On CBDC and the need for public debate: Policy and the concept of process
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Morgan, Jamie Article On CBDC and the need for public debate: Policy and the concept of process Economic Thought Provided in Cooperation with: World Economics Association, Bristol Suggested Citation: Morgan, Jamie (2023) : On CBDC and the need for public debate: Policy and the concept of process, Economic Thought, ISSN 2049-3509, World Economics Association, Bristol, Vol. 11, Iss. 2, pp. 3-24 This Version is available at: https://hdl.handle.net/10419/315849 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc/4.0/
Economic Thought 11.2: 3-24, 2023 3 LEADING ARTICLE On CBDC and the Need for Public Debate: Policy and the Concept of Process Jamie Morgan, 1 Leeds Beckett University Business School, UK [email protected] Introduction According to the Principle of Techno-Geek Proportionality, for every million times a nerd gets ecied ab he lae hing he ld migh change nce. Cenal bank digial cenc (CBDC) may be that once. There is nothing new about digital money, but there may be many profoundly ne hing ab CBDC. Thi i eeciall f eail CBDC that is, CBDC freely available he blic ahe han hleale CBDC, hich i eiced me egieed e and central bank systems. At the moment, the vast majority of money in existence takes the form of deposits at Santander, Barclays and the other commercial banks. As the Bank of England makes clear, most of this is originally produced when a bank extends a loan and creates a sum as a deposit which the borrower can then spend. 2 This money flows around our payments system and the money supply, albeit there is more to money supply than just this, grows as cumulative debt grows and shrinks as debt is paid down. 3 In the UK (and equivalents apply in any modern economy that has commercial banks), though we rarely think about it, since the money is denominated in £s and the central bank essentially guarantees that it will exchange at par for central bank money, most of what we think of as money is really Santander or Barclays etc. credit 1 Thanks to Costis Repapis for comments. 2 For the best-known statement see McLeay, Radia, and Thomas (2014); for similar from another central bank see, for example, Jordan (2018). For context see Ryan-Collins et al. (2012); Werner (2014a, 2014b, 2016). 3 There are various facets to money creation over and above commercial bank lending. Notably when the government ahie ne ending hi i cndced ia he Tea accn a he cenal bank. If hee ae infficien fnd in that account then the central bank merely creates these via keystroke and deems this an overdraft (and the Treasury conceives this as debt to be repaid, leading to bond issuance etc.). In any case, the action leads to money creation used to pay others whose accounts are held at commercial banks, leading in turn to a transfer of reserves from the Treasury account into those commercial banks. As MMT theorists note, the central bank cannot run out of this money, and it is institutional frameworks that frame or limit use (and then representations, ideas, belief and trust which affect how this is conceived within society). So, government can create money through the Treasury-central bank link in addition to how commercial banks create money through lending. Arguably, central banks can also create money on their own behalf (as they have numerous times in order to address financial instability or crisis). See, for example, Berkeley et al. (2021, 2022); Hook (2022, 2023). As the last point made also intimates, money supply management is not just about the mechanics of money creation, it is about fiscal and monetary policy and issues of macroeconomics price stability and inflation targeting, employment levels, output gaps, supporting other government policy such as climate targets, financial stability etc. See later.
