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cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start [2022/05/16 18:21] nick ↷ Links adapted because of a move operation |
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| ====== Question: 04. How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum-employment and price-stability goals? ====== | ====== Question: 04. How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum-employment and price-stability goals? ====== | ||
| - | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:start| Return to CBDC Benefits, Risks, and Policy Considerations ]] | + | |< 100% >| |
| + | | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:start| Return to CBDC Benefits, Risks, and Policy Considerations ]] | <WRAP> | ||
| + | <html><b> | ||
| + | <a href="mailto:[email protected]?Subject=OMG's CBDC WG Response: | ||
| + | Question: 04. How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum-employment and price-stability goals? | ||
| + | ">Provide Feedback</a></b> | ||
| + | </html> | ||
| + | </WRAP> | | ||
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| [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | ||
| - | **How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum-employment and price-stability goals?** | + | **How might a U.S. CBDC affect the Federal Reserve’s ability to effectively implement monetary policy in the pursuit of its maximum employment and price stability goals?** |
| ===== Answer ===== | ===== Answer ===== | ||
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| </WRAP>| | </WRAP>| | ||
| ^ Open Market Operations | <WRAP> | ^ Open Market Operations | <WRAP> | ||
| - | **Open Market Operations** involves the buying and selling of government securities. The term **Open Market** means that the Fed doesn’t decide on its own which securities dealers it will do business with on a particular day. Rather, the choice emerges from an “open market” in which the various securities dealers the Fed does business with – the primary dealers – compete on the basis of price. **Open Market Operations** are flexible, and thus, the most frequently used tool of monetary policy. | + | **Open Market Operations** involve the buying and selling of government securities. The term **Open Market** means that the Fed doesn’t decide on its own which securities dealers it will do business with on a particular day. Rather, the choice emerges from an “open market” in which the various securities dealers the Fed does business with – the primary dealers – compete on the basis of price. **Open Market Operations** are flexible, and thus, the most frequently used tool of monetary policy. |
| </WRAP>| | </WRAP>| | ||
| ^ Reserve Balances | <WRAP> | ^ Reserve Balances | <WRAP> | ||
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| [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | ||
| - | Figure {{ref>transmissionOfmoney}} illustrates the transmission of monetary policy. In the broadest terms, monetary policy works by spurring or restraining the growth of overall demand for goods and services in the economy. When overall demand slows relative to the economy's capacity to produce goods and services, unemployment tends to rise and inflation tends to decline. The FOMC helps stabilize the economy in the face of these developments through the stimulation of the overall demand using an easing of monetary policy that lowers interest rates. Conversely, when overall demand for goods and services is too strong, unemployment can fall to unsustainably low levels and inflation can rise. In these situations, the Federal Reserve guides economic activity back to more sustainable levels and keeps inflation in check by tightening monetary policy to raise interest rates. This process of the FOMC eases and tightens monetary policy to achieve its goals.(( | + | Figure {{ref>transmissionOfmoney}} illustrates the transmission of monetary policy. In the broadest terms, monetary policy works by spurring or restraining the growth of overall demand for goods and services in the economy. When overall demand slows relative to the economy's capacity to produce goods and services, unemployment tends to rise and inflation tends to decline. The FOMC helps stabilize the economy in the face of these developments through the stimulation of the overall demand using an easing of monetary policy that lowers interest rates. Conversely, when overall demand for goods and services is too strong, unemployment can fall to unsustainably low levels and inflation can rise. In these situations, the Federal Reserve guides economic activity back to more sustainable levels and keeps inflation in check by tightening monetary policy to raise interest rates. This process of the FOMC eases and tightens monetary policy to achieve its goals. (( |
| Federal Reserve, | Federal Reserve, | ||
| __Monetary Policy: What Are Its Goals? How Does It Work?__ | __Monetary Policy: What Are Its Goals? How Does It Work?__ | ||
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| <figure transmissionOfmoney> | <figure transmissionOfmoney> | ||
| - | {{ :cbdc:private:cbdc_omg:04_doc:20_comments:brp:q04:screen_shot_2022-04-17_at_8.05.33_pm.png?700 |}} | + | {{ cbdc:04_doc:20_comments:brp:q04:screen_shot_2022-04-17_at_8.05.33_pm.png?700 |}} |
| <caption>The transmission of Monetary Policy.(( | <caption>The transmission of Monetary Policy.(( | ||
| Federal Reserve, | Federal Reserve, | ||
