In which Bernard Hickey argues the Reserve Bank should create accounts for every single resident that can be used to deposit and transact a new central bank digital currrency called the e-tāra
We dont know anything about UBI "deep down". What does a human look like who just gets handed everything to them and never has to strive for anything their whole lives? Do they start painting art masterpieces or do they start abusing drugs and alcohol? Do they do anything productive? Pretty sure we have no idea
There has been quite a lot of research on trials overseas, which tend to show people keep working, although not quite so hard, and their levels of wellbeing rise and poverty fall.
$100.00 dollars. Haha. What an earth would that do? They are so impractical and parsimonious it makes me laugh. Businesses were standardly getting multiple thousands per week for one person. They really are so awful and stupid. If your workforce is unhealthy, cold, hungry and homeless or neglected and abused and in danger it’s not going turn out well is it whatever massive amounts business gets. Which the poor have to them pay for via tax. It’s unsustainable to say the least. Not to mention inhumane and illegal and a failure of Government in a breach of trust, misuse of power and discriminatory and incompetent in the extrem and effects the crime and physical and mental health crisis. Finally we name the drama. They lets Covid in with the infamous “Aussie bubble” it’s knocking off about 4000 vulnerable people currently and overloading hospital systems and could get worse again within weeks, anytime. And yet Government remains ill equipped to cope and unprepared. Polio is back in London too from immigration. We still have diseases of deprivation and poverty to deal with as well. So lots of positive and constructive work for MOs to be doing eh? This is the most important roadmap and has to be the priority so while they get their act together we can all survive without scarring.
Back in the day, way back in 2017 when I was campaigning, I floated the idea of creating wellbeing accounts for everyone. Specifically, I was focused on the idea of preventive mental health measures, allowing people to access coaching and support to prepare for transitions and to help create resilience in life, rather than waiting until people's mental health crashed and then trying to help them when they were already struggling. Preparing people to enter the world of work, navigating the inevitable ups and downs of relationships, including including parenthood, divorce, blended families, losing your job, preparing for a 2nd, 3rd, and 4th career, retiring, un-retiring etc. I proposed giving people personal budgets to spend from aged 13 onwards. The credits would be capped, encouraging them to spend them as they went along, rather than hoarding them. My vision was to embed a culture of self-development and preparing for life's challenges and transitions. The credit system would also encourage and accredit providers so that people would have safe, effective ways to use their wellbeing credits. This system you describe, Bernard, would be a very effective base platform.
A similar concept to a health savings account. I assume the 'credits' you mention would need to be redeemed into to real money by acredited providers at certain intervals. I'd suggest this would be well utilized by the worried well middle class but not as much other groups as it requires a high degree of proactive action, time, flexibility etc. Did you do any costings for this?
I've long been persuaded (by you) about the value of helicopter payments but had reservations on the basis of logistics but your RBNZ idea for a citizen's account is great - well on the way to an UBI !
The way to do this is with a CBCD. or central bank issues digital currency. Doing this would more less give every IRD number an account at the reserve bank. It would enable governments to target stimulus directly to any tax paying entity and allow for RBNZ to transparently view and influence spending and saving in real time with real data. There are massive advantages for efficient taxation and it would give the central banks much more effective and directed tools at targeting stimulus. It would also make the current banking system a bit pointless and way less profitable. It encourage open banking and innovation in the sector.
Making current banking pointless would be a wonderful move. When the Bretton Woods agreement was put together, all sorts of people were invited. One group was deliberately excluded: bankers. 😊
What's so hard about creating an account and logging into myIR and inputting ones bank account number (aside from realme, which isn't necessary) ? Seems a more simple solution than creating a surveillance & control coin, I mean CBDC, apps and other infrastructure.
Creating one from birth ensures that cash goes to kids when they need it most. I get the wariness around privacy and trust of Government. But I'd much prefer our Government or RBNZ to some crypto bros and the criminals who use it for money laundering. Cash is king, I suppose, but is also now the main way to avoid the law and the IRD.
Thanks Wellington. I'm wary about every IRD account getting one, which would risk those with multiple companies getting multiple payments. I'd limit it to a verified resident. I don't underestimate the challenges of verifying residency and identity.
