This week’s podcast will be up early (probably tomorrow or Thursday). My gold friend John Butler was in. John knows a lot about gold, the gold standard and money. We discussed this particular report in a great deal of detail.
If you don’t have time to read it, I’ll sum it up for you: The Bank of England is much further along than we know in planning for a digital legal tender based on blockchain technology. This new money would allow the bank to more quickly execute policies like negative interest rates, quantitative easing, and even cut out commercial banks from the process of creating new money.
That last part is key
Commercial banks remain bloated with debt, especially government debt, which they’ve loaded up on since 2009. In a slow-growth economy, those banks are reluctant to the bidding of their central bank brethren and increase lending. If you have RSCoin – a “distributed ledger technology” designed for the bank by researchers at University College London – you can’t create money without banks!
This isn’t exactly helicopter money. But that’s kind of the point. It’s not cash. You don’t have to drop it from helicopters. You create it with keystrokes. Suddenly, people have more “units” to spend in their bank account. It’s a convergence technology. What do I mean by that?
It’s the convergence of macroeconomic and microeconomic policy. You’re controlling the price and quantity of money. And you’re able to do it, if you like, at the microeconomic level. Of course that last part is just theoretical possibility. You can’t imagine a bank “deleting” the value of your savings by a fixed amount every week in order to punish you for hoarding, can you? Can you?
The other convergence is between fiscal policy and monetary policy. It blurs the distinction between the government borrowing money to spend (fiscal policy) and the central bank lowering interest rates to spur credit creation (monetary policy). You do both at the same time, through the same technology.
This isn’t only centralised money creation. It’s the state putting itself at the heart of money creation in the economy and replacing private sector banks. The state as banker to the world. That seems like an awfully good idea to some people, no doubt. But it creates precisely the conditions for Financial Martial Law that Tim Price began warning about last year.
At the very least, it’s a reminder that technology is amoral. It’s neither good nor bad. How we use it determines whether it’s a tool of liberation or a tool of oppression.
Category: Central Banks