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Will The Fed Usher In A CBDC? by taskmaster4450le

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@taskmaster4450le
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Will The Fed Usher In A CBDC?
This is something that people are most interested in.

What will **the Fed** do?  Will it recommend that we move towards a "digital Dollar" or will they scrap the idea?

In this article, we will delve into what possibly could be the thinking and how this could be structured.

<center>![image.png](https://images.hive.blog/DQmXNR67JYRUVZZBJLAHXKcvJMxCWjmgnuqS2P3Xf3BqTjh/image.png)
[Source](https://cdn.vox-cdn.com/thumbor/NCkXY4MpEb1FdCl5iDtO7ciA3SE=/0x0:6660x4440/1200x675/filters:focal(2798x1688:3862x2752)/cdn.vox-cdn.com/uploads/chorus_image/image/66668240/GettyImages_1209192403.0.jpg)</center>

### The Fed's Limitations

I know this is completely foreign to some but we need to deal in reality here.  The Fed CANNOT create legal tender.  This means the Fed has nothing (as in zero) to do with the creation of US Dollars.  It is limited in what they can do.  This dates back to the original **Federal Reserve Act of 1913** and was further enhanced by the Banking Act of 1933.

What this means is that any **Central Bank Digital Currency** the Fed issues can ONLY apply to the Fed's "customers".  That means the ones who can use it are member banks.

Hence, all the worry about the "FedCoin" is misguided under existing law.  The Federal Reserve cannot interact with US citizens.  If anyone does not believe that, try to find someone with a bank account at the Fed.

The US population has to go through the **commercial banking system**.  That means any FedCoin can only apply to those entities.  Under these circumstances, a digital currency might make a great deal of sense.  We know settlements, especially internationally, could use some help.  Does this mean a token of this nature is the only answer?  Not at all. 

In fact, it might be wiser to take the existing payment system and upgrade the technology.  This is being done domestically although internationally is still lagging a bit.

From this perspective, it is not likely Powell goes for one but he could see the value in it.  

### PoliticianCoin

Of course, the Federal Reserve is not the only one involved in this.  We also have members of **Congress**.  Right now, we await confirmation of Powell by the Senate.  Once he gets that, he can take a more aggressive approach with the political nitwits on Capitol Hill.

Make no mistake about it, Powell is a banker.  He is not going to do anything to destroy the commercial banking system.  The political hacks in Congress, that is another story.

We can presume those senseless fools are drooling to get their hands on a CBDC.  There was already a proposal in the past to include digital wallets in one of the bills.  It was scrapped, probably due to the fact it is illegal.  Nevertheless, things can be changed.

Congress is within their rights to alter the law to allow **the Fed's liability to become legal tender**.  This would pave the way for the Fed to create a CBDC that is used by the population while being controlled by Congress.  If they wanted to implement a spending project, they simply have the Fed create a bond that goes nowhere, put the digital dollars in the Treasury account and, presto, instant money.  Ironic, this is how many mistakenly believe the USD is created now.

The challenge here is we would be giving **monetary policy** to the same nitwits who screwed up fiscal policy over the last few decades.  Obviously politicians are clueless about this other than buying votes and asserting their misguided ideologies.

Want $2 trillion for military or green spending, simply print it up and send it out.

Here is where we would see the fears of the **hyper-inflationists** coming into being. Of course, before we got that, global markets would become unstable, probably in a matter of days.  The markets would see the Fed was truly powerless to stop what was going on (which they are already just most don't realize it).

This is something that Powell is likely to fight.  It is unlikely that he would ever agree to a move like this on his watch.  He would then be the one who saw things sink on his watch.

Naturally, with the political environment that many believe is just simply brewed out of tyranny, it is not over-the-top to believe that Congress will push for this.  It will be interesting to see who wins this tug-o-war if it is to take place.

My guess is Powell is going to resist a change in the law but he cannot do much about it.  On the other hand, once confirmed Powell can push back and there is little Congress (or the President) can do.  If Powell gets the nod, he is there until his term runs out.

Hang on tight.  The next few months will be interesting.

___
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vote details (218)
@cybercrypt0
Every Country is going to create their own digital currency. By hook or by crook.
I think the Fed will move towards Digital Dollar, but Not now it will take long time.
Nice Article 馃挴馃挴
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@harryjoe5432
Wow, in where I live they say things this way **"POWER PASS POWER"**, but though some guys will not leave without putting up a fight, will see how things roll over at the end. We just have to keep up with what happens like movie series 馃槑
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@jfang003
$0.42
I didn't realize the Fed had some problems implementing the CBDC as it would only apply to the customers of the Fed (banks). I can only see things going downhill if they made the Fed's liabilities legal tender. By liabilities, do you mean just the debt or is it just the treasuries/bonds being kept locked with the Fed?

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@shortsegments
Me too.

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@taskmaster4450le
The Treasuries are assets on the Fed's books.  Where the liability comes in is the reserve they "print" which is swapped for the Treasuries and is on the balance sheet of the depositing bank.  That is a liability to the Fed because they have to unwind it at some point.

It is no different than a cash deposit is a liability to a commercial bank since they owe the individual the money.

That is why what the Fed prints is not legal tender.

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@mba2020
This is like being on the greatest roller coaster ever built. 
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@shortsegments
>I didn't realize the Fed had some problems implementing the CBDC as it would only apply to the customers of the Fed (banks).

I was surprised by this point. I knew that banks were the receptiveness largess in the way of cheap money, but didn鈥檛 know the Fed was legally limited to dealing with banks. It makes sense, and further illustrates how the banking system benefits banks predominantly over citizens. 
Thanks
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