I'm not a big fan of the smart contracts idea. I think Australia's system for preventing the purchase of some items is too paternalistic. But wouldn't it also create a weird exchange rate between private money and e-tāra? The private money would have more buying power, and so you'd be able to exchange 100 e-tāra for say $99 on the open market. Now people who are getting e-tāra from MSD can just exchange it to buy cigarette anyway, except with a 1% "tax". May as well just add the 1% to the existing excise tax and do away with the smart contracts IMO.
It's fine if private banks want to do smart contracts. Imagine if ANZ gave you a slightly better savings rate as long as you only spent your money on morally wholesome things. But government money should be the lowest-common-denominator, most easily transacted and "neutral" money so that everyone in society can participate.
But I do like that the RBNZ are looking into creating some sort of digital version of public money. Banks get to decide whether they want you as a customer, so if you happen to have no address, or if they don't like what you do for a living (I think in some countries if you're a sex worker for instance you can have trouble), then you can be excluded from a lot of the economy. So having an alternative to that is good. Plus since e-tāra aren't trying to be decentralised they don't need to muck around with the inefficient block-chain/proof-of-work stuff. It can just use the same sort of database-backed ledger system that electronic money has been using for so many decades now.
We already have that disparity around the fungibility of almost all crypto currency and stable coins. But it exists with cash too when the banks charge a "handling fee" the market will decide and there will be plenty of people willing to exchange Matariki money at a cost for crypto. The difference is holding a CBDC or matariki coins is like giving the IRD your internet banking credentials. They can freeze your funds take them back as they please or even void the transaction as if it didn't happen. If you go buy meth from the mob with your matariki dollars on a block chain its potentially there for every one to see. That is quite a lot of power for a central bank and one law enforcement, totalitarian governments, and tax departments wound love to have. It means that your matariki money would become clean money while other transactions in the lets say dark economy would still take place with cash or barter in blocks of cheese and sheets of GIB board that fell off the back of a truck. :-)
Thanks Philip. It's true. Australia's system was problematic, although some communities with massive drug and alcohol and tobacco use problems actually quite liked it. And yes, I'll need to do some more work on the efficiency aspect.
I'm glad you have come to the same conclusion most of us in crypto came to years ago.
But no reserve bank is actually done it.
In NZ the issue is RBNZ has almost zero capacity to do this. Its like asking a 5 year old to design and build a fighter jet. The crypto industry has been talking about this for 10 years or so. RBNZ simply doesn't have the expertise to pull something like this off. This is the same bank that had to let go some people after failing to apply some recommended security patches to a vendor product they were using. They are not a fintech shop they are a bunch of policy makers auditors and economists. The people who know how to write smart contracts and create block chains are kids and coders who are already crypto millionaires. Any one with real skils and experience in the industry has been around 10 years and automatically a millionaire who is not going to get out bed for a 150k job at RBNZ or Datacom. It reminds me a little of one of those Dilbert cartoons in the dot com bubble ... https://qph.cf2.quoracdn.net/main-qimg-14d287e23953275daf32c59d6ded5793
The rest would become too political on the design and control of a CBDC, If done correctly is makes banks very unprofitable and the RBNZ is tasked to ensure they dont go bust are are profitable. You could also put the AML industry out of business and remove the banking industry bariers and ability to de bank entire sectors of the ecomony.
Thanks Bernard, a nice spark, as Lenin might have observed 😄
Here’s Varoufakis on UBI with lots of related arguments to your own and a crucial attribute for universal payments: they must come from corporate profits because the latter are socially produced. Key ideas in the first six minutes, details there after - https://www.ubi.org/44/ubi-video-yanis-varoufakis
Awesome idea Bernard! If only politicians would have the courage to pick something like this up and run with it. Something like this would be far cheaper and more effective than our current welfare system - not to mention provide a way to stimulate the economy without pumping money into asset holders disproportionately.
What would you think about some sort of Kiwisaver style set up this Matariki account - when a child is born in NZ where the government would match savings from parents up to a certain amount? This would encourage families to save for their children's future and have the benefit if compound interest. And modelled after a popular programme so perhaps more politically palatable?
I'm no fan of retail banks but what's so hard about creating an account and logging into myIR and inputting ones bank account number (aside from realme, which isn't necessary)? A media campaign perhaps also needed. Seems a far more simple solution than creating a surveillance & control coin, I mean CBDC, apps and other infrastructure.
