Comment by djfobbz
3 years ago
For one, unlike cash, the issuing entity can program CBDC to expire on a specific date unless utilized. Another horror use case is that they could track and limit how many hamburgers or pizzas you eat daily, weekly, monthly or yearly!
> For one, unlike cash, the issuing entity can program CBDC to expire on a specific date unless utilized.
The idea isn't new.
https://en.m.wikipedia.org/wiki/Silvio_Gesell
He merely suggested a small fee though. 5.1% per year and only on cash, not some CDBC with privacy concerns. If you keep your money on savings accounts you wouldn't pay anything. If the economy is growing you would get paid interest. If the economy is declining you might pay negative interest.
This is different from a coupon that expires instantly. That is a terrible idea. Don't do this.
Also, the idea of demurrage currencies is to replace the devaluation via inflation with a nominal fee so it is possible that in countries with high inflation rates, the new currency would end up losing less value over time simply because it maintains price stability easily.
Edit: btw. His theory is dated in the sense that Keynes and Dieter Suhr have an updated interpretation. With a hint of Fisher Black you are going to get one of the most interesting economic theories that can explain most of the suffering in the world based on very few assumptions. The money and land reform policy proposals still remain relevant today.
Many ideas aren't new, but that doesn't mean they're government policy.
Why would the government program money to expire? Would the money not become effectively worthless the closer to the expiration date? Why would a business accept transactions from people with money that’s about to expire would that then mean they would be giving away goods and services for free potentially?
In theory you spending it would reset the expiration date.
If you know your money will expire you will spend it, thus stimulating the economy. We also can’t have the dirty proles save their way to a higher social class.
Where are these theories of how a hypothetical future CBDC come from? Is there an official announcement from the Federal Reserve about how they would like it to work? A committee hearing in Congress where this is discussed?
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There are easy ways to get around this. This isn't actually practical to implement. You could just buy and sell stocks within a second.
> We also can’t have the dirty proles save their way to a higher social class.
I don't know what you mean by this. Rich people spend their money at a slower rate than poor people so the rich would be disproportionately impacted by this. Someone living paycheck to paycheck isn't going to have much money that can expire to begin with.
The government could issue money that can be tied to a specific purpose (allowed to be spent with specific merchants or establishments) and have a time limit. Think of the COVID-19 assistance that was given to people. If — instead of just transferring normal money into people’s accounts that allowed people to do whatever they wanted with it whenever they wanted and wherever they wanted - the government could force recipients to spend it across certain things and not others, and gave a deadline to move the money around, would that be something that’s in the best interests of the receiver? By expiring money or by applying negative interest rates, the government can offload its burden on to the people who hold and have to use this money.
That's a question you should ask China. If it's possible, you can bet it's going to happen sooner or later. https://coinpri.com/news/cryptocurrency/the-chinese-cbdc-wil...
I think Japan did try this, as they really wanted people to spe d, vs save.
I assume that the TTL of the money would reset once it has changed hands
If you are assuming how a hypothetical future currency will work then we could easily assume exactly the opposite and the money would be destroyed by a set date to maintain some stable rate of deflation. Do you have evidence that a time to live for a currency is being considered by the Federal Reserve and US government?
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The TTL would have to reset at awkward points. Like paying out salaries otherwise you could just wash trade the TTL away.
I just don't see how this is realistic. It is basically impossible to enforce.
I assume it would accelerate.