The crypto market is currently going down the drain, but that does not alter the fact that interesting things are happening. Now this is a development that is at odds with the idea of Bitcoin. Mastercard, Welss Fargo, Citigroup and several other major banks are launching a digital dollar pilot with the New York Federal Reserve.
Edward Snowden responds
We all know Edward Snowden from leaking classified US government documents. The leak of those documents revealed some global surveillance programs. Edward Snowden is someone who ‘gave his life’ to protect the privacy and freedom of other people. He has since fled the United States and lives in Russia.
So now he is responding to the pilot of these banks with the Federal Reserve to introduce a digital dollar. A digital dollar that makes it possible to control all people’s expenses, but also to direct them.
For example, do you have too much money in your savings account? Then the Federal Reserve can give you a deep negative interest rate with the digital dollar, so that you still run to the store to buy something. Also, with a digital dollar and the elimination of cash, it would theoretically be possible to set a deep negative interest rate.
Digital fiat money and deeply negative interest rates
The big question, of course, is why a digital dollar would make it possible for the Federal Reserve to raise interest rates to, say, -6 percent. That is possible if they manage to withdraw cash from circulation at the same time. With cash money it is possible to escape a deep negative interest rate.
If you get an interest rate of -6 percent on your savings account, you can theoretically go to the bank and withdraw all your money in cash. You do not pay interest on cash money. In that respect, there is a chance that the central bank will decide in the future that cash money will go out of circulation. That would make it possible to introduce a negative interest rate, which can be quite useful in the current macroeconomic situation.