Video Infoblog: De-dollarization & CBDCs: How digital currencies help countries drop US dollar
Transcript
De-dollarization
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the US dollar has a lot of power in the global economy and this gives the United
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States government significant political power in fact many of the international
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financial institutions we have today were built around the dollar being the
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global Reserve currency and it is true that the dollar is the most popular currency used in international trade and
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investment and is also held by many central banks around the world in their foreign exchange reserves however more
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and more countries around the world are seeking alternatives to the dollar as part of a global movement known as D
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dollarization many countries are doing trade bilateral trade with other countries in their own local currencies
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they're promoting investment in local currencies instead of the dollar they're giving out loans in local currencies
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instead of foreign currencies and even central banks are diversifying their foreign exchange Reserves and holding
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other currencies and other assets this financial diversification is part of the
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increasingly multi-polar world we live in it's not only multi-polar politically
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but also economically and in fact these developments go hand inand because it is largely Regional blocks that are
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creating these new institutions so for instance the most well-known example would be bricks founded by Brazil Russia
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India China and South Africa bricks or bricks Plus is discussing the use of
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local currencies in bilateral trade between members the brics new development bank is giving out loans and
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other currencies and further down the road in the future there are discussions of potentially creating a new Reserve
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currency to challenge the dollar aan the association of Southeast Asian Nations
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is going through a similar process creating new Financial mechanisms for trade in local currencies they're also
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creating new inbank messaging systems for the region so the banks in the different countries in Southeast Asia
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can be connected and once again this is part of them trying to diversify their financial architecture so they're not so
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heavily dependent on the dollar and on the western dominated financial institutions especially at a time when
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the United States and the European Union are imposing more and more sanctions on countries All Around the World in Latin
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America we see a similar process with institutions like unasur that are discussed ing creating potentially a new
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currency for the region or also promoting the use of their local currencies in bilateral trade now this
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process is very slow and gradual people who claim the dollar is going to become
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toilet paper and lose all its value overnight or next week they're being very hyperbolic but it is a process that
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is without a doubt happening it's happening right now it's not just hypothetical and equally absurd are the
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people on the other side who claim there is no dollarization and the dollar is infinitely powerful and can never be
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challenged it's funny actually because it's common to hear Financial analysts in the United States and US politicians
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claim that the dollar will always be king and yet we've seen for instance the US Congress has held a special session
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specifically devoted to discussing dollarization and the threat that it
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could pose to the hegemony of the US currency I actually did a separate video
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about the Congressional hearing on dollarization I will link to that in the description below we've also seen
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reports from very mainstream financial institutions like the international monetary fund the IMF which are
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dominated politically by the United States which is the only country with veto power in the IMF but they have
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acknowledged that dollarization is happening again it's gradual it's slow
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but it is absolutely happening in early 2022 the IM IMF published a working
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paper titled the stealth erosion of dollar dominance in which they acknowledged that the share of the US
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dollar in the foreign exchange reserves held by central banks all around the world has been declining in the past two
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decades in 2000 the US dollar made up more than 70% of the foreign exchange
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reserves in central banks around the world and as of 2021 that figure had fallen to just 59 %
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and it continues to decline in fact the IMF claimed this was a stealth erosion
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and maybe it was in the last 20 years but with the proxy war in Ukraine and
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the Western sanctions on Russia that erosion in dollar dominance is no longer stealthy it's blatant because it's very
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clear what's happening the United States and the European Union seized that is they stole more than $300 billion of
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assets in Russia's Central Bank Bank foreign exchange reserves that were located in foreign Banks and the US also
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seized the foreign exchange reserves of the central banks of Iran of Afghanistan
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of Venezuela and now many countries around the world including countries that have historically been Western
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allies are afraid they could be the next one to have their foreign exchange
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reserves essentially stolen by the Western Powers so they're all trying to diversify the assets that they hold in
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fact some top economists have argued that the dollar share in global foreign exchange reserves is even smaller than
