You miss another parallel between the move to centralised printers in university offices and digital pounds, the ability to track each occurrence, easily find deviant behaviour and nudge and punish individuals on arbitrary rules for said deviant behaviour. We have individual weekly print quotas (the limit of which is not made known to us). If we exceed this mystery number we get a shitty email from the faculty manager (the usual petty bureaucrat on x4 an academic salary) asking us why we've exceeded our carbon footprint for the week and asking us to reconsider our printing outputs in the future.
"We have never been in the position in which we now find ourselves, where centralised control over all transactions taking place in the economy is so tantalisingly within reach of central banks;"
This is wrong. You are confusing transactions denominated in pounds with the means of payment. Most of the transactions taking place in the economy, more than 90% of them, are not done with cash and therefore have nothing to do with the central bank. If I pay you £5 by bank transfer, by debit card, by credit card or by cheque, that is not a transaction within the reach of a central bank. A digital pound would have to displace all money held in bank accounts, credit cards and physical cash (there are no proposals to withdraw that if a CBDC is introduced) for all transactions to go anywhere near the central bank, and even then it is debatable what "control" the bank would have.
Give me some credit! I understand that perfectly well and thought it went without saying. The point is that the architecture of the digital pound represents the opportunity to do what I was referring to.
But that’s my point, it really doesn’t. We are talking about digitising small change and keeping the actual small change too, by the way. That doesn’t give you control of very much at all.
You just need to use your imagination a bit. Of course at the beginning this is all about baby steps. The point is that once you have transactions taking place within a ledger which the Bank owns, and once those transactions are being carried out through intermedaries who are regulated by delegated legislation (i.e. the PIPs), you basically then have the structure within which, say, it becomes possible to prevent (or even undo) all transactions concerning a particular merchant, or concerning a particular product or service - or, indeed, to program the 'currency' so it can't be used to make particular transactions or transactions for a certain volume of a good. None of this will happen yet, but if launched it will be a kind of proof of concept - it could happen, and that's enough of a reason to object to it. (Leaving aside all the other risks I mentioned.)
Hmm, I was with you up to merchants. I can see how they’d like to stop “criminals” (wrong-thinkers) from transacting with each other but that is pretty much ruled out with the current ledger design proposals. Doing the same for specific products would be next to impossible, not without rebuilding the entire western world’s payment infrastructure. Programming the currency is a non-sequitur. It would be the equivalent of having government direct debits appearing in your bank account. Does that happen much? So much easier to tax at source. I get the other risks in theory but in practice Visa, Mastercard and the entire commercial banking sector, where there is 1,000x more money, aren’t suffering from them. At the end of the day we are talking about small change, literally.
You can't imagine that there would soon be occasion for limiting purchases of products containing high sugar content, alcohol, too much use of carbon in the supply chain, etc.? You're overlooking the fact that it's very often the 'small change' transactions that are precisely of the kind that an ambitious government would love to control. And it will be in a position to do this - and trumpet it as being anonymous - through the PIPs. This will require a discussion elsewhere though.
Couldn’t agree more. There are armies of people who dream of imposing such restrictions. My point is that there are mundane practical reasons why they will find it very difficult, and therefore will not be in a position to implement their pipe dreams, which will be an embarrassment to them. What I find interesting is what then happens when their irresistible forces meet the immovable object of practical reality. As you say, to be continued elsewhere…
Spot on, as usual. Those at the BoE who write this guff have enough Economics to understand Gresham’s Law: good money will drive out bad. Consequently, they want Bitcoin etc off the pitch or else it will drive out the junk CBDC they will roll out. We only use the ever-devaluing - because of government fiscal incontinence - Pound because we have no choice.
Nailed it David. All the lies laid out clearly. I would continue to use cash as long as possible as this is putting a stick in their wheel. Plus, I truly think it will be a lot harder than they would like it to be to introduce. No doubt though they will keep trying. The only hedge I would add to your list is having a little bitcoin too. It may not work out but there is no doubt major firms and governments are accumulating this now and if it goes belly up you never know.
I would advocate everybody using cash as much as possible. I agree on having a little bitcoin too. Having lots of different asset classes is always good.
Why doesn’t the BoE / Government just ban crypto? It is the pesky newcomer that is giving them a headache. They could easily concoct a story around ransomware, the dark web, UK cracking down on online crime, blah blah. Safety, as ever, being the alibi of tyrants. The public is utterly apathetic. It would relieve the pressure to “do something digital” which they and everyone else knows they will cock-up.
Well, it would be Parliament that would have to ban it. It may indeed happen if at some point people start using cryptocurrencies for daily transactions.
Excellent article Sir.
Thanks!