Economic Thought 11.2: 3-24, 2023 4 units. 4 Retail CBDC could change this state of affairs and the issues are sufficient to require public debate not only regarding the scope of the technology but also the role and adequacy of central banks. This, in turn, provides an opportunity to discuss the nature of process. Some background Currently, central bank money exists in two forms, cash in circulation and the reserve accounts that commercial banks must hold at the central bank and which they are required to use to settle the balances between themselves as payments flow between accounts in one commercial bank and another. Retail CBDC, however, gives the public access to digital central bank money and conversely gives the central bank (and, in principle, government) a new and immediate way to put money into and influence the nature of society and economy. Commercial banks go to a lot of trouble to convey an image of themselves as a vital utility providing an essential service to the public. But behind this sits a small group of private companies to which has been delegated an astonishing degree of power and on whom we are dependent. Potentially, retail CBDC reduces that power and reconfigures dependency within the public-private axis of money. I say potentially, because a great deal depends on purpose, implementation and policy. It is also important to note that CBDC is a catch-all term for different possible designs and use of technology. In general, CBDC makes use of the same distributed ledger, blockchain, cryptographic and smart contract technology as cryptocurrency. 5 The main difference is that these are maintained and controlled by a central authority (the central bank). All the other advantages of the technologies remain the same: secure, rapid, recorded and immutable transaction without the need for settlement via a cnfiming inemedia. A eail CBDC ma al be ken baed (the central bank issues digital tokens e.g. digital £s into a digital wallet which the public carry and ih hem n a deice and can end) accn baed (he cenal bank euires members of the public to maintain an account from which payments are verified), and it may be interest bearing or non-interest bearing. Finally, the central bank can opt to offer direct access to CBDC from the central bank or can choose some variation where the underlying infrastructure is provided by the central bank but the overlaid payments interface is provided by others through new or existing systems. Current interest in the subject began around 2015 and according to the global CBDC Project, almost every country in the world is at some stage in developing and implementing a CBDC. 6 The 4 The terminology varies, central bank money is referred to as sovereign money, narrow, base or high-powered money, and commercial bank money is often just referred to as bank money and is part of broad money. It is mainly because of the conditional and coningen a f he mne (inclding bank mne) elain cenal bank mne i.e. hehe it will exchange at par, that leads to a money hierarchy. 5 On the various forms of cryptocurrency and the issues raised see, for example, Arner, Auer and Frost (2020); Prasad (2021); Carney (2021); Morgan (2023a). See also the appended taxonomy. 6 Note, the Committee on Payments and Markets Infrastructures at the Bank for International Settlements began to investigate the issue in 2015. See also Bech and Garratt (2017). The CBDC Project tracks the status of CBDCs, categorising them into research, proof of concept, pilot and launched (with an additional category of cancelled). The tracker is supported by Boston Consulting Group and EY. Visit: https://cbdctracker.org/
Economic Thought 11.2: 3-24, 2023 5 Bank of England, for example, published a discussion paper on CBDC in March 2020, formed a joint CBDC taskforce with HM Treasury in April 2021, and published a further discussion paper in June 2021 focused on the role of new types of digital money and their impacts (notably a variant of cryptocurrency called stablecoin [corporate coin] and the motives this might provide for launching a CBDC). This was followed most recently by a consultation paper on CBDC in particular in February 2023 (with the consultation to run to June 2023), accompanied by a supporting working paper on the technology. 7 Throughout the period Deputy Governor of the Bank of England with responsibility for financial stability, Sir Jon Cunliffe, provided a running commentary on aspects of the process and its context (re the potential issues raised by new forms of digital money). 8 Notably, in a speech that accompanied the launch of the February consultation he ne ha, O aemen i ha n cen end i i likel ha a eail, geneal e digital central bank currency - a digital pound ill be needed in he UK. 9 Cunliffe was later replaced as Deputy Governor by Sarah Beeden, effective from November 2023, but development continues. 10 Attractions of retail CBDC There are various potentials that provide reasons to adopt CBDC for domestic use (there is a whole other debate for its international implications). 