Post
Topic
Board Economics
Re: Inflation and Deflation of Price and Money Supply
by
tuheeden
on 30/07/2013, 11:16:16 UTC
Here are two scenarios where I think a Central Bank will consider utilizing some form of a crypto currency and why:

1 - A complete overhaul (like Greece or an emerging nation)
2 - As a supplemental sovereign payments system (The Federal Reserve already intervened on the interchange fee for debit cards)

In both examples, I am not naive enough to think that any central bank wants an economic majority model for change, so they will certainly be "official" repository for adjustments. However, in both scenarios, there are very compelling reasons to consider using crypo currencies

- The government would "own" the sovereign payments mechanism (like they do with cash), except now this medium facilitates infinitely more robust international payments. The Federal Reserve and many other world central banks already have laws mandating how much card processors can charge, so I think they would relish being in charge of a competing payments mechanism that they own. Keep in mind that crypto currencies also replace the system of paper checks, so this is yet another huge cost savings

- The cost to issue currency could almost be completely eliminated. ATM's could literally print bills on demand for any amount. Citizens could print their own bills/checks right at their house through some official web site.

- Accountability - The Government would/could require registration of account numbers, making the tracking of financial records completely transparent (at least on the surface and for the citizens...dont expect the government to disclose their ID's). This makes tax collection and auditing much easier

- Money supply manipulation - No change here than current. They could decide when and how much to ramp up the money supply or they could do a proof-of-burn to draw down the supply

- Peer to Peer processing would still be used. The government would certainly not want to invest in a huge server farm for transaction processing, so let miners do their job and simply dial in a reward that is attractive enough for them to do it. It just like printing money to them anyway and it is much more robust than managing a check clearing system and a paper currency system

- Counterfeiting is virtually eliminated, another cost savings

The list would go on but I think you get the idea.

The technology is not mature enough today to facilitate such a transition (just look at the sad state of wallets...) but in 5 or 10 (or 20 to 50..) years both governments and citizens should be much more adept with this technology to potentially consider the extraordinary benefits.