The Fedcoin is Coming, Part 2

In Part One, we said that a Fedcoin is coming. The Fed will have no choice but to issue its own digital currency. But not because of the propaganda that we’re competing against China, or including the unbankables. If they issue a Fedcoin (which is not certain right now), it will be because they are [...]

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6 replies
  1. Marc says:

    Don’t forget the forever ballooning “Zombie” social entitlements that are eating away at the dollar. The Fedcoin could easily pay an unlimited amount of benefits.

  2. Chris55 says:

    Good points, but did you know that the current amount of dollars printed (at least virtually, i.e. monetized, M2) cover just about 25% of the dollars owed, not printed/monetized? Sooner or later that missing 75% will need to be printed, in other words, each recent dollar is worth just about a fourth of it. Once that 75% (and counting) will be printed (monetized), it will flood the streets and be swept away as worthless litter.

    • Gregory says:

      Chris, M2 is only obliged to ‘cover’ itself, so a 4:1 leverage into other forms of credit is not surprising or even alarming. In QTM it only implies that velocity of M2 is around 4. However, QTM is a poor model of how moneyness actually emerges in economies.

  3. Gregory says:

    If the federal reserve system offers such a medium of exchange that stores decaying value (which it arguably already does) you are saying that it must function not as a ‘coin’ (i.e. a unit of account) but as a debt with its own interest rate to be paid. Conversely, should rates become positive and grow, we would expect it to pay us ‘stimulus’ (i.e. positive interest).
    1) That makes the name ‘FedCoin’ misleading.
    2) It conflates welfare with return on savings, in a further confusion of real economic action.
    3) It leaves real economy debt to be denominated in the ‘dollar’ units held in these deposit accounts.
    4) ‘Dollars’ then become a fully arbitrary measure under total central planning control,
    finally free of the last real economic force: hoarding..
    In short this is an ideal design for statists to use to subvert all economic calculation. So I suspect you are correct in forecasting that is coming… They will have extinguished the rentier AND the hoarders (HODLers in modern argot).

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