What does "disruption" look like in the banking space? Banks want the perception of immovable, confidence, reliable, resilience, etc. It's what gives them the credibility to move big money. They don't want to "move fast and break things". Some may think about digital currencies.
My warning is this: Be careful what you wish for. If we were to switch to a full digital currency, there are significant concerns that money could be allocated like a voucher, where it could be sent and only spent in a certain way. Suddenly the government decides those receiving some kind of social care allowance must spend different parts in different ways, i.e. a minimum of 50% MUST be spent on rent (an extremely enticing proposition in a recession). Perhaps there is a tax for not spending enough, or on the correct thing. Perhaps there is a micro-tax for moving it around. Maybe the micro-tax is dependant on your social credit score. The slippery slope goes on.
The only thing currently stopping this is that you can withdraw your entire wage each month and spend it however you want, without such a tax. The government or banks cannot be certain of precisely how you spend your money when using cash. The very moment cash is gone, such implements can be created and there is nothing you can do about it.
Maybe I am behind the times, but I don't like the sound of "disruption" in the banking industry. That last time I saw "disruption" was in 2008, and many people lost their homes.
Why would "the government" do that? I hate it when people talk about "the government" doing something.
The real mechanics you'd see in your example is that the business elite would begin astroturfing support from the American public, with some nonsense about helping the poor better control their finances. Nobody would believe it, and progressives would be against it. In reality it will be driven by the commercial desire to FORCE people to purchase coca cola or whatever.
SNAP, colloquially foodstamps, can only be used on certain forms of food. Frozen goods are fine, but cannot be prepared hot, even if there is not a charge or it is the exact same food product.
So my local corner grocery is allowed to sell anyone frozen food, whether they pay with SNAP or cash. But they also have a microwave that anyone can use to heat up purchased food, except for SNAP buyers. It is interpreted as unlawful for a SNAP recipient to use that microwave to heat up their subsidized food at the place that they bought it, so there is a government policy, enforced at the point of sale, severely restricting the use of SNAP.
This was actually a fascinating research topic for me, because I can only agree that it seems arguably hostile or at least silly and backwards.
I found that the provision in question. The part of the bill defining "food" as "any food except hot food" was actually from the rewriting in 1977, where it was added to (and this comes from a single second hand source) supposedly ensure fair competition with fast-food joints that can't accept foodstamps. To me, nothing indicates that the intention of the government officials was to restrict the choices of recipients, but rather to ensure fair competition. One member, along with a few (maybe two) supporters even bring up the idea of restricting choice based on "nutritional value", but the others tear it down calling it wrongheaded and administratively impossible (my words).
This is interesting because what we don't see is a majority of the house that is OK with restricting choice for the subjects own good, or for some notion of health. Instead we actually see members very hostile to the idea of restricting choice based on "health". The path for such members to accept a restriction anyway is by putting it against something they value more, the fair competition of the free market.
The people who are restricted by the "hot food" limitation is not the recipients of snap, it is the store owners, who are supposed to be banned from competing with KFC.
The house has actually introduced legislation to remove the "hot food" part. It's been referred to a subcommittee of the Agriculture committee, but I can't find any hint that they've even discussed it. I've actually struggled to find any evidence that the subcommittee has discussed anything.
I agree with you that it seems likely that some legislators would fight to keep it with some bad arguments, but right now they haven't even had to make those bad arguments because nobody is pushing it.
The conclusion I can draw is that nobody cares about it. It was included for free market reasons and kept around because nobody gave a shit.
Sure, but it also prevents poor people without access to a kitchen from having hot food.
Do we even know that people reselling hot food would be more of a problem than people reselling cold food? Wouldn't it just be easier to review the transaction data and detect patterns of actual fraud? Is the cost of doing any of this actually lower than the cost of fraud?
Requiring people who get government money for food to not use it on prepared food is a good thing I would think. Technicalities like the one you presented do seem ridiculous on their own however.
If you're so poor that you can't afford food, what are the chances that you have access, time, and ability to turn ingredients into meals every time you need to eat.
I'm totally fine with a person on SNAP using it to get a hot or prepared meal if that's what they need. We have already decided to allocate the resource to them for the purpose of buying food, why does it matter if they spend it on a premade sandwich instead of a frozen burrito.
You can think of it in terms of political parties, if it helps.
"The Democrats would never do that" then Republicans pass the bill, and the Democrats protest, but run with it and don't abolish it when back in power… Swap parties as required for your flavour of government.
The United States Congress, and the executive branch, they never do anything, to the point where you find it absurd to suggest that they would? Everything is done by the ”business elite”?
That would indeed be a bad point, and basically a conspiracy theory. I do not believe that.
My point is that "The Government" is not a singular hivemind, and can't be meaningfully analyzed as such. There are people, those people operate as part of The Government, but any analysis cannot be separated from the person or their affiliations.
Saying "The Government did X" only leads to the misunderstanding that "X" wouldn't have happened without The Government. In reality, "The Government" was the hammer that person "A" used to do "X". Had he not had that hammer, he could have used another.