$10,000 for every newborn? Call me a hater but we have people in poverty having kids to collect extra social welfare payments. The offering you suggest could just drive more unfit parents to keep breeding. How about payments to stop beneficiaries having more kids. Novel thought? On a benefit….get annual payments of $5k if you don’t have another kid.
CBDCs are among one of the worst ideas I've ever heard.
"If a Government was worried about how the money might be spent, it could be limited so the e-dollars could not be used to buy alcohol or for gambling, for example."
Great. Why not let the government control every other aspect of your life while we're at it? So they can chose what injections we get, what we can spend our money on. Why not let them choose our partners as well?
We have a coddling problem. No one can ever lose money on the stock market, no child can now leave a sports competition without a medal. We need to grow up and help each other take responsibility for our own actions and situations.
Not sure who needs to hear this but the letting the government control our lives is not the solution, and certainly not the New Zealand I want to live in
A Reserve Bank personal CBDC account for everyone is a great idea. Interactive smartcards that bypassed even the eftpos system (like security keys) would enable direct person-to-person transfer, and do away with the need for cash.
As well as enabling helicopter money, a CBDC replacing cash opens the way for a small but universal transaction tax to replace GST.
Terrible name, though: 'e-tara' sounds like eating a potato. How about flattering the Productivity Commission and calling it the Zeal, one of the names proposed for New Zealand's decimal currency in the 1960s before we showed our love for all things American and split the pound into two dollars.
The Bank for International Settlement website bis.org has an interesting paper 'Central bank digital currencies: user needs and adoption September 2021' that is accessible, but that I can't provide a link to.
While I understand the reasoning behind this idea, I feel as though there are much more privacy friendly alternatives which can be investigated first. Edward Snowden gives some good thoughts on the dangers of a CBDC.
We dont know anything about UBI "deep down". What does a human look like who just gets handed everything to them and never has to strive for anything their whole lives? Do they start painting art masterpieces or do they start abusing drugs and alcohol? Do they do anything productive? Pretty sure we have no idea
There has been quite a lot of research on trials overseas, which tend to show people keep working, although not quite so hard, and their levels of wellbeing rise and poverty fall.
Way too sensible to fly!
The journey must begin somewhere 😊
Just saw the email title and exclaimed “Yes!” Haha.
I found Yanis Varoufakis’ thoughts about the e-yuan interesting in this interview: https://www.yanisvaroufakis.eu/2022/04/23/discussing-crypto-the-left-technofeudalism-with-evgeny-morozov-crypto-syllabus-long-interview/
An excellent read/watch.
Yanis' fiction book 'Another Now' is worth a read as well :)
Thanks! It looks good, will add it to my list :)
Thanks Janet, Cain, Maurice and Hamersley. I need to do some reading of Yanis.
$100.00 dollars. Haha. What an earth would that do? They are so impractical and parsimonious it makes me laugh. Businesses were standardly getting multiple thousands per week for one person. They really are so awful and stupid. If your workforce is unhealthy, cold, hungry and homeless or neglected and abused and in danger it’s not going turn out well is it whatever massive amounts business gets. Which the poor have to them pay for via tax. It’s unsustainable to say the least. Not to mention inhumane and illegal and a failure of Government in a breach of trust, misuse of power and discriminatory and incompetent in the extrem and effects the crime and physical and mental health crisis. Finally we name the drama. They lets Covid in with the infamous “Aussie bubble” it’s knocking off about 4000 vulnerable people currently and overloading hospital systems and could get worse again within weeks, anytime. And yet Government remains ill equipped to cope and unprepared. Polio is back in London too from immigration. We still have diseases of deprivation and poverty to deal with as well. So lots of positive and constructive work for MOs to be doing eh? This is the most important roadmap and has to be the priority so while they get their act together we can all survive without scarring.
They’re actually insulting.
Back in the day, way back in 2017 when I was campaigning, I floated the idea of creating wellbeing accounts for everyone. Specifically, I was focused on the idea of preventive mental health measures, allowing people to access coaching and support to prepare for transitions and to help create resilience in life, rather than waiting until people's mental health crashed and then trying to help them when they were already struggling. Preparing people to enter the world of work, navigating the inevitable ups and downs of relationships, including including parenthood, divorce, blended families, losing your job, preparing for a 2nd, 3rd, and 4th career, retiring, un-retiring etc. I proposed giving people personal budgets to spend from aged 13 onwards. The credits would be capped, encouraging them to spend them as they went along, rather than hoarding them. My vision was to embed a culture of self-development and preparing for life's challenges and transitions. The credit system would also encourage and accredit providers so that people would have safe, effective ways to use their wellbeing credits. This system you describe, Bernard, would be a very effective base platform.
