What type of wood chipper is the best for nationalizing bank deposits?
What type of wood chipper is the best for nationalizing bank deposits?
schizopoast
Retail CBDCs are a hammer in search for a nail. A product that exactly 0 people have asked for. For all intents and purposes they effectively nationalize the bank deposit industry. This understandably rustles the jimmies of an existing sector that extracted rent from bank deposits with regulatory blessing until now.
So we are now thundering into the era of more government intervention to fix a problem government intervention created. The ECB has a North Korean harvest report paper recommending ways to neuter it enough for existing public-private partnerships to not face a threat to ongoing monopolist extraction.
The conclusion is that:
Banks exert monopoly pricing power on deposits
CBDC's will reduce this rent extraction and increase welfare in the steady state
However the transition period will be volatile as people abandon banks
So CBDC's should be made shittier to dampen demand throughout the transition, for e.g. 3000 EUR per capita limits, restrictions on foreign holdings, etc.
The model shows that these policy choices are successful in making the transition less 'volatile'. But, hold up. How did we end up in a place where we are having banal, technocratic discussions about the degrees to which you could fuck over consumers through government intervention?
The ECB assumes that nationalizing bank deposits shifts more welfare to the economy. If the government had exorbitant privilege over breakfast cereals they'd come to the same conclusion for Rice Krispies. But nobody asked for this cursed coin in the first place, so why exactly are we 'transitioning' anywhere to begin with? Are there alternative places to 'transition' towards that aren't so horrifying? What are the welfare benefits of ‘transitioning’ to more private sector solutions rather than less?
Forbidden questions. We will never find out.
We don't explore these possibilities in sponsored academic research. This is because the premise starts from the central bank wanting to increase its exorbitant privilege at all costs and regardless of its mandate. Therefore everything else must follow. All the models must demonstrate welfare improvements to greater central bank intervention in the economy. All North Korean harvests have been record breaking.
The baseline is the existing state of affairs, where banks extract rent from deposits. The missing piece is that this monopolist extraction is only possible because of regulatory barriers to entry to new entrants, i.e. government interference in the economy.
The forbidden alternative is to:
Do less government intervention in the economy
Allow more competition from the private sector
Lower barriers to entry into the banking sector
The ECB, on the other hand, assumes ex-ante the solution is to:
Do more government intervention
Suck all the oxygen out of the free market
Threaten to obliterate the monopolist financial sector by becoming the ultimate monopolist, but ultimately cuck the product so it doesn't actually end up threatening financial sector cronies
Their baseline for welfare improvement is incorrectly the status quo: an overregulated monopolist private sector. But the actual baseline for policy-making should be the alternative:
Less regulation and more free market competition.
We are deprived of these nuances through the terrifying, faceless technocracy of banal academia in the service of a higher, horrifying, outcome. One more citation to add to a policy recommendation. One more presumption that science marches in the direction of progress.
The economists producing these models are not at fault individually. They are well-meaning nerds, just making models - it's what they know how to do. There is, however, a ruthless and deeply disturbing Nuremberg quality to the debate over what policy recommendations to adopt to prevent CBDCs from competing too well.
It's a bit like having a polite academic debate over what type of wood chipper to pulverize squirrels in. One model suggests diamond tipped blades are more performant. Another that regular shredders do the job just as well. Unfortunately, nobody is halting the discussion and saying: Hold up, why the fuck are we not discussing whether it is the right decision to pulverize animals to begin with?
Airline killed 440 squirrels in `giant shredder' | The Independent | The Independent
I schizopoast with depressing regularity about how you can reliably find government intervention at the root of virtually every economic problem. Consecrating the nationalization of money is the Big One. Don't let the North Korean harvest reports distract you from policy decisions that will inflict certain poverty.