LOS ANGELES, Oct. 8, 2020 /PRNewswire/ -- DoubleLine Capital LP today posted on DoubleLine.com a new paper titled "The Pandora's Box of Central Bank Digital Currencies," written by Bill Campbell, co-Portfolio Manager of the DoubleLine Global Bond Strategy.
To obtain the paper, please click on this link:
Central banks, Mr. Campbell writes, appear to be laying the groundwork for the creation of central bank digital currencies (CBDCs) by which they could make digital cash payments directly to consumers and businesses. In effect, he warns, CBDCs would extend the powers of central banks beyond the scope of their traditional monetary role into fiscal policy, which has been the exclusive domain of fiscal authorities (namely, sovereign governments).
If implemented, according to Mr. Campbell, CBDCs could eventually accelerate inflation well above policymakers' target and undermine fiscal discipline in the economies where central banks adopt them.
"The temptations of CBDCs are not limited to excesses in monetary policy," Mr. Campbell writes. "CBDCs also appear to be an effective mechanism for bypassing the taxation, debt issuance and spending prerogatives of government to implement a quasi-fiscal policy. Imagine, for example, the ease of enacting Modern Monetary Theory via CBDCs. With CBDCs, the central banks would possess the necessary plumbing to directly deliver a digital currency to individuals' bank accounts, ready to be spent via debit cards."
In a survey published in January of this year, the Bank of International Settlements reported that 80% of the world's 66 central banks were engaged in work on digital currencies. In the U.S., Mastercard on Sept. 9 announced progress on a platform to allow central banks to evaluate use cases for CBDCs. The European Central Bank on Oct. 2 published a report by its Eurosystem High-Level Task Force on central bank digital currency on the possible issuance of a "digital euro" and announced the opening on Oct. 12 of a public consultation on the idea.
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