(a) Do you agree that gradually reducing people’s CBDC balances is equivalent to a negative interest rate? (b) If a government becomes tyrannical and wishes to enslave its population, would the CBDC help or hinder its goal?
Need immediate help with Econ question!
The Bank of International Settlements (BIS), a somewhat secretive organization based in Switzerland, recently touted the idea of a Central Bank Digital Currency (CBDC). The CBDC has been gaining popularity among the so-called global elite. To quote a New York Times article
To keep their money relevant, many central banks are experimenting with digital versions of their currencies. These currencies are virtual, like Bitcoin; but unlike Bitcoin, which is a private enterprise, they are issued by the state and function much like traditional currencies. The idea is for central banks to introduce these digital currencies in limited circulation — to exist alongside cash as just another monetary option — and then to broaden their circulation over time, as they gain in popularity and cash fades away...
A central-bank digital currency can [sic] be a useful policy tool. Typically, if the Federal Reserve wants to stimulate consumption and investment, it can cut interest rates and make cheap credit available. But if the economy is cratering and the Fed has already cut the short-term interest rate it controls to near zero, its options are limited. If cash were replaced with a digital dollar,
however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest
(a) Do you agree that gradually reducing people’s CBDC balances is equivalent to a
negative interest rate?
(b) If a government becomes tyrannical and wishes to enslave its population, would the CBDC help or hinder its goal?
Step by step
Solved in 2 steps