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the IMF estimates Steven Jen a currency expert who was a managing director at
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Morgan Stanley estimated that in 2022 the US dollar share of global
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reserves fell down to 47% this is the first time it has been
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under half in many decades this reflects the fact that many countries are seeking
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alternatives to the US hegemonic currency and today I'm going to be looking at a very unique New Way That
Central bank digital currencies (CBDCs)
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central banks and countries around the world are trying to dollarize this is a topic that is very misunderstood and
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today I'm going to explain why it's an interesting development I'm going to be talking about Central Bank digital
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currencies also known by the acronym cbdc what is this well basically it's a
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very simp simple idea that average people can have bank accounts at the Central Bank of their country and cut
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out the middleman of the private commercial banks that of course are operating to make a profit now for
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people who don't know the central bank is the institution that controls the money supply of a country it can print
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more money or reduce the money supply by raising interest rates or buying or
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selling securities in markets or it can change the reserve requirements that
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banks that hold their Reserves at the Central Bank are required to hold the most powerful Central Bank in the world
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is the US Federal Reserve and it gets its power from the fact that it controls
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the supply of dollars in the world private Banks actually can make money
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every time they give you a loan they're technically creating money but the Federal Reserve has significantly more
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control over the US dollar and that means that one of its primary goals is
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controlling inflation technically the FED has a so-called dual mandate and in
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according to law the Federal Reserve is supposed to maintain monetary policy in
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order to have price stability and maximum employment in order to reduce unemployment but in reality the Federal
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Reserve especially in the neoliberal era has just been about maintaining price
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stability and trying to keep inflation very low today the way the system works
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is that the central bank is the banker bank so if you own a big Private Bank like Bank of America Goldman Sachs where
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do you Bank well the big private commercial Banks they have to hold their reserves in the central bank and that's
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true for countries around the world well the idea of a cbdc is that average people can simply have bank accounts
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with a digital currency that is held with the central bank it's basically a public Bank this is an idea that is
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being explored by almost every single Central Bank on Earth in almost every single country and there are a variety
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of reasons why one of them is because this is a way for countries to defend
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their monetary sovereignty and to D dollarize it could be a way to encourage
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more trade and more investment in local currencies and not just the dollar in
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fact this is exactly what the IMF acknowledged in a report that was published this September it noted that
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93% of central banks around the world are exploring Central Bank digital
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currencies and 58% report that they are likely to or might possibly issue a
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retail cbdc in the short or medium term when they say retail cbdc they mean for
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average people to use so basically you have your own personal bank account with the central bank and furthermore more
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than 100 countries are exploring retail cbdc issuance and several central banks
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have already launched Pilots or even issued a cbdc what are the impacts of
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this new technology well as the IMF acknowledges one it could actually decrease the profits of big commercial
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for-profit Banks and two it could also help with d dollarization as the IMF
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wrote in its report quote cbdc offer a safe store of value and efficient means
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of payment which can increase competition for deposit funding increase
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Bank share of wholesale funding and lower Bank profits it noted as well in
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dollarized or euroz economies or in economies where the adoption of crypto
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assets is widespread the introduction of cbdcs could also encourage a greater use
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of the local currency partic clearly in lie of other forms of digital money
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denominated in foreign currency or crypto assets that is it can help with
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dollarization and DEC cryptoz in fact there are already some countries that are experimenting with
mBridge system
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the use of cbdcs in order to dollarize their trade with other nations one
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example is called M brdge this is a system that was created using blockchain
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technology by the central Banks of China Hong Kong Thailand and the United Arab
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Emirates of course quick note for people who don't know Hong Kong is part of China it's known as a special
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administrative region but the reason it has a different Central Bank is because Hong Kong was a British colony until
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1997 and is part of the agreement of reintegrating into the People's Republic of China Hong Kong and China agreed to a
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system they know as one country two systems so Hong Kong was able to
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maintain the capitalist system it had under British colonialism and China maintains its Sovereign socialist system
