Mark Carney’s Trojan Unicorn

Are Central Banks Considering Stealth Nationalization in Sovereign Digital Currencies?

The FT has been trying (more on this later) to work out what central bank governors, like the Bank of England’s Mark Carney, meant when he came down from Mount Parnassus, to tell us all how central banks and governments will increasingly be required to consider the move to a digital reserve currency in a “multi polar world”. Carney was, here, entirely correct in principle. The US manages the US dollar primarily for the US’ interests. Certainly in terms of interest rates, the US Federal Reserve takes the needs of the US economy — as it perceives them — as the basis for how it operates monetary policy and who can use the US dollar, for what purposes. Reading between Carney’s lines, you can also intuit a political frustration that, on more than one occasion, the US will also operate the US dollar in pursuit of US geopolitical policy objectives. Even at some economic cost — and not just to the rest of the world, but potentially to the US itself, too. Carney didn’t mention in his speech about another problem, which is how central banks end up having to step in to support the commercial banks in times of financial stress — the FT spotted this angle, we’ll return to this more fully below.

But firstly – and most importantly – whether a sovereign digital currency ever gets implemented is ultimately going to be a political choice. It is a political – not something that is subject to any economic or technical constraints or influences – decision, if The Powers That Be did decide to introduce a sovereign digital currency. We would have to ask ourselves why it was they made that choice to solve the problems they are confronted with, rather than an equally valid (and considerably simpler) alternative, which was nationalisation of the existing system.

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