Podcast Summary
Real Estate and Society's Digital Trends: Real estate managers use tech for local insights and global expertise, China's digital money mitigates virus spread, but raises privacy concerns, adaptability and tech embrace crucial in daily life
Both in the world of real estate investment and in society as a whole, there's a growing trend towards leveraging technology and digitalization. Principal Asset Management, as a real estate manager, uses a 360-degree perspective to deliver local insights and global expertise, identifying the most compelling investing opportunities. Meanwhile, in the context of the ongoing pandemic, China has shown that digitalization of money can help mitigate the spread of the virus and keep the economy functioning. However, this also raises concerns about privacy and government surveillance. The discussion also touched upon the invisible struggles people face in their daily lives and the importance of empathy and awareness. Overall, these developments highlight the importance of adaptability and embracing technological advancements in various aspects of life.
Cash in the Digital Economy: Not Dead Yet: Despite the convenience of digital transactions, cash remains a safeguard and should be protected for civil liberties and privacy reasons.
While cash is losing significance in the digital economy, it's not dead yet. The convenience of digital transactions and intentional pushes from certain industries and elites have led to a decline in cash usage. However, there are arguments for its continued existence as a backup or fail-safe option. The shift towards digital finance raises questions about civil liberties, privacy, and surveillance. As a society, we need to consider whether we want to maintain the balance between these aspects or tip the scale towards control and censorship. Rowan Gray, our guest today, emphasizes the importance of physical cash as a safeguard and advocates for protecting it.
Money is a creature of public governance and law: Money, whether physical or digital, requires state validation and enforcement for its existence and function in an economy governed by the rule of law
The relationship between money and governments has historically been one of public governance and law. Money, whether physical cash or digital, is ultimately a creature of law and requires some form of public authority for enforcement and final settlement. The state's ability to validate and enforce contracts and property rights gives it primacy in any society with a functioning rule of law. Throughout history, there have been various forms of private money, but they have always had a relationship to state validation and enforcement. In the modern economy, public law and legal governance structures even the most private of relationships. So, when considering digital cash and its role in the economy, it's important to remember that money will always be a creature of public governance and law.
The historical significance of physical cash and its relation to Modern Monetary Theory: Physical cash, with roots in ancient civilizations, shares similarities with Modern Monetary Theory, providing governments with independence and practical solutions for injecting money into economies.
The use of physical cash as a form of money has historical roots dating back to ancient civilizations and their use of tokens as proof of tax payments. This system of bearer instruments, without a central ledger, shares similarities with Modern Monetary Theory (MMT) and highlights the relationship between physical and abstract forms of money. For governments, cash holds significance as it allows them to maintain independence from private intermediaries and provides a practical solution for injecting money into areas lacking established financial institutions. Cash's physical nature offers an infrastructure advantage, making it an essential component in the complex relationship between governments, financial systems, and the economy.
Exploring the benefits of decentralized instruments in unstable political environments: Decentralized instruments, like cryptocurrencies, offer value in unstable situations due to self-validation and flexibility, but bridging the gap between decentralized and traditional public money institutions can be challenging, with potential for alignment through open dialogue and exploration of new concepts.
The benefits of decentralized instruments, like cryptocurrencies, can be particularly valuable in situations where political units are unstable and borders are shifting. These instruments offer a level of self-validation and flexibility that traditional public authorities may not be able to provide. However, bridging the gap between those who advocate for decentralized currencies and those who support public money institutions can be challenging. Some skepticism comes from the association of these ideas with libertarian or fringe groups. Yet, there is potential for alignment between the two perspectives, as both value individual empowerment and economic equality. The MMT community, in particular, has shown openness to exploring these ideas, recognizing the potential for technological advancements to enhance their economic goals. The challenge lies in the complexity of integrating these new concepts with centuries of monetary history and macroeconomic theory. As we navigate this evolving landscape, it's essential to keep an open mind and continue the dialogue between various perspectives.
Government's Role in Social Justice and Equality vs. Individual Liberties: While governments play a role in social justice and equality, it's essential to maintain a balance with individual liberties. Cryptocurrencies' impact on monetary sovereignty is nuanced, with the legal framework playing a significant role in determining the value of money.
While the government plays a crucial role in social justice and equality, it's essential not to blindly trust it with all our hopes and dreams. History shows us that governments have kept lists of people and their activities, leading to problematic consequences. Maintaining a balance between collective government and individual liberties is crucial. Regarding cryptocurrencies, some argue they could diminish the monetary sovereignty of governments, allowing for censorship-free digital money. However, a more nuanced understanding of the role of law and the state reveals that the value of public money is not just determined by taxes but by the legal framework that underpins the entire economy. Private money has coexisted with public money throughout history without posing a significant challenge. Ultimately, understanding the complex relationship between law, money, and the state is crucial for navigating the ongoing debate surrounding cryptocurrencies and their potential impact on monetary sovereignty.
The Role of Public Legal System in Protecting Digital Cash Transactions: A true digital dollar allows individuals to control their own money without relying on banks or fintech companies, and transactions are validated through a decentralized system, ensuring security and privacy.