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so they have separate central banks but Hong Kong is politically part of the People's Republic of China and in this
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new project embridge the central banks of Hong Kong and China as well as the
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central banks of Thailand and the UAE are working on using Central Bank
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digital currencies to process crossborder payments in multiple
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currencies so each country can use its local Sovereign currency for trade and
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investment and other opportunities and they can cut out the middleman of the
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private intermediary Banks which are often based in the United States or other Western countries and of course
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they can also cut out the middleman of the US dollar or another currency this
Why China and other countries use CBDCs
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technology is not just something that could happen in the future it is already happening right now this January the
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United Arab Emirates completed its first ever crossborder payment using a central
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bank digital currency and this was in a payment to China that was worth 13.6
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million Yahoo finance noted that this historic transaction was facilitated
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through the mbridge platform which connects the central banks of mainland China Hong Kong the
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UAE and Thailand and there are more than 25 observing members of countries around
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the world and Yahoo finance noted that this platform helps to safeguard
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currency sovereignty so what we're seeing already is that China and its
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trading partners are finding ways to sanctions proof their trade this was
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exactly the conclusion of a Bloomberg article that was published by the Japan times it not that with the mbridge
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blockchain technology China challenges US dollar dominance using Central Bank
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digital currencies in order to facilitate dollarization to challenge
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the hegemony of the US dollar and to prevent Washington from trying to
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sanction China in the same way that the US and the EU have sanctioned Russia and
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tried to prevent Russia from Trading with its trading partners and as I will discuss later Wall Street
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Big private banks in the US are lobbying hard against Central Bank digital
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currencies not only because it will help other countries avoid us sanctions but
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also because it will likely lead to them losing many of their customers because
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private Banks get away with paying most of their customers basically nothing
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something like 0.02% interest on their savings accounts and if there is an option for a retail
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cbdc and people can hold their Savings in the central bank they can get paid
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much higher interest this is an important issue that I will explore later but the point to take away is that
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wealthy oligarchs big Financial capitalists on Wall Street are against this idea they're lobbying hard against
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this idea along with the US state department as Bloomberg the US media
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Outlet put it quote the digital Yuan challenge to US dollar dominance in7
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trillion of daily foreign exchange flows is Dashing ahead thanks to blockchain
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enabled embridge project a report published by the bank for international
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settlements in 2022 acknowledged that this embridge
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strategy of central banks using digital currencies connected through blockchain technology could quote support the use
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of local currencies in international transactions and also quote Safeguard
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currency sovereignty and monetary and financial stability so I think this is a
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significant reason why cbdcs have been really demonized especially in the
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United States and some other Western countries they do offer alternatives for
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countries largely the global South to experiment with using their own local currencies instead of always being so
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dependent on the US dollar and also on the US banking system and on
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International financial institutions like for instance the Swift interbank messaging system which is based in
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Belgium and basically controlled by the US government and Western powers can use
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these institutions to try to basically kick out foreign countries from accessing the international financial
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institutions we saw this for instance with Russia with the proxy war in Ukraine the Western Powers disconnected
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many Russian Banks from the Swift interbank messaging system and the US did the same thing to Venezuela as part
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of the US coup attempt and blockade against Venezuela's leftist government
Surveillance? Or privatized tyranny?
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now to be fair another popular criticism that we hear of the idea of Central Bank
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digital currencies especially from Libertarians in the west is that this can be used for surveillance and that's
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certainly true it could be used for surveillance however we should put a big asterisk here there already is mass
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surveillance in the financial system as it exists the US government doesn't need Central Bank digital currencies to
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monitor people's spending Behavior they already do that the difference now is
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that it is done by private Banks private for-profit corporations that are
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collaborating with the US government and there's a symbiotic relationship with between the government and the private