11 Perhaps the easiest to grasp is typically posed using that catch-all em fm ecnmic jagn efficienc. While e all ndeand ha borrowing money invites fees and interest charges, we still tend to think of money as something we pay with rather than something we pay for. Yet creation of money, production and maintenance of money delivery (to those we access it from) and of payment and processing systems all involve costs and fees. 12 Sometimes we are aware of these and sometimes not. For eamle, an and age f mne and mainenance f ATM and he nek ha 7 See Bank of England (2020, 2021, 2023a, 2023b). See also Barrdear and Kumhof (2016) and on the narrative and context Morgan (2022a). 8 See, for example, Cunliffe (2021a, 2021b, 2022). 9 See Cunliffe (2023). 10 The e eleae annnced he al ange f enibiliie: A he Bank De Gen f Financial Sabili, Saah ill la a ccial le in ening he afe and abili f he UK financial ec and ill i n he Financial Policy Cmmiee (and chai i in he Gen abence) he Mnea Plic Cmmiee and he Pdenial Reglain Committee and play a key role in providing a link between financial stability and monetary policy. Sarah will also be a member of the Court of the Bank of England, Chair the Financial Market Infrastructure Board, and represent the Bank of England n a nmbe f nainal and inenainal bdie. 11 These focus mainly on its use to provide an alternative to cryptocurrency use for remittances and to evade capital controls (and in a context where cryptocurrency threatens a version of dollarisation in countries with unstable currencies and weak central banks). For a detailed breakdown (albeit slightly dated) see Chainalysis (2021). There is, however, also an issue regarding the impacts for the role of the $ as the dominant reserve currency (see Kuehnlenz, Orsi and Kaltenbrunner 2023), as well as issues over the compatibility of technologies that underpin any CBDC and affect the connections between different CBDC. The Bank for International Settlement, for example, has a project Project M- Bridge. Visit: https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm 12 Ne, cenal bank d hgh benefi fm eigniage.
Economic Thought 11.2: 3-24, 2023 6 underpins these is a massive hidden expense. 13 Every payment system involves some underpinning infrastructure and existent payment services involve intermediaries, each charging fees and this is far larger in scope and contains more actors than just commercial banks. Fundamentally though, the current banking system puts the majority of our income and most of our financial activity in the hands of commercial (private) banks. CBDC could provide an alternative that eliminates the need for much of this intermediation, its costs and fees. Less radically, a CBDC might introduce diversity and competition for commercial banks as they cenl ei. The Bank f England, f eamle, mmaie hei ima miain in he figure below. Figure 1 Source: Bank of England (2023a: 24) In any case, central banks currently face a conundrum. In the present system cash represents a visible marker of money. It reminds the public that the state stands behind the value of money. P anhe a, cah ide an iman mblic anch hich hel mainain in money. 14 In an increasingly cashless society with evermore diverse digital payment options this role is under threat. 15 While the Bank of England, for example, is clear that it does not envision 13 For example, according to the Ceeney report on the future of cash, maintaining the cash infrastructure (ATM and cash sorting centres etc.) in the UK costs around £5 billion per year (Ceeney 2019:1213, 64). 14 On money see Braun (2016). In general see Pratten (2017); Colledge, Morgan and Tench (2014); Morgan and Sheehan (2015). 15 In the UK more than 50% of payments were made using cash in 2010, by 2020 this had reduced to 17% and according to UK Finance it was 14% in 2022. See, for example, https://www.ft.com/content/6f60def7-9458-40d4-b3a6- 50575ba1e080
Economic Thought 11.2: 3-24, 2023 7 CBDC as a substitute for cash in the near future, the development of a CBDC is, at least in part, an acknowledgement of the direction of travel technology of money seems to be taking. If a suitable delivery system can be developed it also provides an important opportunity to provide money to unbanked and/or cash dependent people. This could both enhance financial inclusion and, given the potential of CBDC, lead to the replacement of cash with a digital variant less conducive to tax evasion, fraud and criminality. Wee menined and in a cmle finance em i n an abac cnce. Much depends on projection of competence, credibility and authority. In the modern world we are increasingly aware of limits on these. CBDC provides multiple opportunities for a central bank to improve its control, respond to problems and forestall crises. A successful CBDC could reduce the attraction of cryptocurrencies as means of payment (though not as speculative assets) and thus prevent the future (further) loss of control of money supply that these threaten. CBDC might also significantly enhance monetary policy. A widely adopted and used CBDC could provide a new means to directly and more or less immediately increase or decrease the money supply, target specific economic sectors or socio-economic groups and influence commercial interest rates, as well as payments systems activity. Again, none of this need depend on the cooperation of commercial banks and could provide an alternative to dependence on commercial banks. Even if used conservatively CBDC could provide a mechanism to encourage compliance from commercial banks. Issues going forward For commercial banks there are reasons to be concerned regarding disruption to the status quo. N nl migh he le