises substantially, the current administration will be voted out by a disgusted nation. If too much of the banking system fails - and there exist very few politically acceptable tools to correct that - the collapse would be a nightmare for everyone.
Some analysts are saying that this is how the centralized digital currencies are going to be implemented, because of the ‘crisis’. I’m wondering: any creative minds out there see another economic pathway possible? I’d sure like to think there is one!
With regards to the implementation of a CBDC within the US:
This is the wrong crisis for that maneuver. Currency replacements are done when there is a crisis of confidence in the currency, usually involving a measure of Weimar Republic levels of hyperinflation. Within the global economy, there is no such crisis of confidence in the dollar, at least not yet.
As China's eCNY rollout has demonstrated, a CBDC is not a compelling alternative to existing fiat currency -- if totalitarian China can't force a CBDC on the people an only mildly fascistic US government has not got a prayer, particularly as the move would face considerable resistance from the banking sector (if the banks don't have a measure of control over how it's managed they'll fight it and if they do have a measure of control they'll defeat the purpose). Without a crisis of confidence in the currency, the digital dollar has an uphill battle.
By the way, I realize that I’m asking a LOT in looking for a creative pathway out of our building financial dilemma. Anyone who could solve this would - and should! - win the Nobel Prize in Economics.
In a more serious note, there are folks that are doing serious work at exactly that. The most notable is Andrew Torba who runs Gab. He's been steadily working on adding payments and e-commerce features to his platform, as part of what he calls "building the parallel economy." His focus is on building an infrastructure for fundamentalist Christians such as himself to gather, commune, and transact business away from the woke weirdness of mainstream economy.
The cryptocurrency crowd is convinced all this financial madness is setting the stage for Bitcoin's ultimate triumph. They might be right.
For myself, part of my goal with All Facts Matter is to empower individuals to make more informed and better decisions about their own personal economy. Being a cross between an anarcho-capitalist and a libertarian (small "l"), I firmly believe that the solution is to let individuals manage their individual affairs, which means government just needs to get the Hell out of the way.
I like to think the serial economic lunacies of Dementia Joe's regime and the economically obtuse Federal Reserve are making that argument for me! 😁
Agreed. I am also at the libertarian/Constitutional Conservative end of the spectrum, and want the government to (mostly) get out of my life. The past three years of creeping socialist authoritarianism has horrified me. And the ‘new economics’ of Modern Monetary Theory - are they insane? That’s the economic equivalent of a perpetual motion machine; you can’t produce real wealth without actual productivity!
Yes, and they’ve become so convoluted and intertwined!
The financial authorities are soon going to have to choose between ongoing inflation, or allowing more banks to fail. There must be some financial mechanism to avoid both of these political disasters, but I sure don’t know what it would be.
When the mortgage meltdown of 2008-2009 unfolded, I was surprised that they had mechanisms such as quantitative easing to ‘fix’ it. (Sure, it effectively was just printing money, inflating certain asset classes, and kicking the problem down the road, but it calmed the public and bought years of time). But NOW what are they going to do?
Keep in mind that the securities portfolios at the core of this crisis are within themselves doing okay. Default risk is fairly low.
The problem is the securities themselves are locked into low yields, which makes them unattractive in the secondary market. Their fair market value is thus less than what the banks paid, and the banks are consequently compelled to hold them to maturity and let them "roll off" the books.
Unfortunately for the banks, this ties up capital and impairs liquidity, which means the banking sector needs to collectively raise $620 Billion in fresh capital, from investors who would be pissed at the ask. That is basically what happened to SVB--Wall Street told the bank to "f*** off" with their emergency public offering last week.
All of which makes the problem as large as bank managements' collective egos.
Yes, they are indeed ‘damned if they do and damned if they don’t’! If inflation rises substantially, the current administration will be voted out by a disgusted nation. If too much of the banking system fails - and there exist very few politically acceptable tools to correct that - the collapse would be a nightmare for everyone.
