Scott Sumner on Tyler Cowen on CBDC

I read Tyler Cowen’s Bloomberg blog post giving his thoughts about central-bank digital money for consumers. Tyler is smarter than I am and certainly one of the world’s leading economists, yet I couldn’t help but shake my head as I read, thinking “No, I don’t think that’s right.” In particular, I thought consumers could handle keeping their money with the Fed, especially if the Fed didn’t pay interest, and then the banks (and, I hope, nonbanks) would compete for loans in the market. That seems sensible to me. My other point is that I think there will be huge demand for CBDC, which will streamline the banking system enormously and remove the fees charged by all the middlemen (something Mark Carney is very excited about). I was about to write up my thoughts when Scott Sumner saved me the trouble. Please read Scott’s post:

Scott Sumner on Tyler Cowen on CBDC

Note his final words:

Whatever we do, I’m certain that it will be the wrong thing. Banks have way too much political power and any new regime will undoubtedly cater to their interests.
— Scott Sumner