The way we think about money is as a global ledger. However, the reality is a lot more complicated if you look at what goes on under the hood of those "rapid digital transfers".
The money in your bank account exists only as a liability of the bank. It is just a number in the bank's database. And each bank has their own database. So transferring money from bank A to bank B means that bank B must agree to take on the liability, in exchange for something else.
Most of the time, the illusion of a global ledger is maintained, but it can break down when the system is under stress (e.g. financial crisis of 2008). Introducing a CBDC would fix this, and would make money work the way we already think it works.
Sure, but the "commercial bank money" layer is a feature rather than a bug of the system from the point of view of central bank and commercial banks alike (investment costs and risks are reduced by readily available credit at a predictable price, and the broad money supply is elastic in response to demand) and it makes no difference at all to those on either side of the transfer.
If you worry about the stability of interbank lending and solvency of banks, you resolve that with legal requirements around lending and reserves, not introducing a new optional form of m0
> If you worry about the stability of interbank lending and solvency of banks, you resolve that with legal requirements around lending and reserves, not introducing a new optional form of m0
Scenario 5 in this whitepaper hints that the ECB is considering a CBDC for this reason nonetheless. (Some other reasons are also given in the other scenarios.) They also talk about how a CBDC would be competition for commercial bank money, so the consequences indeed do need to be carefully considered.
Yes, this is how money works and is created today through fractional reserve lending. This has the tremendous advantage of being able to finance economic growth on credit, with a corresponding inflation risk that needs to be managed. That's a feature not a bug.
The money in your bank account exists only as a liability of the bank. It is just a number in the bank's database. And each bank has their own database. So transferring money from bank A to bank B means that bank B must agree to take on the liability, in exchange for something else.
Most of the time, the illusion of a global ledger is maintained, but it can break down when the system is under stress (e.g. financial crisis of 2008). Introducing a CBDC would fix this, and would make money work the way we already think it works.