7 ms·

The Future of the Monetary System [pdf]

59 points by vikrum 3y ago

ponymontana 3y ago
[flagged]
deleted 3y ago
[deleted]
- deleted 3y ago
  [deleted]
bankerasexample 3y ago
For those who are claiming they should dismiss this paper because it was written by Credit Suisse (who have collapsed), I will weigh in as someone who works in a bank. The people who wrote this would have had absolutely nothing to do with the banks risk management or corporate decision making, and so exist more or less orthogonally from the people who caused its collapse. This is doubly true given European regulation which requires segregation of business lines within the bank: you even see the report is produced by ‘credit suisse research institute’ which will produce+sell research separately from the risk taking parts of the business. Not saying it’s correct/not prone to groupthink but the people writing will be some of the top economists/research analysts out there.
user90131313 3y ago
[flagged]
- pants2 3y ago
  Whatever your thoughts on crypto, it seems short-sighted not to include some discussion of it in a "Future of the Monetary System" paper. You have countries like El Salvador moving to a Bitcoin standard, BlackRock's CEO saying "tokenization will be the next evolution in markets," Norway testing Ethereum-based CBDCs, etc.
  - randomname93857 3y ago
    >> countries like El Salvador moving to a Bitcoin standard Could you please list the countries that are moving to bitcoin, as you say?
    - pants2 3y ago
      Central African Republic, Fiji and Tonga are currently moving to accept Bitcoin as legal tender[1]. 1. https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_country_or_territory https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_...
- imtringued 3y ago
  I'm not sure why anyone would want to use a monetary system that maximizes transaction costs. Yeah sure you personally have an incentive to advertise it, since you are directly benefitting from roping people into paying these transaction costs, but that doesn't make it practical. By transaction costs I not only mean the fees you pay to the miners by the way. Every time there is deflation, there is an opportunity transaction cost made up by the difference in price between the forward pulled transaction and the change in price due to deflation of the reverse transaction that would happen in the future. (Assuming equilibrium of sales and purchases over a lifetime). Companies must source inputs ahead of time, so they are spending money first and earning it later. In other words, they must sell low and buy high. Any enterprise must overcome the hurdle rate imposed by deflation induced transaction costs. This is why deflation kills an economy. The easiest way to reduce transaction costs is by not producing anything and that is why the Bitcoin economy has remained small.
- bongodongobob 3y ago
  World of Warcraft gold is a better and more stable currency than Bitcoin.
  - user90131313 3y ago
    see you at gold MC and beyond :) I enjoy reading these visionary comments. ETF is real. gl.
- toomuchtodo 3y ago
  Until a currency has a military and economy behind it, it’s a toy. That is what a currency represents: power and trust.
  - idiotsecant 3y ago
    I think the fundamental and radical idea of cryptocurrency is that this is not true. Currency can have value even if it isn't derived from the point of a sword. I know crypto has a lot of scam baggage and that is unavoidable for a permissionless system, I think. Regardless, the idea that you can wrest away the levers and dials of monetary policy away from world powers and put it in the hands of a permissionless system is a powerful and potentially system-altering one. I have been a fan of cryptocurrency for this reason since well before people were writing news articles about them. I think the phenomenal success of crypto to this point is a strong indicator that you might be wrong, or at least not totally right
    - throwawayqqq11 3y ago
      > I think the fundamental and radical idea of cryptocurrency is that this is not true. Not to sound nitpicky but an idea cant dis-/proof anything. Trust is the only foundation of cryptocurrencies, and your argument is a good example of biased reasoning to coat it with such (i guess you still hodl). The volatility of cryptocurrencies will be their downfall aka. loss of trust in the long term because people already have the expectation of rising value, whereas a stable currency would require a roughly 1:1 exchange, which would make it hot garbage for pretty much all the hypsters. They value hodling and not circulation, which is the primary use case of a currency. My argument is a systemic one. I am not pointing to graphs or big players.
      - idiotsecant 3y ago
        There is quite a lot of crypto that holds a very consistent value in a trustless, permission-less way and that people (including myself) use as a stable store of value. I suppose you might not be aware of them but it doesn't mean they don't exist. I'm not sure that volatility in layer 1 is a bad thing. You don't buy, for example, Ethereum expecting that it will be worth that same number of us dollars today that it is tomorrow. You buy it to use as computing resource on the ethereum network. If you want something that is stable against the US dollar (which itself pretty wildly volotile lately, thanks to the many Cheeto fingerprints of central bank currency manipulation) you might onstead buy DAI which you can be confident will be worth the number of US dollars you paid for it tomorrow. The ecosystem is maturing and there are valid, elegantly engineered solutions in the crypto space. Don't let the scams and speculation make you ignorant to the real work talented people are doing.
- indy 3y ago
  Unfortunately the people on HackerNews tend to be hostile towards Bitcoin so you probably shouldn't expect a very constructive set of comments here. (learning to ignore these people was the most financially rewarding thing I've done in my life)