These incentives already exist. The tax code has been manipulated to encourage or discourage behavior since at least WW2. A digital currency makes a lot of these incentives easier to create and easier to enforce, but they wouldn't be new.
The Federal Reserve is a bank. And we already have a relevant historical example to examine, postal savings accounts. I'm not aware of any special power that the executive branch had to bypass the judicial branch where those accounts were concerned, versus privately held accounts. Plus, the Post Office was directly answerable to the President then, while the Federal Reserve has never directly answered to the President. This is an unfounded fear and doesn't reflect anything intrinsic to a (central bank-administered) digital currency.
Not for consumers and non-bank businesses it isn't. You don't have an account at the fed. You have an account at plain old commercial bank. Someone at the plain old commercial bank can freeze your money, right now. You'll have to sue, go to court, win, just to get access to your money.
If the fed becomes the place you have an account, they can do what the commercial bank currently can do.
The difference is incentives - why do it? Commercial banks have no incentive, and in fact have the incentive to push back when asked.
As for the president - sure - generally speaking the fed is independent. But they have significant regulatory and supervisory roles all by themselves, and are part of the administration of the government even if they aren't "part of the administration" as the term is usually used in the US.
Commercial banks answer to the government, to the central bank, to their shareholders, and to their non-governmental regulators (payment networks, insurers, etc). This has created plenty of examples of "debanking" of businesses and individuals who bring with them excessive risk due to their history of attracting controversy and/or legal trouble.
Whereas, the government can of course confiscate assets already, including through commercial banks, but generally cannot refuse service. If a CBDC becomes the norm, an account held at the central bank becomes a right, and thus refusal of service becomes a punitive measure subject to statutory and constitutional limits and scrutiny. This is arguably better than the commercial bank situation, where "business risk" is (generally) a valid reason to refuse to provide service.
The incentives/goals are the issue. By and large, commercial banks want to do business with you. They are subject to constraints, but they want to do it. They can/do also push back, they aren't just doing whatever the government says.
Cash is already practically gone in a lot of countries. I don't know anyone who uses it and don't even know how the bills look nowadays. Must have been at least 10 years since I even touched physical cash.
My main issue with cash is that I hate receiving coins. If it weren't for coins, I would try to do occasional transactions in cash, just to support something that is truly anonymous.
It only remains if people who have choices actually prioritize using cash.
I get strange looks from folks now since I try to use cash whenever possible to do so.
If I’m the only one taking the effort to do this, everyone will eventually lose this option. It’s incredibly frustrating to watch people actively work to not understand this point.
All so they can make 2% in credit card points, pretend they are at some materially increased risk of crime, and the convenience argument. None of which are very compelling compared to “a third party now mediates what spending you are allowed to partake in”. Works until it doesn’t.
It might be bad but it isn't self evident. There are several contexts where it would be useful to have. To keep it generic, people can be forced to do all kinds of things. A lot of people cant manage their money. Putting the exact amount in a rent account would be better and cheaper than being put under some kind of supervision.
Rationing everything might seem like a terrible idea right now but the good times might end any moment.
There is also the some what sinister angle where adding new game mechanics to an old rather boring game could make gameplay more interesting.
Favoring a flat playing field would require we ignore how much money some people really have. (and how they got it)
For some reason it is normal for vouchers to expire. We might want you to buy vegetables but if you chose not to you don't have to. There is no need for anyone to grow vegetable rich.
The other thing stopping it is the law and the fact that the US dollar is the global reserve currency and that would be a pretty great way to ruin that
We’re not talking about a digital dollar so much as a government mandated spending program for all citizens or perhaps retail account owning individuals.
> we’re very deep down slippery slope hypotheticals by this point
Not really. We're talking about how the U.S. government treats local deposits at American banks. That's not really relevant to the dollar's international role.
I mean, the government in the US already loves dictating what poor people can spend their money on when they get assistance.
Look at WIC for example, even in progressive California, they literally force you to buy only white eggs: https://docs.wic.ca.gov/Content/Documents/ShoppingGuide-EN-A... . You also can’t buy any cheese with taste, because you are poor and you don’t deserve good food.
My warning is this: Be careful what you wish for. If we were to switch to a full digital currency, there are significant concerns that money could be allocated like a voucher, where it could be sent and only spent in a certain way. Suddenly the government decides those receiving some kind of social care allowance must spend different parts in different ways, i.e. a minimum of 50% MUST be spent on rent (an extremely enticing proposition in a recession). Perhaps there is a tax for not spending enough, or on the correct thing. Perhaps there is a micro-tax for moving it around. Maybe the micro-tax is dependant on your social credit score. The slippery slope goes on.
The only thing currently stopping this is that you can withdraw your entire wage each month and spend it however you want, without such a tax. The government or banks cannot be certain of precisely how you spend your money when using cash. The very moment cash is gone, such implements can be created and there is nothing you can do about it.
Maybe I am behind the times, but I don't like the sound of "disruption" in the banking industry. That last time I saw "disruption" was in 2008, and many people lost their homes.