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for-profit Banks I mean how many Goldman Sachs Executives have gone to the US
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Treasury or to the Federal Reserve again there's a revolving door there it's some of the same people involved on both
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sides and already the US government for instance by imposing sanctions it often
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freezes the private bank accounts that foreigners have in private banks in the
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US and especially now as most people do their Banking online with like a phone
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app or on a website I mean all of that is being monitored clearly and Banks also have regulations and policies like
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anti-money laundering so the surveillance argument I think doesn't really hold up because the really the
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system we have now is just as surveilled that's not the right question the question is should the private corporate
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for-profit Banks be able to have a strangle hold on the banking system or
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should there be a public option that's what the idea of Central Bank digital currency could propose I mean it's
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similar to the idea of a public option for healthcare you don't have to have
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the government healthare you can get Private health care but you're guaranteed the service by the state and
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in that sense cbdcs can be a step a gradual step toward essentially
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nationalizing the banking sector now in some countries like China for instance the banking sector is almost entirely
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nationalized all of the big banks are owned by the state and they're not run to Simply make profits they're run to
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provide financing for development to lift people out of poverty to build
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infrastructure to create productive economic activity that actually helps
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Pro provide goods and services for people in their everyday lives whereas in the United States it's the exact
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opposite the US banking system is entirely dominated and controlled by
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private for-profit Banks like JP Morgan Bank of America Goldman Sachs they have
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trillions of dollars in assets and of course it's the worst of Both Worlds
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because they make all their profits privately they go into the the hands of corporate Executives and shareholders
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and yet whenever they're in trouble they get bailed out by the government so all of the risk is socialized all of the
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costs of bailing them out are socialized and all of the profits are privatized
Why Wall Street opposes CBDCs
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and I think this is actually another significant reason why there is so much demonization of Central Bank digital
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currencies in the US it's because there's a lot of lobbying by the private Banks it could really hurt their bottom
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line the IMF admitted this in its report published this September it noted that
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cbdcs can increase competition for deposit funding which could lead to
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lower Bank profits it's very easy to explain if you have the public option of
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holding your savings in the central bank then the private for-profit banks are
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going to have to find a way to incentivize you to instead hold your savings with them and in order to do
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that they're going to be pressured to raise the interest payments on the deposits that you hold at their bank now
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today the interest rates that the private Banks pay on deposits are
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laughably low in fact the average rate is about
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0.4% and that is significantly below inflation so if you're just just holding your money in a savings account in a
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commercial Bank you're actually losing wealth over time because inflation is
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higher than the interest the bank is paying you on your deposit and that 0.4% is the average I mean there are still
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many banks that are only paying 0.2% on savings accounts this is even
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more ridiculous when you consider the fact that in the past year the Federal Reserve the US Central Bank has been
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aggressively raising interest rates at the fastest Pace in decades as of
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September the federal funds rate was at 5.33% this is the interest rate at which
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the private banks that hold their reserves in the Central Bank the rate that they charge each other in order to
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borrow each other's reserves so if a private bank has excess reserves in the
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FED they can lend that money from their reserves to another Private Bank
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overnight and they'll be charged 5.33% interest so the private banks are
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making more and more on interest payments and yet they have barely raised the interest payments that they actually
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give to average depositors people like you and me so the way the system exists
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at least in the US not in a socialist country like China where the banking system is run by the state on behalf of
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the people not on behalf of big corporate oligarchs and the US banking system which is dominated by these
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colossal banks that are deemed too big to fail you already have the same kind of tyrannical system that Libertarians
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warn about but instead of the state being the tyrannical system it's large corporations monopolies oligopolies they
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already have the authoritarian system that we that Libertarians always warn about the difference is that the
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financial system is largely held in private hands and by the way a lot of
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money creation is done privately by the commercial Banks because when you go to
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a private bank and you deposit your money in your savings account or checking account in the bank the bank
