Thread by @GeorgeSelgin

There's are many question-begging claims in this Time magazine article on CBDC by @DionRabouin, starting with its title's sensational suggestion that the digital yuan poses a threat to the U.S. dollar's global status: time.com/6084146/china-…

An earlier version's headline was even more over the top: "The U.S. Is Losing the Global Race to Decide the Future of Money--and It Could Doom the Almighty Dollar." What poppycock!

The digital RMB is a retail payments innovation--essentially, a substitute for ordinary retail bank deposits, paper notes, and coin. It's launch has ZERO bearing on the RMB's (or yuan's) attractiveness as either a reserve or an int'l invoicing currency. That's Z-E-R-O.

Many paragraphs after its frightening title, the article itself admits that "the renmibi will _not_ become the word's reserve currency--at least, not any time soon." And no wonder: have you checked its volatility lately? So what possible threat can it pose to the Almighty Dollar?

Nor is any other gov't currency poised to take over the dollars role. Instead of being told about serious rivals, we are told that many nations would like to be less reliant upon the USD. But wishes aren't threats.

Dion's answer is that "by being at the forefront of CBDC development," China "is in position to take the lead on development of rules and regulations for digital currencies on a global scale."

Well, there's no denying that being at the forfront of something's development makes it easier to take the lead in its development, since those are the same thing. But so what? Note what has happened here: the problem isn't that if the U.S. lags behind the dollar is doomed...

Instead, not being first is regarded as a problem in itself! (There's not a spec of truth to the claim that by being first China will dictate digital currency rules and regulations to the rest of the world.) "Leadership" is treated as an end in itself.

But being a leader, or not "falling behind" aren't themselves arguments for doing anything. If they were, we'd have to do all sorts of stupid things just because otherwise some other (stupid) country might beat us to it!

The article also exaggerates CBDC's capacity to supply payments needs that can't be supplied by private alternatives. In fact, there is little that CBDC's can do that private digital media can't--digital currency is, after all, a private sector innovation.

Though the article refers to M-PESA as if it were a CBDC, it is in fact a private one originally helped by Kenya's gov't, which sought to "to encourage innovative [private sector] projects so as to deepen the provision of financial services in emerging economies."

All sorts of other private sector digital payments innovations have been happening everywhere, including the U.S. And if we are behind in those, it is partly because of aggressive opposition by the banking lobby, and...

partly because, instead of encouraging private sector innovators, like Kenya's gov't, U.S. regulatory bureaucrats would rather have us follow China's CBDC lead!

You may thank those same bureaucrats for the fact that "transferring money balances between U.S.-based bank accounts...can take days." That's not because private payment systems are flawed. It's because the Fed's wholesale settlement services are closed on weekends and holidays!

And don't even get me started on Elizabeth Warren's likening of stablecoins to wildcat banknotes!

In fact, it is private sector alternatives, not China's digital RMB, that really pose a threat, not to the dollar's status as the dominant international currency unit, but to suppliers of old-fashioned dollars, including ordinary banks.

As the BIS's Hyun Song Shin says, in a passage in the article, having central banks issue their own digital currency "is in part a reaction to this private sector activity." That's reason enough, Shin says, for it helps 'to preserve the role of money as a public good."

But this is yet another phony argument for CBDCs, for the very simple reason that money _isn't_ a "public good" according to economists' usual understanding of that term, as Roland Vaubel pointed out many years ago. onlinelibrary.wiley.com/doi/abs/10.111…

I conclude that it is, after all, the CBDC skeptics who have it right, including the Fed's own Chris Waller. As the article notes Waller recently called central bank digital currency "a solution in search of a problem." I think Time magazine has just helped him to make his point.