The dependence of private entities on the public legal system for protecting and supporting their wealth becomes more apparent when the use of legal power is involved. Regarding digital cash, a true digital dollar would mean having a bearer asset that is not a liability of any bank or fintech company, but something that the individual actually controls. This concept can be divided into three pillars: accounts, credit, and cash. With cash, the critical part is the ability of two different wallets to effectuate a transaction according to predetermined rules, similar to exchanging physical cash without revealing identities. The wallet system identifies each other with a handshake, and the wallet balances work differently from transferring money between accounts. In this scenario, two individuals wearing balaclavas exchange $100 for smaller bills, effectively transacting $10, but the bank teller only validates the no double spending rule and changes the relative size of different wallet balances.
Decentralized Transaction System using Robots: Create a secure, decentralized transaction system between two wallets acting as robots, ensuring protection against counterfeiting and privacy, without the need for a third party or government surveillance.
It's possible to create a decentralized, secure transaction system using a specific protocol between two wallets, acting as robots, ensuring protection against counterfeiting and privacy, without the need for a third party or government surveillance. This system would involve approved hardware and software, and transactions would only go through if they meet certain criteria, such as a handshake using public keys and a balance check that equals a predetermined sum. The wallet balances could be kept at home, and the protocol would ensure the finality and secrecy of transactions. This concept is inspired by the FreedomBox Foundation, which aims to provide privacy-respecting, open-source software for various services, allowing individuals to host their own "cloud" services at home, reducing reliance on centralized financial technology companies and increasing privacy.
Digital cash with 4th amendment protection: Individuals can use digital wallets for financial privacy and control, but building consensus for a common protocol is crucial.
The use of turnkey, easy-to-use software for digital cash transactions with 4th amendment protection can provide individuals with a degree of financial privacy and control. This technology, which can be compared to keeping money under a mattress but with a tiny phone charger as the "mattress," would likely not replace traditional banking systems for large institutional money flows but could serve as a tool for economic privacy for individuals. Building consensus for this common protocol, especially for international transactions, is crucial, and the privacy debate around financial transactions has already begun due to concerns over government surveillance and censorship. The limits on the size of physical bills serve as a potential precedent for quantitative limits on digital wallets. The speaker suggests that a reasonable balance can be had in terms of scale and scope of these digital wallets, but it's essential not to capitulate to the center of the negotiation on day one.
Motivations behind CBDCs may not always be privacy-focused: Central banks' motivations for CBDCs can vary, with some prioritizing control and macroeconomic management over privacy and decentralization.
While the conversation around central bank digital currencies (CBDCs) often focuses on privacy and decentralization, many central banks may have other motivations. For instance, the Swedish Central Bank's limited e-cash layer is more akin to carrying cash on a plane than a radical shift in international payments flows. The debate over CBDCs often centers around token- versus account-based systems, but many proposals for distributed ledgers are actually account-based systems with decentralized accounts. Central bankers, who are typically macroeconomic or statistical modelers, have a centralizing public planning mentality that may not align with civil libertarian concerns. Organizations like Positive Money in the UK and individuals like Brett Scott are advocating for the importance of digital cash and privacy. However, it's essential to recognize that the motivations behind CBDCs may not always be privacy-centric.
Central Bank Accounts vs Token-Based Systems: Choices Matter: The infrastructure for digital public money should be carefully considered, as it may be challenging to add a token-based system once centralized accounts are established. China's approach to digital money highlights the importance of balancing control, transparency, and privacy.
The ongoing debate around central bank accounts versus token-based systems for digital public money is more complex than it seems at first glance. While some argue that central bank accounts are the way to go and dismiss token-based systems as irrelevant, others see the importance of having a token-based cash-like instrument within a digital monetary system. The speaker warns that once the infrastructure for future digital public money is built around centralized accounts, it will be difficult, if not impossible, to go back and add a token-based system. China's approach to digital money, which emphasizes centralized control and transparency, serves as a cautionary tale. The Chinese government, acting as the first and last friend in every transaction, is building a system where they have access to all financial data. While this is justified in the name of law enforcement, it raises concerns about privacy and the potential for misuse. As the speaker emphasizes, this is a critical moment in the development of digital public money, and it's essential to consider the long-term implications of the choices we make now.
Integrating Cryptocurrencies and Modern Monetary Theory with Digital Token Central Bank Money: Economist Rowan Gray advocates for the integration of cryptocurrencies and Modern Monetary Theory (MMT) into a digital token version of central bank money, arguing it's the ideal moment to do so before infrastructure fully develops, and expects his book 'Digitizing the Dollar' to be a must-read on the topic.
Economist and author Rowan Gray is advocating for the integration of cryptocurrencies and Modern Monetary Theory (MMT) and the creation of a digital token version of central bank money. Gray argues that this is the ideal moment to establish this concept as part of the future digital money system, as it may become increasingly difficult to add this feature once the infrastructure is fully developed. He also acknowledges the challenge of convincing both the pro-public institution camp and the libertarian crypto enthusiasts to work together on this. Gray's book, "Digitizing the Dollar," coming out in January 2021, is expected to be a must-read on this topic. Additionally, a new Bloomberg podcast, "Money Stuff," hosted by Matt Levine and Katie Greifeld, is worth checking out for those interested in finance and Wall Street news.