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| [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | [[cbdc:public:cbdc_omg:04_doc:20_comments:brp:q04:start| Return to Top]] | ||
| - | The following "desirements" are from the [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:cbdc_omg:15_summary:start | White Paper]] as identified by the [[https://www.omg.org/ | Object Management Group's ]] report called [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:cbdc_omg:15_summary:start | White Paper Analysis]]: | + | The following "desirements" are from the [[https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf | White Paper]] as identified by the [[https://www.omg.org/ | Object Management Group's ]] CBDC WG report called [[cbdc:public:cbdc_omg:04_doc:12_summary:start | White Paper Analysis]]: |
| <table> | <table> | ||
| - | <caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG</caption> | + | <caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG's CBDC WG.</caption> |
| |< 100% 15% >| | |< 100% 15% >| | ||
| ^ Benefits | B0003, B0004, B0007, B0011, B0018, B0020, B0024, B0025,B0026, B0029, B0034, B0038, B0040, B0044, B0045, B0046, B0047, B0049, B0051 | | ^ Benefits | B0003, B0004, B0007, B0011, B0018, B0020, B0024, B0025,B0026, B0029, B0034, B0038, B0040, B0044, B0045, B0046, B0047, B0049, B0051 | | ||
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| </WRAP>| | </WRAP>| | ||
| ^ B0025 ^ Serve as a new foundation for the payment system |<WRAP> | ^ B0025 ^ Serve as a new foundation for the payment system |<WRAP> | ||
| - | The CBDC could offer another mechanism to the existing non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks. However, in order to offer real-time settlements, it may need to use a different mechanism than the existing [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:04_cbdc_guide:06_append:glossary:a:ach Automated Clearing House (ACH) Network | Automated Clearing House (ACH) Network]] currently in use to electronically move money between banks accounts across the U.S. The current ACH network is run by an organization called Nacha, formerly the [[https://www.nacha.org/ | National Automated Clearing House Association (NACHA)]]. | + | The CBDC could offer another mechanism to the existing non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks. However, in order to offer real-time settlements, it may need to use a different mechanism than the existing [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:a:ach | Automated Clearing House (ACH) Network]] currently in use to electronically move money between banks accounts across the U.S. The current ACH network is run by an organization called Nacha, formerly the [[https://www.nacha.org/ | National Automated Clearing House Association (NACHA)]]. |
| </WRAP>| | </WRAP>| | ||
| ^ B0026 ^ Provide a bridge between legacy and new payment services |<WRAP> | ^ B0026 ^ Provide a bridge between legacy and new payment services |<WRAP> | ||
| - | There definitely would need to be a bridge between the existing ACH-NACHA payment network and a U.S. CBDC, its associated Consensus Algorithms, and the network of nodes. However, in addition to the bridge between the two, there probably needs to exist a new consolidated frontend ([[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:a:api | Application Programming Interface (API)]]?) that abstracts the type of payment from the participants in the transactions. In other words, the transaction should be agnostic to the non-cash mechanisms such as debit cards, credit cards, electronic transfers, checks, and CBDC. | + | There definitely would need to be a bridge between the existing ACH-NACHA payment network and a U.S. CBDC, its associated Consensus Algorithms, and the network of nodes. However, in addition to the bridge between the two, there probably needs to exist a new consolidated frontend ([[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:a:api | Application Programming Interface (API)]]?) that abstracts the type of payment from the participants in the transactions. In other words, the transaction should be agnostic to non-cash mechanisms such as debit cards, credit cards, electronic transfers, checks, and CBDC. |
| </WRAP>| | </WRAP>| | ||
| ^ B0029 ^ Support basic purchases of: <WRAP> | ^ B0029 ^ Support basic purchases of: <WRAP> | ||
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| </WRAP>| | </WRAP>| | ||
| ^ D0005 ^ Design could affect monetary policy implementation and interest rate control by altering the supply of reserves in the banking system |<WRAP> | ^ D0005 ^ Design could affect monetary policy implementation and interest rate control by altering the supply of reserves in the banking system |<WRAP> | ||
| - | From a Monetary Policy perspective, only the **Reserve Balances** are important. As long as the **Reserve Balances** account for Cryptocurrency and U.S. CBDC balances there should be little impact on the Monetary Policy. | + | From a Monetary Policy perspective, only the **Reserve Balances** is important. As long as the **Reserve Balances** account for Cryptocurrency and U.S. CBDC balances there should be little impact on the Monetary Policy. |
| </WRAP>| | </WRAP>| | ||
| ^ D0009 ^ Design should allow for significant foreign demand for CBDC, further complicating monetary policy implementation |<WRAP> | ^ D0009 ^ Design should allow for significant foreign demand for CBDC, further complicating monetary policy implementation |<WRAP> | ||
cbdc/public/cbdc_omg/04_doc/20_comments/brp/q04/start.1652739690.txt.gz · Last modified: 2022/05/16 18:21 by nick