  - deleted 3y ago
    [deleted]
  - ramon156 3y ago
    The fact your indication is very close to the original comment makes me wonder if this is alt-account behavior.
    - indy 3y ago
      No, I'm a different person, not sure how I can prove that to you though?
      - lioeters 3y ago
        Maybe you can prove your identity and humanity (!) with some kind of a distributed immutable ledger. ;)
        JP_Watts 3y ago
        One of the features of asymmetric key cryptography is that you can only prove that you're the same person (private key).
        throwawayqqq11 3y ago
        Nope. Identity management needs a central authority. This will be implemented in web5.0 then.
  - toomuchtodo 3y ago
    No one is saying you can't make money off of crypto in the same way you would on Gamestop-esq meme stocks. That does not mean a mechanism to gamble (which is what speculative investments are) will end up as a way of commerce (monetary systems).
- groestl 3y ago
  "0 mention of Bitcoin" might have sparked a discussion, but: as a Millenial I feel your mention of "Boomer" is unwarranted, and as a dev in fintech I very much understand blockchain tech, but "the future of the monetary system" and Bitcoin? Payments maybe, but "the monetary system"? Please.
  - smallmancontrov 3y ago
    Hasn't the monetary system historically reverted to commodity money whenever there was a shakeup in the major powers? I have doubts about the "bitcoin is better commodity money" idea myself, but they have more to do with the fact that Bitcoin is probably quite easy to kill at superpower scale and less to do with the idea that we will never see commodity money ever again.
    - cupcakecommons 3y ago
      What's the vector you think a super power would use to kill it?
      - smallmancontrov 3y ago
        1. Just ban it. Kick it off the app stores, prevent financial services companies from dealing with it, and maybe make an example of a renegade bitcoin ATM company to stop nerds like us from getting ideas. 2. Attack the blockchain itself. It can stand bozo-scale hacks, but NSA scale? They control the internet backbone. They can just drop the packets. They have hardware backdoors all over the place and have been known to successfully hack completely airgapped setups. Maybe they even bring clever math/chips to the fight. That's more speculative than necessary, but again, not actually very speculative next to their historical accomplishments. 3. Deploy police to server room. Or special ops, if they played the non-extradition-country game correctly. We aren't talking about Goldfinger levels of infrastructure. No secret island nuclear program is necessary... but even if it were, remember that superpowers are absolutely capable of that sort of thing.
        3y ago
- LegibleCrimson 3y ago
  Bitcoin can't handle more than 10 transactions per second. That's absolutely useless for anything beyond a toy currency. I'm not against the idea of a fully-digital currency, even a crypto-currency, but Bitcoin is never going to be viable.
  - deleted 3y ago
    [deleted]
deleted 3y ago
[deleted]
fHr 3y ago
Some overengineered paper from January 23. It is 2024 and there is no more cs. I wouldn't take this serious, the bank that published it couldn't even survive 23. No risk management whatsoever.
sedev 3y ago
From the Conclusions section: > The main question we tried to answer is whether a significant shift away from the US dollar as the dominant “hegemonic” currency is likely to occur in the foreseeable future, and in which direction the monetary system might develop. The key conclusion was that the fate of the US dollar as the currency hegemon depends on a number of factors, with the degree to which US policy makers would be able to maintain macroeconomic stability relative to other countries of supreme importance. Only if stability is maintained will the US dollar retain its position as the safe-haven currency of choice. In heavily hedged terms, they conclude that the situation is currently stable and likely to remain so. My opinion is that there's good information in this document but the editing (mostly in the sense of structure and clarity) is quite poor, prone to using the very real complexity of the issues at hand as an excuse for weasel words, wishy-washiness, and desperation to please one's boss. In reading this document, I recommend that you keep in mind that the document is from late 2022 and Credit Suisse imploded in early 2023, so, as the document's authors might say, one suspects that it does not represent a level of intellectual rigor that one would prefer to see from a globally important bank.
- nimbius 3y ago
  Economic sanctions imposed by Switzerland on Russian individuals and businesses had the most significant impact on the demise of the bank. Credit Suisse held about $33 billion for Russian clients, 50% more than UBS. What does any of this have to do with "intellectual rigor?" sources are cited in the paper and the authors are among leading global economists. death by association is a cheap way to avoid the real intellectual rigor of refuting legitimate points in the publication. Political unrest in the US and US over-reliance on sanctions are two of the most damning threats to monetary hegemony in the 21st century. routine defaults on an arbitrary ceiling of debt have precipitously reduced US credit ratings over the past decade. a federal insurrection is also something you might not wish to see in a country that boasts its safe currency. https://en.wikipedia.org/wiki/United_States_sanctions https://en.wikipedia.org/wiki/United_States_sanctions the us sanctions about 26 countries and nearly 2300 people. so https://www.cnas.org/publications/reports/sanctions-by-the-numbers-2022-year-in-review https://www.cnas.org/publications/reports/sanctions-by-the-n...

