Forget about the cash you have hidden under your mattress. What if money starts losing value like a loaf of bread? This may sound like the plot of a science fiction movie, but a nearly forgotten economic theory called “Freigeld” (Free Money) suggested exactly that. It may seem strange, but this concept has surprising relevance to the future of payments, especially with the rise of CBDCs.
Central bank digital currencies are the buzz of the city, with active research or development in more than 130 countries around the world. A digital form of national fiat currency issued and regulated by central banks promises a faster and more efficient payment system.
Things seem to be moving quickly, even with Swift developing interconnection solutions for cross-border payments, but could we be rushing towards problems? Before jumping into the CBDC future, shouldn’t countries and individuals carefully weigh the potential benefits and risks?
Connecting the money time bomb and CBDC
The brainchild of German economist Silvio Gesell, Freigelt envisioned a currency that would depreciate over time. Think of it like a prepaid gift card with a ticking clock. This “stay fee” keeps the economy flowing by encouraging people to spend. Hoarding cash is impossible because your money will literally lose value.
Gesell’s radical ideas may not be a blueprint, but they provide a thought-provoking lens through which to see the potential (and pitfalls) of digital currencies.
Although far from expiring money, CBDCs give central banks unprecedented control over digital currencies. This may seem like an echo of Freigeld and opens the door to much worse features. In fact, forget the nanny status. They are algorithmic authoritarians who can line their pockets with CBDCs. And just having a “sugar tax” pre-programmed to be automatically deducted from your CBDC balance if you buy sugary sodas might sound like a public health benefit on the surface… well… right? Maybe not.
This seemingly harmless “nudge” opens up a slippery slope. What if that same CBDC system started making automatic deductions for speeding tickets, overdue library fees, or forgetting to floss? The line between benign incentives and intrusive micromanagement is blurring faster than you can say “financial dystopia.”
Personal freedom empowers you to make your own choices, and CBDCs could limit those choices, which raises serious concerns, no matter how well-intentioned. We deserve a financial system that promotes personal responsibility, not one that infantilizes us.
Here are some additional things to consider:
- Privacy risks and changing power dynamics: CBDCs could track every transaction, giving governments (or worse, hackers) a complete picture of spending habits. This means no more privacy for your morning coffee or spontaneous splurge.
- Black Mirror Effect: Did you jaywalk? Access to essential services may be restricted… A future where social credit scores are linked to CBDC balances is certainly a scary one. This is because greater government control over financial operations could centralize power and limit individual freedom.
- Targeted stimulus, targeted closure: CBDC can be used in hyper-targeted stimulus packages. Should we foster certain industries? Citizens can receive CBDC allocated for spending at local businesses in the sector. However, the flip side of this coin is scary because it could lead to a scenario where the government could disable CBDC access during protests. This means that financial tools designed to empower can become tools of control.
- And who controls that value? Central banks are likely to rely on interest rates and money supply controls, but the dynamics may differ from traditional methods, making it important to rethink their values.
It seems rather clear that instead of the “nudge” that CBDCs implement, governments should focus on financial education and encouraging healthy choices.
The debate surrounding CBDCs is just beginning, and the bottom line is that while CBDCs deliver on their promise, they should not come at the expense of our financial freedom and privacy. As a result, individuals must demand a cautious approach that prioritizes individual freedom over algorithmic dominance.
Are we in trouble?
This is not to say that CBDCs are inherently bad. The potential benefits, including faster transactions and financial inclusion, are undeniable. But before diving in headfirst, it’s important to have an honest conversation about the potential pitfalls. CBDC is more than just a new payment system. This represents a paradigm shift in the way governments and institutions interact with our financial lives.
As with many things, the key here seems to be striking a balance. Innovation can thrive with strong safeguards, ensuring CBDCs become tools for progress rather than gateways to a future out of a sci-fi nightmare. This in turn makes transparency and public discourse essential before we become trapped in a digital financial system with unforeseen consequences.
So will CBDC usher in a new era of programmable money, or will it simply replicate the inequalities of the past? Only time will tell, but one thing is certain. The future of payments is about to get interesting.
