The former chairwoman of the US Federal Reserve said that Fed was not very enthusiastic regarding a digital currency because:
“Whenever there are concerns about any other form of deposit in the economy, or investment, people will have a tendency to sell those things and try to switch immediately to digital cash. I think that could have negative impact on financial stability,” Yellen said.
The remarks were made within the context of her views on bitcoin. She said she is not a fan, listing concerns regarding money laundering, potential inefficiencies due to its decentralized nature, its lack of a stable price, and because of its high energy use.
She then moved on to whether Fed could effectively launch digital cash. She said the same concerns would apply, arguing that illicit use of a digital version of cash would grow considerably.
There would be concerns over cybersecurity, she said. Then stated “I think digital currency provided by the Federal Reserve could become very attractive as a deposit, and in a way end up displacing potentially the life deposits of the banking system.
You might say, that’s competition… but you have to ask yourself… we count on the banking system to make loans and you would be undermining an institution that we count upon to perform a very important form of financial intermediation.”
Making it an interesting, albeit one sided, view on digital cash. She is of course right regarding all the listed concerns. Money, like a car, is a tool. Criminals, so being humans, use all the same tools as everyone else.
With criminals, however, it is somewhat easy. There’s a crime, all are in full agreement that there’s a crime, now it’s just a matter of detectives doing their job, finding the perpetrator and locking him/her up.
If we consider the banking collapse, however, is it really fair to say there was a crime, and at the same time is it fair to say there was not?
Powell now is raising interest rates. If he makes a mistake, is that a crime? If that mistake crashes the economy, is that worse or better than some petty criminal trying to break the law – something they probably will do anyway, if they are so inclined, regardless of whatever barrier.
The starving children of Venezuela now live in a crime riddled land because of monetary mismanagement.
Some money laundering mainly committed through the fiat banking system is hardly comparable to that misery and to the misery the west was put through by banks during much of the beginning of this decade.
Calling for profit commercial banks as institutions further hides their casino nature. The investors, as in the depositors, see almost no gain whatever while bankers are charging borrowers up to 17%.
The investors instead have to bailout the banks, despite seeing almost no gain from the huge profits banks make from their “financial intermediation.”
No gains because they have no competition. And of course Fed shouldn’t be competition. Fed should instead be subject to accountability and an audit because it is the monopoly of monopolies.
The free market should be competition to commercial banks, something so provided by all these blockchain inventions. And if people in a time of crisis want to go there or to some other digital cash, then who is this woman to tell them otherwise?