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    Finance is changing dramatically. A new book explains how

    The future of money. According to Eswar Prasad. Belknap Press; 496 pages; $ 35 and £ 28.95

    NSOr almost People, money still means physical cash printed only by public institutions. But it’s a surprisingly modern incarnation. Only a century ago, private currencies were competing with government-issued banknotes. It may also be short-lived as cash succumbs to the digitization of finance and new payment methods take over. This big bang has a huge impact on states, people and businesses. Eswar Prasad says it depends on the central bank, the world’s poorest institution to embrace change without losing control, whether it benefits more than harm.

    It may not surprise the reader that the cash is declining. Many people deposit from their laptops to the bank and pay by phone. Financial innovation is also old news. One of the first “fintech” breakthroughs was centuries ago when it helped China design a boom in Asian commerce by introducing banknotes in place of heavy and rare metal coins. It happened to. But this time it’s not, Prasad argues. He states that previous overhauls were primarily improvements to existing systems. The end of cash is revolutionary (perhaps within 10 or 2 years).

    He says three types of destructive agents are involved. The first is a fintech company. There are different groups, they have a strong online presence, and they have the knack for processing data.Their onslaught is debit cards and ATM— Because it covers all aspects of financial markets and financial institutions, from lending and payments to investments. By expanding the markets for financial services, they help democratize them. Still, they do not impose a change of power. Banks are still dominant.

    Bitcoin, and many other digital money it has inspired, can bring about more radical changes. By joining the user’s network to validate transactions, payments can be made without the need for a trusted central authority. Prasad suspects that decentralized money (less secure, stable, and less efficient) will outperform his official cousin. But he warns that the relevant technology is being adopted by big companies like Facebook. Their billions of users and economic influence have allowed them to make cryptocurrencies an attractive medium of exchange and a means of storing value.

    Fearing that this could unemploy them, many central banks are beginning to confuse themselves by developing their own digital currencies — the third and most important shock. Well done, these “CBDC“s” upgrades the financial system. It is more efficient than cash to settle transactions and can also provide a backstop in the event of a private sector-managed digital payment system failing. They can provide access to digital payments and other financial products to the “bank accountless” community. It could also allow central banks to try new monetary policy tools to make it easier to track illegal transactions.

    Previously IMF, Prasad may have been expected to support a public solution. Even if the pendulum returns to the private sector, he believes the central bank should and will continue to be at the center of finance. But the strength of his analysis is that he is familiar with both the technical details and the big picture trade-offs.He is afraid CBDC■ It may be vulnerable to hacking and bugs. They can crush private innovations and cause instability that they intend to prevent. On the other hand, the new responsibilities of the central bank can undermine the independence of the central bank. Transaction privacy is lost. Prasad practices the balance he advocates and has an enthusiastic but subtle nuance.

    He also succeeded in making the financial system clear and interesting, without resorting to shortcuts or exaggerations. His patient explanation of how it works, studded with well-studied examples and personal anecdotes, imposes cosmic order on the constellations of institutions that determine how money flows. To do. When it loses its shape, it becomes difficult to understand the meaning of money. This book explores its turbulent economic and social implications and shapes this most abstract concept. ■■

    This article was published in the Printed Books and Arts section under the heading “Kill Bill”.

    Finance is changing dramatically. A new book explains how Source link Finance is changing dramatically. A new book explains how

    The post Finance is changing dramatically. A new book explains how appeared first on California News Times.

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