A similar concept to a health savings account. I assume the 'credits' you mention would need to be redeemed into to real money by acredited providers at certain intervals. I'd suggest this would be well utilized by the worried well middle class but not as much other groups as it requires a high degree of proactive action, time, flexibility etc. Did you do any costings for this?
Thanks Sarb. Great idea, especially the 13 threshold.
Hi Bernard,
I've long been persuaded (by you) about the value of helicopter payments but had reservations on the basis of logistics but your RBNZ idea for a citizen's account is great - well on the way to an UBI !
Pat
Thanks Pat.
The way to do this is with a CBCD. or central bank issues digital currency. Doing this would more less give every IRD number an account at the reserve bank. It would enable governments to target stimulus directly to any tax paying entity and allow for RBNZ to transparently view and influence spending and saving in real time with real data. There are massive advantages for efficient taxation and it would give the central banks much more effective and directed tools at targeting stimulus. It would also make the current banking system a bit pointless and way less profitable. It encourage open banking and innovation in the sector.
Making current banking pointless would be a wonderful move. When the Bretton Woods agreement was put together, all sorts of people were invited. One group was deliberately excluded: bankers. 😊
Great point Maurice.
What's so hard about creating an account and logging into myIR and inputting ones bank account number (aside from realme, which isn't necessary) ? Seems a more simple solution than creating a surveillance & control coin, I mean CBDC, apps and other infrastructure.
Creating one from birth ensures that cash goes to kids when they need it most. I get the wariness around privacy and trust of Government. But I'd much prefer our Government or RBNZ to some crypto bros and the criminals who use it for money laundering. Cash is king, I suppose, but is also now the main way to avoid the law and the IRD.
Thanks Wellington. I'm wary about every IRD account getting one, which would risk those with multiple companies getting multiple payments. I'd limit it to a verified resident. I don't underestimate the challenges of verifying residency and identity.
I'm not a big fan of the smart contracts idea. I think Australia's system for preventing the purchase of some items is too paternalistic. But wouldn't it also create a weird exchange rate between private money and e-tāra? The private money would have more buying power, and so you'd be able to exchange 100 e-tāra for say $99 on the open market. Now people who are getting e-tāra from MSD can just exchange it to buy cigarette anyway, except with a 1% "tax". May as well just add the 1% to the existing excise tax and do away with the smart contracts IMO.
It's fine if private banks want to do smart contracts. Imagine if ANZ gave you a slightly better savings rate as long as you only spent your money on morally wholesome things. But government money should be the lowest-common-denominator, most easily transacted and "neutral" money so that everyone in society can participate.
But I do like that the RBNZ are looking into creating some sort of digital version of public money. Banks get to decide whether they want you as a customer, so if you happen to have no address, or if they don't like what you do for a living (I think in some countries if you're a sex worker for instance you can have trouble), then you can be excluded from a lot of the economy. So having an alternative to that is good. Plus since e-tāra aren't trying to be decentralised they don't need to muck around with the inefficient block-chain/proof-of-work stuff. It can just use the same sort of database-backed ledger system that electronic money has been using for so many decades now.
We already have that disparity around the fungibility of almost all crypto currency and stable coins. But it exists with cash too when the banks charge a "handling fee" the market will decide and there will be plenty of people willing to exchange Matariki money at a cost for crypto. The difference is holding a CBDC or matariki coins is like giving the IRD your internet banking credentials. They can freeze your funds take them back as they please or even void the transaction as if it didn't happen. If you go buy meth from the mob with your matariki dollars on a block chain its potentially there for every one to see. That is quite a lot of power for a central bank and one law enforcement, totalitarian governments, and tax departments wound love to have. It means that your matariki money would become clean money while other transactions in the lets say dark economy would still take place with cash or barter in blocks of cheese and sheets of GIB board that fell off the back of a truck. :-)
We need a coin backed by ingots of tasty cheese :D
Tasty cheese!
Thanks Philip. It's true. Australia's system was problematic, although some communities with massive drug and alcohol and tobacco use problems actually quite liked it. And yes, I'll need to do some more work on the efficiency aspect.