me in f hei bine becae f CBDC, diinemediain may also cause balance sheet shrinkage and increase the funding costs associated with bank loans. The problem for commercial banks is more obvious in the case of cryptocurrencies than it is in the case of CBDC but the two are similar: a payment from a bank account transfers to a digital wallet and so the commercial bank loses this sum from a customer account but also an equivalent sum from its reserve account at the central bank. 16 Since people will still have a need to borrow and the commercial bank still wants to lend (as a profit making entity), insofar as it maintains its lending, the bank will need to acquire more reserves (at some cost to itself) to maintain the liquidity of its reserves and offset the drain on its reserves as more customers move money out of their accounts. The Bank of England provides a useful summary in the figure below (albeit their assumptions concerning impact are highly debatable). 16 Visit: https://www.ppesydney.net/the-future-of-money-and-bankings-crypto-reserve-drain-problem/
Economic Thought 11.2: 3-24, 2023 8 Figure 2 Source: Bank of England (2023a: 39) CBDC, meanwhile, adds an additional complexity that is unlikely to be relevant in the case of cryptocurrencies. If there is loss of trust in a commercial bank, unless prevented somehow, customers will have the capacity to transfer into CBDC at the stroke of a key from which an accelerated digital run on one or several commercial banks could occur. This possibility, of course, invokes the spectre of financial crisis. From the point of view of the central bank, however, CBDC could also provide a way to directly inject money into the economy with, in fact, the opposite effect to that just stated. Such an injection might forestall an incipient crisis focused on the commercial banks, preventing an initial disruption or panic becoming a more widespread economically damaging financial crisis, while also allowing the central bank to guarantee the integrity of payments in the economy. To reiterate, this could be used to pre-empt bank runs, but equally it could provide a mechanism that allows commercial banks to go bust and be wound down safely. Older readers will recall the palpable fear during the financial crisis that the payments
Economic Thought 11.2: 3-24, 2023 9 system would grind to a halt. In principle, CBDC provides the central bank with a direct lever to forestall this problem in times of emergency. In the case of the UK, however, so far, and despite stating it has no intention of introducing a CBDC in a format that artificially preserves the status quo and impedes competition, the Bank of England seems to favour a form of CBDC that operates via other platforms, limits holdings, coexists with commercial banks as is and pays no interest. It is, as such, a conservatively posed future alternative, at least to begin with. 17 The issue of power There is a lot more we could say here but it should be clear that a CBDC allows a central bank to ake n ne e (in he caaci d ene), ake back e (in em f ce be he deciie ac in a em ene), b al eha acie eceie e (in he h ge decide ene). Thee la deend e mch n eecie, accnabili and an age old debate regarding the legitimate role of the state and the scope for democratisation of its institutions. With this in mind, there is a final feature of the technology that underpins new forms of digital money, including, in principle, CBDC that warrants a mention, and that is programmability. We have become used to thinking of money as a universal and anonymous means of getting what we want, but a programmable money can be both time limited and purposed. As such, a CBDC could become a means to support local economic activity, finance investment, ensure automatic payment of tax at point of transaction, achieve social welfare goals and enforce carbon budgets. Depending on your point of view this is enlightened public policy in action or sinister social engineering. In any case, programmable money allows for progressive policy agendas, but equally for new forms of rationing and discrimination. 18 Independence? The notion that CBDC may affect the power of central banks to act in the world has wider context. A i imle indeendence f cenal bank acknowledgement of the benefits of separation from the government of the day in terms of policy decisions and powers has been a noted trend over the last thirty to forty years. The Bank of England, for example, was founded in 1694, nationalised in 1946 and given formal independence in May 1997 and this was followed by the 17 Note, at time of writing it still was not clear that a CBDC would definitely run on distributed ledger technology. However the February technical paper notes the system anticipates a need to deal with 30,000 transactions per second but explores possibilities up to 100,000 per second (Bank of England 2023b: 39). See appended figure for summary of system possibilities. 18 Note, one might wonder whether programmable money remains money rather than some other thing. But it is, of course, named gammable money, ld be ied b a ecgnied ahi h and behind i and can eadil be conceived as changing the nature of money rather than misrepresenting itself as money. There have in any case been man alenaie mne ih liidi limiain. Sill, gammable mne eem me like cedi a he cman store than money as we have come to think of it.