Forget about the cash you have hidden under your mattress. What if money starts losing value like a loaf of bread? This may sound like the plot of a science fiction movie, but a nearly forgotten economic theory called “Freigeld” (Free Money) suggested exactly that. It may seem strange, but this concept has surprising relevance to the future of payments, especially with the rise of CBDCs.
Central bank digital currencies are the buzz of the city, with active research or development in more than 130 countries around the world. A digital form of national fiat currency issued and regulated by central banks promises a faster and more efficient payment system.
Things seem to be moving quickly, even with Swift developing interconnection solutions for cross-border payments, but could we be rushing towards problems? Before jumping into the CBDC future, shouldn’t countries and individuals carefully weigh the potential benefits and risks?
Connecting the money time bomb and CBDC
The brainchild of German economist Silvio Gesell, Freigelt envisioned a currency that would depreciate over time. Think of it like a prepaid gift card with a ticking clock. This “stay fee” keeps the economy flowing by encouraging people to spend. Hoarding cash is impossible because your money will literally lose value.
Gesell’s radical ideas may not be a blueprint, but they provide a thought-provoking lens through which to see the potential (and pitfalls) of digital currencies.
Although far from expiring money, CBDCs give central banks unprecedented control over digital currencies. This may seem like an echo of Freigeld and opens the door to much worse features. In fact, forget the nanny status. They are algorithmic authoritarians who can line their pockets with CBDCs. And just having a “sugar tax” pre-programmed to be automatically deducted from your CBDC balance if you buy sugary sodas might sound like it would benefit public health on the surface… well… right. Maybe not.
This seemingly harmless “nudge” opens up a slippery slope. What if that same CBDC system started making automatic deductions for speeding tickets, overdue library fees, or forgetting to floss? The line between benign incentives and intrusive micromanagement is blurring faster than you can say “financial dystopia.”
Personal freedom empowers you to make your own choices, and CBDCs could limit those choices, which raises serious concerns, no matter how well-intentioned. We deserve a financial system that promotes personal responsibility, not one that infantilizes us.
Here are some additional things to consider:
- Privacy risks and changing power dynamics: CBDCs could track every transaction, giving governments (or worse, hackers) a complete picture of spending habits. This means no more privacy for your morning coffee or spontaneous splurge.
- Black Mirror Effect: Did you jaywalk? Access to essential services may be restricted… A future where social credit scores are linked to CBDC balances is certainly a scary one. This is because greater government control over financial operations could centralize power and limit individual freedom.
- Targeted stimulus, targeted closure: CBDC can be used in hyper-targeted stimulus packages. Should we foster certain industries? Citizens can receive CBDC allocated for spending at local businesses in the sector. However, the flip side of this coin is scary because it could lead to a scenario where the government could disable CBDC access during protests. This means that financial tools designed to empower can become tools of control.
- And who controls that value? Central banks are likely to rely on interest rates and money supply controls, but the dynamics may differ from traditional methods, making it important to rethink their values.
It seems rather clear that instead of the “nudge” that CBDCs implement, governments should focus on financial education and encouraging healthy choices.
The debate surrounding CBDCs is just beginning, and the bottom line is that while CBDCs deliver on their promise, they should not come at the expense of our financial freedom and privacy. As a result, individuals must demand a cautious approach that prioritizes individual freedom over algorithmic dominance.
Are we in trouble?
This is not to say that CBDCs are inherently bad. The potential benefits, including faster transactions and financial inclusion, are undeniable. But before diving in headfirst, it’s important to have an honest conversation about the potential pitfalls. CBDC is more than just a new payment system. This represents a paradigm shift in the way governments and institutions interact with our financial lives.
As with many things, the key here seems to be striking a balance. Innovation can thrive with strong safeguards, ensuring CBDCs become tools for progress rather than gateways to a future out of a sci-fi nightmare. This in turn makes transparency and public discourse essential before we become trapped in a digital financial system with unforeseen consequences.
So will CBDC usher in a new era of programmable money, or will it simply replicate the inequalities of the past? Only time will tell, but one thing is certain. The future of payments is about to get interesting.