I'm glad you have come to the same conclusion most of us in crypto came to years ago.
But no reserve bank is actually done it.
In NZ the issue is RBNZ has almost zero capacity to do this. Its like asking a 5 year old to design and build a fighter jet. The crypto industry has been talking about this for 10 years or so. RBNZ simply doesn't have the expertise to pull something like this off. This is the same bank that had to let go some people after failing to apply some recommended security patches to a vendor product they were using. They are not a fintech shop they are a bunch of policy makers auditors and economists. The people who know how to write smart contracts and create block chains are kids and coders who are already crypto millionaires. Any one with real skils and experience in the industry has been around 10 years and automatically a millionaire who is not going to get out bed for a 150k job at RBNZ or Datacom. It reminds me a little of one of those Dilbert cartoons in the dot com bubble ... https://qph.cf2.quoracdn.net/main-qimg-14d287e23953275daf32c59d6ded5793
The rest would become too political on the design and control of a CBDC, If done correctly is makes banks very unprofitable and the RBNZ is tasked to ensure they dont go bust are are profitable. You could also put the AML industry out of business and remove the banking industry bariers and ability to de bank entire sectors of the ecomony.
Thanks Bernard, a nice spark, as Lenin might have observed 😄
Here’s Varoufakis on UBI with lots of related arguments to your own and a crucial attribute for universal payments: they must come from corporate profits because the latter are socially produced. Key ideas in the first six minutes, details there after - https://www.ubi.org/44/ubi-video-yanis-varoufakis
Awesome idea Bernard! If only politicians would have the courage to pick something like this up and run with it. Something like this would be far cheaper and more effective than our current welfare system - not to mention provide a way to stimulate the economy without pumping money into asset holders disproportionately.
What would you think about some sort of Kiwisaver style set up this Matariki account - when a child is born in NZ where the government would match savings from parents up to a certain amount? This would encourage families to save for their children's future and have the benefit if compound interest. And modelled after a popular programme so perhaps more politically palatable?
Thanks Nick. I think KiwiSaver could be part of the equation somehow.
I'm no fan of retail banks but what's so hard about creating an account and logging into myIR and inputting ones bank account number (aside from realme, which isn't necessary)? A media campaign perhaps also needed. Seems a far more simple solution than creating a surveillance & control coin, I mean CBDC, apps and other infrastructure.
$10,000 for every newborn? Call me a hater but we have people in poverty having kids to collect extra social welfare payments. The offering you suggest could just drive more unfit parents to keep breeding. How about payments to stop beneficiaries having more kids. Novel thought? On a benefit….get annual payments of $5k if you don’t have another kid.
CBDCs are among one of the worst ideas I've ever heard.
"If a Government was worried about how the money might be spent, it could be limited so the e-dollars could not be used to buy alcohol or for gambling, for example."
Great. Why not let the government control every other aspect of your life while we're at it? So they can chose what injections we get, what we can spend our money on. Why not let them choose our partners as well?
We have a coddling problem. No one can ever lose money on the stock market, no child can now leave a sports competition without a medal. We need to grow up and help each other take responsibility for our own actions and situations.
Not sure who needs to hear this but the letting the government control our lives is not the solution, and certainly not the New Zealand I want to live in
A Reserve Bank personal CBDC account for everyone is a great idea. Interactive smartcards that bypassed even the eftpos system (like security keys) would enable direct person-to-person transfer, and do away with the need for cash.
As well as enabling helicopter money, a CBDC replacing cash opens the way for a small but universal transaction tax to replace GST.
Terrible name, though: 'e-tara' sounds like eating a potato. How about flattering the Productivity Commission and calling it the Zeal, one of the names proposed for New Zealand's decimal currency in the 1960s before we showed our love for all things American and split the pound into two dollars.
https://nzhistory.govt.nz/nz-adopts-decimal-currency
The Bank for International Settlement website bis.org has an interesting paper 'Central bank digital currencies: user needs and adoption September 2021' that is accessible, but that I can't provide a link to.
While I understand the reasoning behind this idea, I feel as though there are much more privacy friendly alternatives which can be investigated first. Edward Snowden gives some good thoughts on the dangers of a CBDC.
Blog Post: https://edwardsnowden.substack.com/p/cbdcs
Video Interview: https://decrypt.co/95263/edward-snowden-slams-central-bank-digital-currencies-the-risk-is-very-easy-to-illustrate