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doesn't hold all of that cash in its reserves instead the bank takes your
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deposit and then they invest it in some kind of interest bearing asset because if they just hold the dollars or the
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Euros or whatever currency over time it will depreciate in value because of
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inflation usually they end up investing in government debt which is bonds but
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there are many other forms of Investments they make including other Securities and stocks and with the other
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part of the money that you put in your deposit in your bank account they lend that out to other people to use as a
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loan so if you look at the balance sheet of a bank your asset as a customer which
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is your bank account is the deposit right and the deposit is the liability
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of the bank if you go to the bank the bank has to pay you that money so for the bank that's a liability however when
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they lend your money in your deposit to another customer in the form of a
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mortgage so they can buy a house suddenly the loan that bank gives becomes an asset for the bank and it
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becomes a liability for the person who borrowed from the bank and of course many customers when they take out the
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loan the mortgage from the bank it's actually larger than the money that they're holding in their deposit so
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actually they're indebted to the bank and the bank is profiting from you now they're doing this to make profit right
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that's the goal of the private Commercial Bank but if you do everything through the Central Bank the idea is it
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would provide much more competition in the banking system I mean unless you're just going to nationalize the banking
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system which is what China did which has worked much better for the Chinese economy but if you're still going to maintain this system with private Banks
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lending for profit well if you can have a public option and open a bank account
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with the central bank and an and a central bank digital currency the private banks are going to be forced to
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find a way to incentivize you to hold your savings at the bank to take loans
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from those Banks so they're going to give you more favorable interest rates that's exactly why the IMF explained
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that Central Bank digital currencies could lower Bank profits and of course they're talking about private commercial
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Banks now another Advantage is that they simply provide more stability and this is especially clear at a time in the
Stability and bank bailouts
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United States where this year in 2023 three of the largest bank crashes
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in US history have happened in this year the other biggest bank crash was back in
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2008 in the financial crisis so that was another very clear example of what
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happens when the private for-profit Banks engage in very risky irresponsible
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Behavior they over leverage themselves and they make basically huge bets they
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have they hold billions or trillions of dollars in derivatives that are just essentially bets they have significantly
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more bets than they actually hold in all of their assets and then when their bets go wrong One Bank collapses and it could
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be like a series of dominoes and then other Banks collapse and you could have another massive financial crisis well as
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the IMF acknowledged in its report Central Bank digital currencies offer a safe store of value unlike Bank deposits
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and other liabilities of private financial institutions which are subject to credit and liquidity risk and the
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possibility of bank failures cbdc would not carry such risks and here we see
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another example of this hypocrisy where anytime a private Commercial Bank in the
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US fails it's almost always bailed out often by the Federal Reserve which
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prints billions of dollars in order to lend give emergency lending to these Banks to help provide liquidity so so
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they can save these Banks prop them up so they can pay their depositors because of course there's often a run in the
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bank people who have their savings account at the bank they want to get their money out in many cases these are wealthy depositors and their deposits at
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the bank and their account are significantly higher than the federally insured limit of
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$250,000 and we saw this year with bank collapses like for instance the the
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crash of Silicon Valley Bank or First Republic Bank that the US government
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helped to bail out billionaires and big corporations that had billions of
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dollars in deposits that were not insured federally and yet the government still bailed them out so the US already
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has a system that is again fully privatized and yet the profits are
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privatized but the risk is socialized anytime there is instability the government steps in to bail out all of
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these rich people so why should there not be a public option and that's what
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central Bank digital currencies could offer and finally this brings me back to the main topic of discussion today which
Monetary sovereignty
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is how this new technology could help countries dollarize as the IMF wrote in
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its report quote in dollarized or euroz economies the introduction of a cbdc
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could encourage a greater use of the local currency in lie of dollars or Euros by making the local currency a
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more attractive means of payment thus the CBD could also help maintain monetary