59 points by vikrum 3y ago

ponymontana 3y ago

[flagged]

deleted 3y ago

[deleted]

deleted 3y ago
[deleted]

bankerasexample 3y ago

For those who are claiming they should dismiss this paper because it was written by Credit Suisse (who have collapsed), I will weigh in as someone who works in a bank. The people who wrote this would have had absolutely nothing to do with the banks risk management or corporate decision making, and so exist more or less orthogonally from the people who caused its collapse. This is doubly true given European regulation which requires segregation of business lines within the bank: you even see the report is produced by ‘credit suisse research institute’ which will produce+sell research separately from the risk taking parts of the business. Not saying it’s correct/not prone to groupthink but the people writing will be some of the top economists/research analysts out there.

user90131313 3y ago

[flagged]

pants2 3y ago
Whatever your thoughts on crypto, it seems short-sighted not to include some discussion of it in a "Future of the Monetary System" paper. You have countries like El Salvador moving to a Bitcoin standard, BlackRock's CEO saying "tokenization will be the next evolution in markets," Norway testing Ethereum-based CBDCs, etc.
- randomname93857 3y ago
  >> countries like El Salvador moving to a Bitcoin standard Could you please list the countries that are moving to bitcoin, as you say?
  - pants2 3y ago
    Central African Republic, Fiji and Tonga are currently moving to accept Bitcoin as legal tender[1]. 1. https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_country_or_territory https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_...
imtringued 3y ago
I'm not sure why anyone would want to use a monetary system that maximizes transaction costs. Yeah sure you personally have an incentive to advertise it, since you are directly benefitting from roping people into paying these transaction costs, but that doesn't make it practical. By transaction costs I not only mean the fees you pay to the miners by the way. Every time there is deflation, there is an opportunity transaction cost made up by the difference in price between the forward pulled transaction and the change in price due to deflation of the reverse transaction that would happen in the future. (Assuming equilibrium of sales and purchases over a lifetime). Companies must source inputs ahead of time, so they are spending money first and earning it later. In other words, they must sell low and buy high. Any enterprise must overcome the hurdle rate imposed by deflation induced transaction costs. This is why deflation kills an economy. The easiest way to reduce transaction costs is by not producing anything and that is why the Bitcoin economy has remained small.
bongodongobob 3y ago
World of Warcraft gold is a better and more stable currency than Bitcoin.
- user90131313 3y ago
  see you at gold MC and beyond :) I enjoy reading these visionary comments. ETF is real. gl.
toomuchtodo 3y ago
Until a currency has a military and economy behind it, it’s a toy. That is what a currency represents: power and trust.
- idiotsecant 3y ago
  I think the fundamental and radical idea of cryptocurrency is that this is not true. Currency can have value even if it isn't derived from the point of a sword. I know crypto has a lot of scam baggage and that is unavoidable for a permissionless system, I think. Regardless, the idea that you can wrest away the levers and dials of monetary policy away from world powers and put it in the hands of a permissionless system is a powerful and potentially system-altering one. I have been a fan of cryptocurrency for this reason since well before people were writing news articles about them. I think the phenomenal success of crypto to this point is a strong indicator that you might be wrong, or at least not totally right
  - throwawayqqq11 3y ago
    > I think the fundamental and radical idea of cryptocurrency is that this is not true. Not to sound nitpicky but an idea cant dis-/proof anything. Trust is the only foundation of cryptocurrencies, and your argument is a good example of biased reasoning to coat it with such (i guess you still hodl). The volatility of cryptocurrencies will be their downfall aka. loss of trust in the long term because people already have the expectation of rising value, whereas a stable currency would require a roughly 1:1 exchange, which would make it hot garbage for pretty much all the hypsters. They value hodling and not circulation, which is the primary use case of a currency. My argument is a systemic one. I am not pointing to graphs or big players.
