CBDCs: Breaking Free from Bank's Hypnotic Spell and Stockholm Syndrome
Our money transfer system is broken though banks will never admit it.
This is a great overview of the state of CBDCs, including a solid overview of the digital yuan, rupee, and euro programs, notwithstanding the rather unenthusiastic title.
Opponents of CBDC love to state that CBDCs are a “solution looking for a problem.”
This opinion doesn’t surprise me, and my retort is to say that most of those who say this suffer from “Stockholm Syndrome,” where they empathize and support their captors.
That’s why, unsurprisingly, many CBDC opponents come from within or around the banking industry. They’ve developed a good relationship with their captor and can’t give it up!
So, I ask fair-minded readers one simple question:
Does the US paying banks 2.3% of its GDP and the EU 1.4% in payment fees represent a real and significant problem to solve?
The answer is clear: society could do much more with these countless billions than hand them to banks.
So why are the report authors under banks’ hypnotic trance and can’t see the problem? Is it Stockholm syndrome?
👉TAKEAWAYS
CBDC Value Proposition For Banks
Enhancing interbank payments: CBDC variants specifically designed for commercial banks can streamline the underlying processes and scale the effectiveness of interbank payments. Banks consequently benefit from improved liquidity management and risk mitigation.
Facilitating cross-border payments: By enabling direct, secure, and cost-effective transfers between different currencies, CBDCs can be a game-changer for commercial banks and FIs engaged in international banking. They can vastly reduce the reliance on correspondent banks and improve the speed and transparency of cross-border payments.
Supporting secondary markets for government securities: By offering real-time settlements, increasing market efficiency and reducing counterparty risks, CBDCs can significantly enhance the support provided by commercial banks to secondary markets for government securities.
McKinsey’s Global Payments Review 2023 gives a stunning view of how much banks make from payments. Past reports showed that bank payments as a percent of revenue were 28% in 2010.
👊STRAIGHT TALK👊
The concept that CBDCs are a “solution looking for a problem” shows an incredibly callous attitude to the billions paid to banks in payment fees.
And for those who say cards are good enough, card fees are roughly 1.1% of US GDP and .6% of the EUs! Let that sink in, and the fact card fees represent a direct tax on all citizens.
Stockholm syndrome has some rather distinct signs, many of which seem to fit within our relationship with banks:
Feel emotionally connected to bank credit cards.
Share the bank’s values when they tell us that the fees are low.
Refuse to escape a hostile situation.
Refuse to convict the abusing bank.
Those who state that CBDCs are searching for a problem seem unable to acknowledge and confront banks for their outsized costs to society.
The next time you listen to an anti-CBDC argument, look for Stockholm Syndrome.
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