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sovereignty and sustain the demand for central bank money with greater monetary
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autonomy monetary policy transmission will be stronger through all channels I
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want to emphasize two important terms in that paragraph one monetary sovereignty
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they could help maintain monetary sovereignty and another they could provide greater monetary auton autonomy
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those are the crucial terms sovereignty and autonomy that's why I think there is
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this demonization of this new technology that is already being used by countries like China because it's clear that if
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countries have monetary sovereignty and autonomy they will not be as dependent on the US dollar and if countries are no
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longer as dependent on the US dollar Washington can't try to destroy their economies with sanctions it can't try to
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cut the out of International Financial intitutions like the Swift interbank messaging system it can't try to cut off
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international trade and investment in their economies yes there definitely are
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some downsides including the possibility of surveillance but again I'm I'm pretty skeptical of this argument because we
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already see that countries that are have completely privatized banking systems like the US their government still uses
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the private Banks to spy on everyone and still still when they impose sanctions and freeze people's bank accounts it
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doesn't matter that your bank account was held with a private bank again it's the worst of Both Worlds it's the the
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mass surveillance but with privatized profits and socialized losses and risk
mBridge experiments
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and earlier I mentioned the mbridge system using blockchain technology that was created by the central banks of
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China Hong Kong Thailand and the UAE I want to look back at a report that was
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published last year by the bank for international settlements it noted that
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quote crossborder payments using a common platform based on distributed
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Ledger technology DT that is the most common form of that is blockchain
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blockchain is a form of distributed Ledger technology this crossborder
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payment system would allow multiple central banks to issue and exchange
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their respective Central Bank digital currencies this can greatly increase the
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potential for international trade flows and crossborder business this led China
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Thailand and the UAE to create custom designed and developed native blockchain
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technology which they refer to as the mbridge Ledger and over six weeks in August and
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September 2022 20 commercial Banks from the Hong Kong special administrative
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region of China along with mainland China the UAE in Thailand conducted
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payment and foreign exchange payment vers payment transactions on behalf of their corporate clients using the
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Central Bank digital currencies issued on the mbridge platform by their
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respective central banks over 12 million usar was issued on the platform although
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they're measuring this in US dollars because you know this is the bank for international settlements but they were
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not using US dollars they were using each region so Hong Kong mainland China
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the UAE and Thailand they were all using their local Sovereign currencies in
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order to process these payments they facilitated over 160 payments and
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foreign exchange payment versus payment transactions totaling more than $22
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million Us in value so this is already happening we're seeing this is not this
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is not hypothetical this is being developed and not only by China not only
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by land and the UAE there are other countries all around the world that are looking into using this technology to to
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diversify their international trade and investment the report pointed out that
International trade (without dollars)
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every year China Thailand and the UAE do hundreds of billions of dollars of trade
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with each other and yet the majority of that trade is settled in foreign currencies largely the US dollar and the
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report notes that this is despite the deepening intra Regional economic ties
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and supply chain integration over recent decades so I'm going to read this long
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paragraph here and explain some of the main points because this is very important the bank for international settlements noted quote local currencies
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play limited roles in international trade owing in part to the relatively High transaction costs associated with
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most Asian currencies compared with those of major currencies when they say major currencies they mean you know the
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US dollar and the Euro the hegemonic currencies so it's expensive and
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difficult for countries to use their local currencies for trade with each other so this dependence on foreign
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currencies for crossborder payments could inadvertently impact monetary
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sovereignty now I wouldn't use the word inadvertently in some cases it is advertent because the US wants these
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countries to be dependent on the use of the US dollar that's exactly how the US
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can use sanctions as a weapon against so many countries but anyway let me continue here the dependence on foreign
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currencies for crossborder payments could inadvertently impact monetary sovereignty through monetary policy
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spillovers from the currency originating jurisdiction what they mean there is that anytime the Federal Reserve carries