You miss another parallel between the move to centralised printers in university offices and digital pounds, the ability to track each occurrence, easily find deviant behaviour and nudge and punish individuals on arbitrary rules for said deviant behaviour. We have individual weekly print quotas (the limit of which is not made known to us). If we exceed this mystery number we get a shitty email from the faculty manager (the usual petty bureaucrat on x4 an academic salary) asking us why we've exceeded our carbon footprint for the week and asking us to reconsider our printing outputs in the future.
Yeah, funnily enough, that sounds like the future if ever the digital pound becomes the dominant medium of exchange...
McG, you really MUST learn to trust the Bank! See .....
https://unherd.com/2024/02/the-bank-of-england-gambled-with-your-money-and-lost/?tl_inbound=1&tl_groups[0]=18743&tl_period_type=3
Pilkington is always worth reading.
"We have never been in the position in which we now find ourselves, where centralised control over all transactions taking place in the economy is so tantalisingly within reach of central banks;"
This is wrong. You are confusing transactions denominated in pounds with the means of payment. Most of the transactions taking place in the economy, more than 90% of them, are not done with cash and therefore have nothing to do with the central bank. If I pay you £5 by bank transfer, by debit card, by credit card or by cheque, that is not a transaction within the reach of a central bank. A digital pound would have to displace all money held in bank accounts, credit cards and physical cash (there are no proposals to withdraw that if a CBDC is introduced) for all transactions to go anywhere near the central bank, and even then it is debatable what "control" the bank would have.
Give me some credit! I understand that perfectly well and thought it went without saying. The point is that the architecture of the digital pound represents the opportunity to do what I was referring to.
But that’s my point, it really doesn’t. We are talking about digitising small change and keeping the actual small change too, by the way. That doesn’t give you control of very much at all.
You just need to use your imagination a bit. Of course at the beginning this is all about baby steps. The point is that once you have transactions taking place within a ledger which the Bank owns, and once those transactions are being carried out through intermedaries who are regulated by delegated legislation (i.e. the PIPs), you basically then have the structure within which, say, it becomes possible to prevent (or even undo) all transactions concerning a particular merchant, or concerning a particular product or service - or, indeed, to program the 'currency' so it can't be used to make particular transactions or transactions for a certain volume of a good. None of this will happen yet, but if launched it will be a kind of proof of concept - it could happen, and that's enough of a reason to object to it. (Leaving aside all the other risks I mentioned.)
Hmm, I was with you up to merchants. I can see how they’d like to stop “criminals” (wrong-thinkers) from transacting with each other but that is pretty much ruled out with the current ledger design proposals. Doing the same for specific products would be next to impossible, not without rebuilding the entire western world’s payment infrastructure. Programming the currency is a non-sequitur. It would be the equivalent of having government direct debits appearing in your bank account. Does that happen much? So much easier to tax at source. I get the other risks in theory but in practice Visa, Mastercard and the entire commercial banking sector, where there is 1,000x more money, aren’t suffering from them. At the end of the day we are talking about small change, literally.
You can't imagine that there would soon be occasion for limiting purchases of products containing high sugar content, alcohol, too much use of carbon in the supply chain, etc.? You're overlooking the fact that it's very often the 'small change' transactions that are precisely of the kind that an ambitious government would love to control. And it will be in a position to do this - and trumpet it as being anonymous - through the PIPs. This will require a discussion elsewhere though.
Couldn’t agree more. There are armies of people who dream of imposing such restrictions. My point is that there are mundane practical reasons why they will find it very difficult, and therefore will not be in a position to implement their pipe dreams, which will be an embarrassment to them. What I find interesting is what then happens when their irresistible forces meet the immovable object of practical reality. As you say, to be continued elsewhere…
Spot on, as usual. Those at the BoE who write this guff have enough Economics to understand Gresham’s Law: good money will drive out bad. Consequently, they want Bitcoin etc off the pitch or else it will drive out the junk CBDC they will roll out. We only use the ever-devaluing - because of government fiscal incontinence - Pound because we have no choice.
Nailed it David. All the lies laid out clearly. I would continue to use cash as long as possible as this is putting a stick in their wheel. Plus, I truly think it will be a lot harder than they would like it to be to introduce. No doubt though they will keep trying. The only hedge I would add to your list is having a little bitcoin too. It may not work out but there is no doubt major firms and governments are accumulating this now and if it goes belly up you never know.
I would advocate everybody using cash as much as possible. I agree on having a little bitcoin too. Having lots of different asset classes is always good.
Why doesn’t the BoE / Government just ban crypto? It is the pesky newcomer that is giving them a headache. They could easily concoct a story around ransomware, the dark web, UK cracking down on online crime, blah blah. Safety, as ever, being the alibi of tyrants. The public is utterly apathetic. It would relieve the pressure to “do something digital” which they and everyone else knows they will cock-up.
Although I think a big problem would be defining what a cryptocurrency is. Clearly, they can't ban blockchain technology as such.
Well, it would be Parliament that would have to ban it. It may indeed happen if at some point people start using cryptocurrencies for daily transactions.