Some analysts are saying that this is how the centralized digital currencies are going to be implemented, because of the ‘crisis’. I’m wondering: any creative minds out there see another economic pathway possible? I’d sure like to think there is one!
With regards to the implementation of a CBDC within the US:
This is the wrong crisis for that maneuver. Currency replacements are done when there is a crisis of confidence in the currency, usually involving a measure of Weimar Republic levels of hyperinflation. Within the global economy, there is no such crisis of confidence in the dollar, at least not yet.
As China's eCNY rollout has demonstrated, a CBDC is not a compelling alternative to existing fiat currency -- if totalitarian China can't force a CBDC on the people an only mildly fascistic US government has not got a prayer, particularly as the move would face considerable resistance from the banking sector (if the banks don't have a measure of control over how it's managed they'll fight it and if they do have a measure of control they'll defeat the purpose). Without a crisis of confidence in the currency, the digital dollar has an uphill battle.
Once again, you’ve made my day by reassuring us, with good reasoning, that the CBDCs aren’t inevitable!
The only things that have ever been inevitable are death and taxes, and given the sorry state of the IRS I'm not sure about taxes! 😉
By the way, I realize that I’m asking a LOT in looking for a creative pathway out of our building financial dilemma. Anyone who could solve this would - and should! - win the Nobel Prize in Economics.
Still, anyone want to brainstorm some ideas?
In a more serious note, there are folks that are doing serious work at exactly that. The most notable is Andrew Torba who runs Gab. He's been steadily working on adding payments and e-commerce features to his platform, as part of what he calls "building the parallel economy." His focus is on building an infrastructure for fundamentalist Christians such as himself to gather, commune, and transact business away from the woke weirdness of mainstream economy.
The cryptocurrency crowd is convinced all this financial madness is setting the stage for Bitcoin's ultimate triumph. They might be right.
For myself, part of my goal with All Facts Matter is to empower individuals to make more informed and better decisions about their own personal economy. Being a cross between an anarcho-capitalist and a libertarian (small "l"), I firmly believe that the solution is to let individuals manage their individual affairs, which means government just needs to get the Hell out of the way.
I like to think the serial economic lunacies of Dementia Joe's regime and the economically obtuse Federal Reserve are making that argument for me! 😁
Agreed. I am also at the libertarian/Constitutional Conservative end of the spectrum, and want the government to (mostly) get out of my life. The past three years of creeping socialist authoritarianism has horrified me. And the ‘new economics’ of Modern Monetary Theory - are they insane? That’s the economic equivalent of a perpetual motion machine; you can’t produce real wealth without actual productivity!
Every economist since Karl Marx thought he was sharper than Adam Smith, and every one of them has been totally wrong.
The key thesis in Wealth of Nations was that a nation's wealth was the productive labor of its people. That was true in 1776 and it is true today.
Which means, yes, the MMT crowd is insane.
Which financial dilemma? There are so many from which to choose! 😁
Yes, and they’ve become so convoluted and intertwined!
The financial authorities are soon going to have to choose between ongoing inflation, or allowing more banks to fail. There must be some financial mechanism to avoid both of these political disasters, but I sure don’t know what it would be.
When the mortgage meltdown of 2008-2009 unfolded, I was surprised that they had mechanisms such as quantitative easing to ‘fix’ it. (Sure, it effectively was just printing money, inflating certain asset classes, and kicking the problem down the road, but it calmed the public and bought years of time). But NOW what are they going to do?
Keep in mind that the securities portfolios at the core of this crisis are within themselves doing okay. Default risk is fairly low.
The problem is the securities themselves are locked into low yields, which makes them unattractive in the secondary market. Their fair market value is thus less than what the banks paid, and the banks are consequently compelled to hold them to maturity and let them "roll off" the books.
Unfortunately for the banks, this ties up capital and impairs liquidity, which means the banking sector needs to collectively raise $620 Billion in fresh capital, from investors who would be pissed at the ask. That is basically what happened to SVB--Wall Street told the bank to "f*** off" with their emergency public offering last week.
All of which makes the problem as large as bank managements' collective egos.
Very well said!