Could a digital dollar support the US economy?
Economies around the world face hurdles in the form of rising national debt and threats of inflation, but a digital dollar can be a saving grace for the United States.
Natasha Che, macroeconomics expert and founder of Soundwise, postulated why a USD digital token issued by the Federal Reserve could change America’s fate.
In a long Tweeter on August 3, the author declared that the largest export from the United States was its currency, the dollar. It is currently the largest monetary network in the world, used for 40-50% of global trade settlements and international credits.
With this reserve currency status, Che claims that the United States can “get away with murder” for its monetary policy and accumulate debts to disastrous levels, she explained. Global trade increases every year, as does its demand for dollars, so providing a medium of exchange and a store of value for the planet is a lucrative monopoly.
The digital dollar to the rescue?
Currently, the United States continues to accumulate debt against other countries. This is especially true for China, which sells its exports and takes treasury bills and IOUs as payments. Trade deficits accumulated over time will equal the foreign debt of the United States.
Che suggested a dollar-as-a-service (DaaS) type of export mechanism whereby America benefits from intangible seigniorage income. Since this would not be on the books, trade deficits minus “DaaS” would equate to external debts.
“All other things being equal, if the United States is to reduce its debt, it must increase the value of its dollar exports as a service. But how? By making the USD money network bigger and easier to use.
The greenback is becoming less and less available outside the United States, but a central bank digital currency could change all that, she speculated. Issuing a crypto-dollar to the world through big tech companies, making APIs available to anyone, and network interoperability with major public blockchains could be beneficial for the Federal Reserve.
Stable coins such as USDT and USDC have already emphasized the demand for digital dollars, so official currency can be a means of “weapon” currency. The United States is already concerned that China is doing just that.
Everything talks, little action
While China has already launched several pilot projects for its central bank digital currency, the United States is still far behind, constantly stumbling over its own regulatory hurdles and trampling on stablecoins.
On July 30, Federal Reserve Governor Lael Brainard laid out a series of urgent reasons regarding the issuance and development of a digital US dollar. He told the Aspen Institute’s economic strategy group:
“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the United States doesn’t, I can’t understand. this. It just doesn’t sound like a sustainable future to me.
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