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Saturday, October 19, 2019

"Digital Currencies" Innovation - Is Anything Significant Really Happening?

This blog has covered this topic extensively over the years and has monitored events related the potential for so called "digital currencies" (either privately issued or issued by central banks) to make some kind of significant impact on the current monetary system. 



Now Bloomberg has published this article "Fed Drags Feet as Digital Money Challenges Central Banks" that implies that the IMF is concerned that central banks are falling behind the innovation curve and that "it is just a matter of time before we see massive disruption" according to Tobias Adrian of the IMF. 


Readers here know that we have been reporting for some time that the reality is that there is no indication that any kind of significant new "digital money" innovation that could shake up the existing monetary system is on the near term horizon. Instead, we have steadfastly reported that any changes we do see are more likely to be very gradual and incremental over long periods of time unless some kind of new major financial crisis disrupts the present monetary system.

The first thing to note here is that the money we have now issued by the Fed and other central banks is already "digital money" for the most part. So the term "digital currency" being used to imply something new and innovative is arriving can be misleading. Usually, it is actually the ledger system used to record and track the transactions of the money that is really being talked about which is where things like "blockchain" enter the picture. But even there, there is no indication at this time that central banks are ready to suddenly plunge into using a blockchain ledger system on any kind of major scale. Honestly, what we see is a lot of use of buzz words and some hype, but not very much actual innovation or major changes so far to our present system. 

However, I encourage readers not to just take my word for this analysis. I have often mentioned that I do get input from leading experts on these kinds of issues and that my analysis is mostly based on the credible information I get from these sources. 

Robert Bell (CEO of KlickEx), is one example of these kinds of high credibility sources. Robert does not have to speculate on these kinds of issues because he lives it every day and is one of the leading experts in the world on payment systems and the related technologies used to operate them. Robert has worked with many central banks and met with institutions like the IMF and BIS to discuss these kinds of issues over the years. He was kind to do an interview for this blog and has provided very valuable input here over the years based on his real world experiences. When Robert tells me what is really going on around the world, I simply know that I can trust his analysis to be accurate and up to date.

I showed the Bloomberg article linked above to Robert and he was kind to reply with his thoughts on it as a kind of update on things for readers here. Robert was in Washington DC at the time attending the IMF and World Bank fall meetings.

Here is what he said in his email reply in regards to anything significant happening any time soon related to "digital money"

"As far as real systemic change... There's nothing on the cards for the monetary system. The digital services spoken of (in the Bloomberg article) will not change anything fundamental, and the IMF and BIS are even further behind where most central banks are. 

The central banks will implement real time slowly, and banks will reduce cross border prices slowly. 

Swift and their GPI project is already doing this work, but banks are taking a long time to reduce prices, that's all. 

Open Banking, is speeding things up a bit, but not much."    ---- Robert Bell (KlickEx)

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My added comments: Readers sometimes wonder how I am able to offer analysis on these issues with my having no personal background in banking or macro economics. The answer is simple. I get input from highly credible sources who are experts in their field like Robert Bell. Usually, their input and insights are right on target. I see that borne out over time over and over again. 

Many times they prefer I do not directly attribute quotes in their names which I honor. In that case, I try my best to summarize the information for readers without attributing it to any specific expert. But I do want to clearly credit them for helping to greatly improve the analysis offered here and the reason why we have been able to correctly predict that despite constant articles that some kind of major change is about to happen to disrupt the current US dollar based monetary system; the reality has been slow and gradual change as we have been reporting here for some time.

If I do hear anything to change that analysis, I will certainly let readers know. However, it is more likely that if something does quickly arise to disrupt the present system, none of us will really know much ahead of time as Jim Rickards has said for many years. There are always potential risks to the current system and we have documented many of them here, but those running the system are not looking to make sudden major changes. They prefer stability and for any changes to be gradual over time. The US Fed in particular, moves very slowly and cautiously.

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