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Crash fiat dollars and CBDC to the recuse?

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Not likely. Not even possible, really.

To introduce a digital dollar as a replacement for a devalued regular dollar would require an act of Congress (the Federal Reserve has already conceded that it lacks statutory authority to introduce a digital currency).

Not only would a digital dollar not enjoy reserve status among the world's currencies, in an economic collapse it wouldn't even make a difference. In fact, it likely would make the situation far worse, just by the measure of fiscal chaos it would introduce.

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Would this scenario apply to other countries as well?

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I just realized the actual context of your question. (Substack doesn't always do a great job of presenting a full discussion thread, I've noticed).

Regards the introduction of a CBDC, obviously the legal mechanics and requirements will vary from country to country. In the EU, for example, the introduction of a digital euro would likely fall under the auspices of the EU and ECB leadership.

As regards Canadian law, I simply do not know if the Bank of Canada has existing legal authority to introduce a digital currency.

However, any digital currency so introduced has to somehow possess a veneer of credibility and necessity to succeed. China's e-yuan, for example, is largely a failure simply because the average Chinese doesn't see a need for it. For them it does nothing the regular currency does not already do, and Beijing slotted the e-yuan alongside the existing yuan, rather than replacing the yuan.

For the ECB to introduce a digital euro presents a logistics problem that would be difficult to overcome and impossible to ignore: the most commonly used currency in SWIFT banking transactions is the euro. Which means for the ECB to replace the euro with a digital euro has to also enable non-Europeans to utilize the digital euro the same way they utilize the regular euro in banking transactions. While the EU and the ECB might enjoy some coercive power to make adoption of a digital euro happen within the Eurozone, those powers end at the boundary of the eurozone.

The single great challenge for the introduction of any new currency, digital or otherwise, is credibility. What would make a digital euro or a digital dollar more credible and more trustworthy a currency than the euro or the dollar? The answer is little if anything.

In the case of G20 currencies, if the CBDC is a truly "new" currency and not merely a digital representation of the existing currency, all debt instruments, including sovereign debt, would need to be rewritten and ultimately repriced. The only way to avoid that is to not make the CBDC a truly "new" currency, which eliminates its core reason for existing.

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Among the G20 nations, probably so.

Any country with a developed financial market whose participants are heavily invested either directly in synthetic derivatives or use synthetic derivatives as a hedge against risk, as their benchmark interest rates rise, are likely to see the derivatives flip from the hedge to the risk.

Any market in which that happens is going to experience either a wave of defaults on various forms of debt as refinancing becomes impossible at current (higher) interest rate levels or a wave of margin calls and consequent forced selling of financial assets (debt securities in particular), either of which leads to a liquidity crisis in the marketplace.

In the case of Canada, while Toronto is itself a very active financial center, Canada is close enough to the US that if there is a margin call meltdown in the US Treasuries market, that crisis will likely extend almost organically to Canadian investors as well, so the US crisis would almost automatically become the Canadian crisis.

But Germany and France--both countries with a fair number of distressed banking institutions--are also likely to experience a similar meltdown scenario as benchmark debt yields rise.

Italy's economy has a number of other issues of sufficient severity that they might experience another crisis before a margin call meltdown has the chance to happen--rather like avoiding smallpox because you died of plague first.

In the Eurozone broadly the stage has been set for another sovereign debt crisis for some time now, and it's only a question of when and what shape it will take.

And in every instance, investors within a country's financial markets are quite capable of seeing the problems, but just refuse to act to get ahead of the crisis.

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Oh, it's deeper than that when it comes to USA/Canada. The two countries are intricately tied to one another. So much so, especially for Canada, it's like trying to cut veins without causing blood hemorrhaging. Canada is heavily reliant on the USA. In fact, we're effectively a branch-plant economy within the U.S. financial empire. Thinking otherwise is foolish.

We're basically one country but two different flags. But shhhh. Just don't tell nationalists in Ottawa or Quebec City. Gotta pretend we're fully independent.

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