This post is a quick overview of the E-Dollar with some updates from when I wrote my first post that are making my prediction that it could be implemented more and more likely.
I stumbled across the E-Dollar in the following Business Insider article:
The article is interesting, and frightening, but please skim over it to understand the rest of the post.
Reading this article was an epiphanic moment for me, not in the sense that I thought that the E Dollar was the proper solution to our monetary ills, but that it was the perfect solution for the current power structure in both government and finance. Below is an excerpt from my first post, DebtCrash - History and Introduction , explaining why the E Dollar would make so much sense considering rock and hard place we are currently between:
The reasons the E Dollar would be implemented start with the fact that this plan maintains the unbreakable covenant of changing monetary systems, the powers that be, the government and the banks get stronger. After a number of years, eventually paper dollars would lose so much valve they would go extinct.
The list of ways this helps the government is long. First, since eventually the old paper dollar would go extinct and all commerce would be electronic, it would be easy for the government to track money thus easier to tax. This would certainly please tax and spend liberals who try and vilify anyone who attempts to avoid taxes, ironic considering that is what this nation was founded on.
Another benefit of being able to track the new e-dollars is black market transactions in dollars would disappear. This would delight right of center. Without cash, illegal drug trade would have a major barrier. An even a bigger feather to the right is that it would be more difficult for people to hide secondary income thus take advantage of entitlements while working âunder the tableâ. Illegal immigrates would also have a much more difficult time living in the US, talk about a plus for the conservatives. The government also wouldn't need to spend money to create new bills and coinage.
Finally the biggest pro is the governmental debt will be priced in the âoldâ dollars, meaning the burden of the national debt would decrease by as much as the Fed decides to set the negative interest rate at annually.
So we've pleased both sides of the isle, now on to the banks.
Well the benefit to the banks is quite clear, not only are you forced to keep your savings with them to speculate with and collect their standard fees on, but they also will be able to charge you interest for the privilege.
Some of the concerns that run a distant third, those of the people of the United States COULD also be addressed. I emphasize could because they will only help a certain portion of the population and only if the powers in the government and banks feel as if they need more popular support for the E dollar. As with the government debt, the new system COULD allow ALL old debt to be priced in the old dollars thus lessening the burden on anyone holding previous debts, and with a large portion of the population with underwater home mortgages and huge student loans Iâm sure the relief would be welcome.
The losers in this would be those who were prudent and didn't take on large debts but since there are far more debtors than savers, politically, the plan would still be a winner. I have to admit before learning the truth about our system I racked up my fair share of debt and a little piece of me would be relieved.
In my view to meet the classification as an E Dollar there are three conditions that must be met as follows:
- The E Dollar must be a negative rate of return for holding money in a bank account.
- The E Dollar should be a crypto-currency.
- And finally the highest hurdle, the "old" paper dollar must have an exchange rate with the E Dollar which causes it to lose value more quickly than the negative rate of return imposed by the nation's banks.
Technically there would be a fourth condition to be an E 'Dollar', as I have envisioned it, it would have to be American. That said if any nation implemented an E Currency meeting the first three conditions it would add validity of my claim and make it much more likely that such a currency would travel to the United States and the World.
Now for the updates. When I started writing my first post in early 2014 there was only one central bank that had a negative deposit rate, the rate which banks can hold money at the central bank, and that was Switzerland. Toward the end of writing that post the ECB Joined the party with a -0.1% deposit rate. The Danish and Swedish central banks have since joined the party and both the ECB and SNB have made deposit rates even further negative. The Swiss Central Bank not only charges interest for bank deposits but in December of 2014 started lending at a negative rate of -0.5%, this was increased to -0.75% just one month later. The Swedish Riksbank followed suit with a 0.1% negative lending rate In February of this year and just two weeks ago went further negative to -0.25%. The trend is clear, central banks want negative interest rates and the zero lower bound is not nearly as hard as it once was.
As would be expected these negative rates at the central banks have caused some commercial banks to force negative rates on their depositors. Although for the reasons outlined in the above E-Dollar story this has mainly been confined to corporate and institutional or very large private customers.
Banks in the US are even instituting negative rates without the burden of their central bank doing so first.
The first condition for the E dollar has been met overseas and even in the US. Though this has taken place it has still not been imposed on retail bank customers indicating it is still in the trial phase.
The second condition is also being explored by the Filipino government:
As in Mexico:
Ecuador has actually implemented its E Currency:
These new currency schemes should not be confused with the electronic version of current sovereign currencies which are already in wide use, they are new, with cryptographic design and fulfill the second condition.
There is no evidence, or rumors for that matter, of any nations attempting an exchange rate between cash and an electronic currency, but the temptation seems overwhelming.
The other options to solve the monetary crisis that is coming include outright default, a hyper-inflationary reset, the use of SDR's or a Debt Jubilee and are certainly possible. I for one am regularly surprised at some of the actions taken, but the trend toward an E-Dollar and its lure for the powers that be should not be ignored.
For those who believe bitcoin could be a solution I direct you toward this post: http://www.debtcrash.report/entry/bitcoin-an-e-dollar-beta-test
If you would like an overview of how we got here and why the E dollar or other monetary overhaul is necessary please read the History and Introduction.
To see the effects of the E dollar on total credit market debt vs banning cash with negative rates, as well as our current path take a look at this post.