    - idiotsecant 3y ago
      There is quite a lot of crypto that holds a very consistent value in a trustless, permission-less way and that people (including myself) use as a stable store of value. I suppose you might not be aware of them but it doesn't mean they don't exist. I'm not sure that volatility in layer 1 is a bad thing. You don't buy, for example, Ethereum expecting that it will be worth that same number of us dollars today that it is tomorrow. You buy it to use as computing resource on the ethereum network. If you want something that is stable against the US dollar (which itself pretty wildly volotile lately, thanks to the many Cheeto fingerprints of central bank currency manipulation) you might onstead buy DAI which you can be confident will be worth the number of US dollars you paid for it tomorrow. The ecosystem is maturing and there are valid, elegantly engineered solutions in the crypto space. Don't let the scams and speculation make you ignorant to the real work talented people are doing.
indy 3y ago
Unfortunately the people on HackerNews tend to be hostile towards Bitcoin so you probably shouldn't expect a very constructive set of comments here. (learning to ignore these people was the most financially rewarding thing I've done in my life)
- deleted 3y ago
  [deleted]
- ramon156 3y ago
  The fact your indication is very close to the original comment makes me wonder if this is alt-account behavior.
  - indy 3y ago
    No, I'm a different person, not sure how I can prove that to you though?
    - lioeters 3y ago
      Maybe you can prove your identity and humanity (!) with some kind of a distributed immutable ledger. ;)
      - JP_Watts 3y ago
        One of the features of asymmetric key cryptography is that you can only prove that you're the same person (private key).
      - throwawayqqq11 3y ago
        Nope. Identity management needs a central authority. This will be implemented in web5.0 then.
- toomuchtodo 3y ago
  No one is saying you can't make money off of crypto in the same way you would on Gamestop-esq meme stocks. That does not mean a mechanism to gamble (which is what speculative investments are) will end up as a way of commerce (monetary systems).
groestl 3y ago
"0 mention of Bitcoin" might have sparked a discussion, but: as a Millenial I feel your mention of "Boomer" is unwarranted, and as a dev in fintech I very much understand blockchain tech, but "the future of the monetary system" and Bitcoin? Payments maybe, but "the monetary system"? Please.
- smallmancontrov 3y ago
  Hasn't the monetary system historically reverted to commodity money whenever there was a shakeup in the major powers? I have doubts about the "bitcoin is better commodity money" idea myself, but they have more to do with the fact that Bitcoin is probably quite easy to kill at superpower scale and less to do with the idea that we will never see commodity money ever again.
  - cupcakecommons 3y ago
    What's the vector you think a super power would use to kill it?
    - smallmancontrov 3y ago
      1. Just ban it. Kick it off the app stores, prevent financial services companies from dealing with it, and maybe make an example of a renegade bitcoin ATM company to stop nerds like us from getting ideas. 2. Attack the blockchain itself. It can stand bozo-scale hacks, but NSA scale? They control the internet backbone. They can just drop the packets. They have hardware backdoors all over the place and have been known to successfully hack completely airgapped setups. Maybe they even bring clever math/chips to the fight. That's more speculative than necessary, but again, not actually very speculative next to their historical accomplishments. 3. Deploy police to server room. Or special ops, if they played the non-extradition-country game correctly. We aren't talking about Goldfinger levels of infrastructure. No secret island nuclear program is necessary... but even if it were, remember that superpowers are absolutely capable of that sort of thing.
      - 3y ago
LegibleCrimson 3y ago
Bitcoin can't handle more than 10 transactions per second. That's absolutely useless for anything beyond a toy currency. I'm not against the idea of a fully-digital currency, even a crypto-currency, but Bitcoin is never going to be viable.
- deleted 3y ago
  [deleted]