Economic Thought 11.2: 3-24, 2023 10 Bank of England Act 1998, which then established its reformulated constitution, governance, statutory powers and responsibilities. 19 Central banks are typically responsible for the maintenance of monetary and financial stability and are organised according to a combination of powers and mandates. These typically fc m iibl n ice abili ia a age ae f inflain (hich ma be a fmal infmal target) but also, with notable variations by country, responsibilities extend to maintaining employment, liaising with the Treasury to achieve other macroeconomic goals (to ensure that monetary policy and fiscal policy do not conflict), as well as monitoring and intervention for microprudential (focused on individual financial organizations) and macro-prudential (focused on emergent systemic dynamics and trends) purposes. As post-Keynesians and especially critical macro-finance proponents argue, there has been a notable shift in the powers (official and unofficial) and areas of responsibility of central banks over the years since the Global Financial Crisis central banks are lenders of last resort but also in some ways guarantors and market makers across an ever more complex financial system populated by a proliferation of financial instruments and tradeable assets and by multiple actors in numerous jurisdictions. 20 The ineenin b he Bank f England in ene blem caed and b Liabili-Driven- Inemen fnd ide a high file ecen eamle. 21 In any case, there has, over the years been a great deal of debate regarding what independence means. One important line of critique has been that independence has resulted in a echncaic inlain f cenal bank fm demcaic accnabili and that the form and concerns of independence have in effect embedded the vested interests of commercial banks and finance so independence is not neutrality (in theory or practice), it is tacitly politicised. As the above should indicate independence is a conditional term given the evolving context central banks find themselves in. 22 This extends also to relations with the government of the day. In some 19 Visit: https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/twenty-years-of-boe-independence-the- evolution-of-monetary-policy.pdf And: https://www.legislation.gov.uk/ukpga/1998/11/contents Note, the Bank was privately owned but effectively a public-private partnership until nationalisation. It was not until the Bank Charter Act of 1844 that the Bank was given exclusive rights to issue banknotes (though not in Scotland). The Act also formalised a gold standard, establishing a ratio between gold reserves held by the Bank and the currency it could issue. The Bank still operates as a quasi-commercial entity and is self-financing. See: https://www.mmu.ac.uk/sites/default/files/2021-11/Understanding the Bank of England.pdf One might also draw attention here to the Debt Management Office (DMO), established in 1998 and to which responsibility for issuance of government debt (gilts) was transferred from the Bank of England. As of early 2024, the DMO had issued more than £3 trillion. Visit: https://www.dmo.gov.uk/ 20 See Dutta et al. (2020); Gabor (2020) and visit: https://criticalfinance.org/. And also compare Morgan (2009) and Morgan (2022b). 21 For a clear account see the letter from Jon Cunliffe to the Treasury Select Committee: https://www.bankofengland.co.uk/-/media/boe/files/letter/2022/october/letter-from-jon-cunliffe-ldi-18-october-2022.pdf 22 For example, in March 2023 (25 years since the 1998 Act) the House of Lords Economic Affairs Committee launched an ini (iniing eidence bmiin) iled The Bank f England: h i indeendence king? See latter and visit:
Economic Thought 11.2: 3-24, 2023 17 According to Rescher, Western philosophy has mainly focused on things or substance and because of this has found it difficult to reconcile itself to the existence of process and this has often resulted in dichotomy (being-becoming etc.), as the table below indicates: Table 1 The classic metaphysical distinction A contrastie schedule of ontological categories Substance philosophy Process philosophy Aile caegie Process categories discrete individuality interactive relatedness substance process separateness wholeness (totality) quantity quantitative features condition (fixity of nature) activity (selfdevelopment) quality topicality (thematic nature) uniformity of nature innovation/novelty relation relationships (interconnections) unity of being (individualised specificity) unity of law (functional typology) place/space and time state spatiotemporal location (inner)condition/ structure, order descriptive fixity productive energy, drive etc. action and affection force, energy, change, power classificatory stability fluidity and evanescence possession accompaniments passivity (being acted upon) activity (agency) Source: Adapted from Rescher 1996: pp. 35 and 36. For Rescher he ce meahician ha n ih (and n need) f diening ih he hing concept hing ae me inciel and adeael nded a inaniain f ceain sorts of process or process-cmlee (Reche 1996: 33). There is a great deal more to this than we have the space to discuss here, but a key aspect f Reche agmen i ha mch f he dichm debae egading bance and ce is built around misunderstanding. Every substantive thing is in process and is part of processes at some scale of time the universe is moving towards heat death and perhaps renewal, the eah lihhee i in cninal min, landmae hif, mnain ie and fall, cean and seas swell and shrink, species evolve and become extinct, plants go through life cycles, as do animals, as do we, societies and ways of doing things are conceived, lived and altered, civilizations come and go etc.
Economic Thought 11.2: 3-24, 2023 18 A he iniial e fm Reche al indicae, ce de n mean neceail significant change in one thing or many things, change is simply an observable common manifestation of the condition of things in process. Moreover, process does not mean any particular described quality of change (degeneration, decay etc.) and nor is it restricted to cases lacking cleal defined bance, ch a a m a i ( can a bi f m in a ja and i emain m n can ne a i in jail, nl ie), ince hi i cnflae ce as a state with the absence of definitive substance in the particular case. Rather, for our purposes, everything is in process, while remaining some combination of matter and energy with complex ganied e and enial (me f hich ae nel emegen i.e. deenden n he organisation of parts). 29 Continuity, endurance (perdurance) and change are ultimately all in some ene ceal and in an cae hee i n ch hing a an inanane ce (Reche 1996). One might also point out then, that process is not only pervasive, but by extension temporality is intertwined with process. The above may seem like abstract philosophical points and thus a digression, but it is worth noting that they bear directly on how we view both central banks and money. There is a longstanding ontological/methodological critique of mainstream economics that suggests that it end heie and mdel in em f (imlicil) cled em and hi amn he claim that the mainstream deals poorly with change and uncertainty and by extension process (for example, Lawson 2015). As Sheila Dow notes, modern central banking is far more theory-bound than it used to be and thus more a mainstream creature, though there are definite limits to this (Dow 2017). As some readers may be aware, following the abject failure of its inflation forecasting, there is currently a review of the way the Bank of England goes about constructing and using forecasting. 30 Me ecificall, in a Ma 2023 meeing, he Bank f England C f Diec cmmiined a eie in he Bank fecaing and A a f ha, he eie hld consider the appropriate approach to forecasting and analysis in support of decision-making and cmmnicain in ime f high nceain fm big hck and cal change. 31 It was announced on 28th Jl 2023 ha Ben Benanke, jin inne f he The Seige Rikbank Pie in Ecnmic Science in Mem f Alfed Nbel in 2022 and fme Chaiman of the Federal Reserve (2006-2014) ld lead he eie, ed b he Bank Indeenden Evaluatin Office (IEO). Hee, in Nembe 2023 a He f Ld Ecnmic Affai Committee (EAC) inquiry expressed concern that more would be required to overhaul the way the Bank conducts itself and this extends to concern regarding its ever-expanding remit. 32 Some 29 Note, even the things physicists have conceived as fundamental at one time or another in state of the art theory had to cme in being and deend n he ganiain hich i ininic ha ae f being. Field, f ce, and anm states adds another facet to this, which arguably is processual. 30 For previous critique of the econometrics and especially inflation targeting models see, for example, Nasir and Morgan (2018; 2023a, 2023b). 31 Quote from Bank of England terms of reference press release: https://www.bankofengland.co.uk/- /media/boe/files/news/2023/bernanke-review-tor.pdf 32 Visit: https://www.ft.com/content/3c6cc2ff-e00b-4725-8454-2a18b042aeea
