Inflation and Government Digital Currencies
Government digital currencies could make imposing arbitrary monetary controls much easier
In a recent interview, Joseph Stiglitz, a Nobel-Prize winning economist, argued that governments should shut down digital currencies. It’s not that he’s against digital currencies per-se, it’s just that he doesn’t like the current crop of private digital currencies:
“I’ve been a great advocate of moving to an electronic payments mechanism. There are a lot of efficiencies. I think we can actually have a better regulated economy if we had all the data in real time, knowing what people are spending”
Arguing for centralized control because of “efficiencies” that could be introduced is the equivalent of people arguing for censorship to “protect the children”. It’s the lowest common denominator, a starting point for more state control.
Let’s think about the efficiencies that could be introduced by forcing people into a digital currency controlled by the state. Gas prices are too high? We can ration gas digitally. Imagine if the state could restrict how much each American spends at the pump. It would certainly be a lot more “efficient” than coordinating with the millions of gas stations in America. Carbon emissions too high this month? We denied your flight purchase. Or maybe restrict how much money we spend on food. For years we’ve been told we could all be rich by brewing our coffee at home, now we can enforce it!
But it doesn’t have to stop there. The Federal Reserve can combat inflation at its source. Here’s an interview with Fed chairman Jerome Powell about inflation:
So in principle, it seems as though, by moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that.
Inflation has nothing to with the $12 trillion in newly created dollars over the last few years, mostly divvied out to large banks. It’s just that people are paid too much. One way to stop inflation is to get wages down.
To be fair, Powell wasn’t talking about governemtn digital currencies, but they would certainly help in this goal. With digital currencies, this problem can be “solved” with a stroke of a keyboard. You won’t need to go to to Congress, or go through the messy legislative process. We can just empower some unelected body to adjust the cash balance of Americans that are hoarding wealth. The beauty of it is that it won’t land on the shoulders of any one politician or political party. It’ll be an administered by the unelected persistent administrative state.
Money is already mostly digital and only a few major payment providers exist, due primarily to regulation. The state can already pass de-facto restrictions through regulation, mostly under the guise of combatting “fraud” or know your customer (KYC) regulations. This was the reason many legal marijuana distributors or sex workers can’t get bank accounts. But governmental digital currencies would make this even worse.