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out policies on behalf of the United States so for instance if it raises
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interest rates in order to bring down inflation which is what we've seen the FED do in the past year that means it's
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going to have Ripple effects in countries all around the world because by raising interest rates it makes it
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more expensive to get access to Dollars and that hurts many other countries that rely on getting access to dollars in
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order to settle International Trade balance of payments issues or they need dollars to import Commodities like
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energy oil or gas or capital goods machine parts food they need to get
34:55
access to dollars and because the Federal Reserve has been raising interest rates it makes it more expensive to get access to those dollars
35:02
or it also leads to Capital flight because people who have invested in other countries they will actually
35:08
withdraw their capital and invest it in the United States with the rising interest rates so then that forces other
35:15
countries to raise their interest rates as well and that means that when those central banks and other currencies raise
35:21
their interest rates it also makes it more expensive to lend it increases the cost of borrowing money which reduces
35:28
the overall money supply and it often causes recessions and economic problems
35:34
so that means that the US because of the power of the dollar exports its own
35:40
domestic monetary policy to the rest of the world this is known as the triffin Paradox so here in this report the bank
35:48
for international settlements is pointing out that being dependent on the US dollar causes monetary policy
35:55
spillovers from the the currency originating jurisdiction like the US and furthermore it also adds more
36:02
intermediaries and steps to the overall process so it makes it more complicated whereas if you're just doing everything
36:08
in your local currencies through your central banks it's much quicker it's much easier so the report provided an
36:15
example they wrote say there's a payment between a Thai company that is importing
36:22
goods from a Mainland Chinese company and they're using a foreign currency as
36:28
the invoicing currency so this would be very common this would be a company in Thailand wants to import products from
36:35
China say phones from the Chinese phone maker xiaomi so when they do this
36:42
transaction the Thai importer invoices that transaction in dollars so
36:49
essentially they have to pay in dollars so what that means is that the bank that
36:55
the Thai company uses in Thailand and the bank that is in mainland China of
37:01
the exporter that is selling the phones and the correspondent banks that each
37:07
Bank used by the Thai bank and the Chinese banks have to use we're talking about four different banks here they all
37:14
have to process the payment and convert those currencies into US dollars not
37:20
only is this very complicated but it also strengthens the US dollar because
37:26
anytime you go to Foreign Exchange Market and you exchange your currency for the dollar you're actually
37:31
depreciating your currency against the US dollar which is appreciating value
37:37
strengthening the US dollar helping the United States in the process the report pointed out that additional complexities
37:43
are involved if the Thai and Chinese banks that are used by the companies are
37:49
small local banks and they have no direct correspondent Network in which case they might have to work with even
37:55
more intermed mediary so if it's a small local bank in Thailand that doesn't have a relationship with a US Bank they have
38:02
to work with a larger Bank in Thailand that that does have a relationship with
38:08
a big bank usually you know a new york-based bank so now you're adding a fifth bank to this process and the
38:15
report pointed out with multiple Banks along the payment chain transaction fees
38:20
can be charged so that means that that the cost of doing trade is becoming even higher and furthermore there are also
38:28
regulations like know your customer kyc or also anti-money laundering AML or
38:34
also counterterrorist financing CTF checks these are very common many banks
38:39
Implement these policies and each Bank involved in the transaction might engage
38:45
in this which can cause numerous break points so this is how complicated it is
38:51
for countries that are geographically close to each other or even neighbors to trade trade with each other think about
38:58
how difficult it is why should two countries in Asia that are very close to
39:03
each other or neighbors why should they have to go through the US banking system
39:08
why should four five six even more banks have to be involved in this very simple
39:15
transaction one way of cutting out all of those middlemen and all of the fees
39:20
they charge all of the red tape is simply facilitating local trade in local
39:26
currencies and one way of doing that is simply using Central Bank digital currencies on a system like the
39:34
blockchainbased embridge system that China has helped to develop and then if the country has balance of payments
39:41
issues like for instance it has a current account deficit it ends up importing more than its exports and it
39:48
needs to get access to more for foreign currency in order to deal with those imbalances well then the central bank
39:53
can deal with that issue right but if you just cut out all the middlemen not only does it simplify the process not
40:00
only does it make it cheaper and faster for for firms in different countries to
40:05
trade with each other but it's also a way of challenging the hegemony of the US dollar I mean this is a win-win for
Why are CDBCs so feared in the US?
40:12
every country involved except the United States of course which is why I think once again there is so much propaganda
40:18
demonizing the idea of Central Bank digital currencies and why again the
40:23
private commercial banks in the US JP Morgan Bank of America that's why
40:29
they're lobbying so much against cbdcs so the next time you hear you know a
40:34
Libertarian talk about cbdcs are an or authoritarian plot for the government to
40:40
control everything that we do and monitor all the payments that we do I mean if you're using credit cards if
40:46
you're using digital banking systems and apps and websites I mean they're already doing that but the difference is that
40:53
the private banks are making profits on it in the process I mean the the banking
40:58
system is in private hands and they're the ones profiting and average people are the ones losing out so I think this
41:04
is a very interesting technological development and it's another example of this move toward multipolarity not only
41:12
in the international political system but also increasingly in the international economic order and finally
41:19
as I explained earlier this is not some pie in the sky idea this is already
41:25
happening China and its trading partners are already using digital currencies cbdcs in order to settle imbalances in
41:33
their balance of payments and this could make it very difficult in the future for the us to try to impose more sanctions
41:40
on China and carry out a kind of economic War like the economic war that the West has been waging against Russia
Outro
41:47
and as always here at geopolitical economy report these are the issues we are going to be analyzing and exploring
41:56
I I'm Ben Norton I want to thank everyone for joining me today please subscribe on whatever platform you're
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