Economic Thought 11.2: 3-24, 2023 19 readers may also be aware that a previous EAC inquiry resulted in a degree of scepticism regarding CBDC hich a efeed a a lin in each f a blem. 33 In any case, no review or reconsideration of the role of a central bank can be adequate unless it is able to make sense of context and make sense of process a world in motion and in the case of central banks this is quintessentially a matter of power, position and interests. Conclusion There are numerous everyday issues we might bring to the fore here. The Bank of England, for example, is supposed to be self-financing but not profit-making. Interest bearing CBDC would thus be something of a problem. However, the underlying issues are who has the power to decide what form of organization a central bank is, followed by what decisions are made regarding what a central bank becomes, since these two create the framework and foci the central bank pursues. A CBDC, moreover, is an opportunity to revisit debates, and as a corollary invites further discussion regarding the nature and role of theory of banking, finance and money. A post Keynesian, for example, looks at these quite differently than a mainstream economist. Finally, it is worth reminding ourselves that one of the original justifications for cryptocurrency a a dee ceicim egading he mie f bh cain (he bank) and he ae (infa a he ae i caed b financial inee). Fr a libertarian, the spectre of a central bank asserting greater control over money removes the main attraction that the technology originally offered (peer-to-peer decentralized activity). For more mainstream voices, a poorly constrained CBDC may undermine the independence of the Bank of England and provide a new set of tools that encourage greater intervention on behalf of the government of the day. 34 From still another perspective, CBDC offers scope to democratise finance and provide a public alternative that breaks the power of the banks. From this last point of view, the main barrier to enlightened use of CBDC is a narrow central bank technocracy, hampered by insufficient imagination and unwilling to grasp the potentials CBDC offers. There is, therefore, much to discuss and great need for deliberation. 33 For discussion of this see EAC (2022). 34 This also invokes another issue we have not considered and that is the degree to which government fiscal policy is dependent on and constrained by debt issuance. The standard way to think about this (opposed by MMT proponents etc.) is that of the power of bnd igilane. Si Rbe Seeham h a a he ime CEO f he DMO cmmened n he eacin Li T infam mini-bdge f Seembe 2022 Dn kid elf in hinking ha can deel policy in a vacuum without taking the market into account. In a world where we have debt to sell, policy-making cannot be diced fm he eali f he make (Ralh 2024).
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Economic Thought 11.2: 3-24, 2023 23 Wene, R. (2016) A l cen in ecnmic: Thee heie f banking and he cnclie eidence. International Review of Financial Analysis, 46: 361-379. Appendix 1: Bank of England Summation of UK CBDC Format, Context and Potential Acronym key: RTGS, Real-Time Gross Settlement Service; API, application programming interface; PIP, Payment Interface Provider; ESIP, External Service Interface Providers. Source: Bank of England (2023b: 46)
Economic Thought 11.2: 3-24, 2023 24 Appendix 2: Bank for International Settlement taxonomy of money Source: Bech and Garratt (2017: 60) ______________________________ SUGGESTED CITATION: Mgan, Jamie (2023) On CBDC and he Need f Pblic Debae: Plic and he Cnce f Pce, Economic Thought, 11.2, pp. 324. http://www.worldeconomicsassociation.org/files/journals/ economicthought/WEA-ET-11-2-Morgan.pdf