deleted 3y ago

[deleted]

fHr 3y ago

Some overengineered paper from January 23. It is 2024 and there is no more cs. I wouldn't take this serious, the bank that published it couldn't even survive 23. No risk management whatsoever.

sedev 3y ago

From the Conclusions section: > The main question we tried to answer is whether a significant shift away from the US dollar as the dominant “hegemonic” currency is likely to occur in the foreseeable future, and in which direction the monetary system might develop. The key conclusion was that the fate of the US dollar as the currency hegemon depends on a number of factors, with the degree to which US policy makers would be able to maintain macroeconomic stability relative to other countries of supreme importance. Only if stability is maintained will the US dollar retain its position as the safe-haven currency of choice. In heavily hedged terms, they conclude that the situation is currently stable and likely to remain so. My opinion is that there's good information in this document but the editing (mostly in the sense of structure and clarity) is quite poor, prone to using the very real complexity of the issues at hand as an excuse for weasel words, wishy-washiness, and desperation to please one's boss. In reading this document, I recommend that you keep in mind that the document is from late 2022 and Credit Suisse imploded in early 2023, so, as the document's authors might say, one suspects that it does not represent a level of intellectual rigor that one would prefer to see from a globally important bank.

nimbius 3y ago
Economic sanctions imposed by Switzerland on Russian individuals and businesses had the most significant impact on the demise of the bank. Credit Suisse held about $33 billion for Russian clients, 50% more than UBS. What does any of this have to do with "intellectual rigor?" sources are cited in the paper and the authors are among leading global economists. death by association is a cheap way to avoid the real intellectual rigor of refuting legitimate points in the publication. Political unrest in the US and US over-reliance on sanctions are two of the most damning threats to monetary hegemony in the 21st century. routine defaults on an arbitrary ceiling of debt have precipitously reduced US credit ratings over the past decade. a federal insurrection is also something you might not wish to see in a country that boasts its safe currency. https://en.wikipedia.org/wiki/United_States_sanctions https://en.wikipedia.org/wiki/United_States_sanctions the us sanctions about 26 countries and nearly 2300 people. so https://www.cnas.org/publications/reports/sanctions-by-the-numbers-2022-year-in-review https://www.cnas.org/publications/reports/sanctions-by-the-n...