Central Bank Digital Currency (CBDC) could replace cash transactions in coming years, but also has the potential to reshape the process of credit and money creation
A question about figure 9: Where does the bond come from? I understand it is government debt so the treasury added to its liabilities. So essentially the bond is like an overdraft at the CB (which is illegal I guess)?
Of course if so then we are back at a fiscal transfer, from the government to the the private sector just indirectly via the CB.
Thanks. The mechanics are left deliberately vague, but the government can just provide a tradeable asset to the CB to restore capital to positive. Don't think "overdraft" is the right word, there is no government deposits associated, only the transfer of a claim on government.
This is a great piece!
A question about figure 9: Where does the bond come from? I understand it is government debt so the treasury added to its liabilities. So essentially the bond is like an overdraft at the CB (which is illegal I guess)?
Of course if so then we are back at a fiscal transfer, from the government to the the private sector just indirectly via the CB.
Thanks. The mechanics are left deliberately vague, but the government can just provide a tradeable asset to the CB to restore capital to positive. Don't think "overdraft" is the right word, there is no government deposits associated, only the transfer of a claim on government.