Introduced by John Psaila, Managing Partner of Deloitte Luxembourg, and moderated by Sarah Khabirpour, the 10th edition of Deloitte's Horizon conference was held on September 28 in a hybrid mode. In 2022, Deloitte will offer its event a brand new format. In the meantime, this year's phygital event gathered 50 onsite attendees and 250 online participants. In this article, the first of a series of four, we get into the lecture given by Bruno Colmant.
Bruno Colmant, a financial specialist, tax expert, economist, university professor, but also multidisciplinary thinker and prolific author, opened the conference by addressing a trend that will constitute a genuine revolution in monetary history: central bank-issued digital currencies (CBDC's).
He reminded the audience that money has a dual nature. It is both a store of wealth - a stock - created by central banks and a means of payment - a flow - generated by private banks. In the 1930's, the American economist Irving Fisher had the idea of sterilizing the money flow and ensuring that only central banks could create money. That way, if the economy lacks inflation, the central bank can increase the stock of money and lend to banks, which in turn lend to individuals or businesses. On the other hand, in case of overheating, the central bank can reduce the number of monetary units. "This is quite a revolutionary idea", commented Bruno Colmant, "because it is tantamount to nationalizing money". Anyway, Fisher's idea, known as the Chicago Plan, never saw the light of day: President Roosevelt opposed it, as did commercial banks.
"In my book on the Chicago monetary Plan published last year, I wondered if the idea of a state-issued cryptocurrency founded on this plan was plausible", recalled Bruno Colmant. "And I wrote that we were not that far from such a scenario".
According to him, the reason why major central banks are currently working on digital currencies is due to the fact that they hold a large part of the public debt, which will merely continue to accumulate in the coming decades.
"The big advantage for states is that if central banks are able to determine the quantity of money, they are also able to constantly modulate the quantity of government bonds they buy", said Bruno Colmant. "By the way, in Fisher's plan all public debt was to be bought by the US central bank", he added.
One of the dangers of CBDC's would be that the entire life cycle of those currencies could be traced. Were the system to become widespread, it would mean the end of black money and, all money flows being traceable, tax returns would become superfluous. At a later stage, governments would have the power to affect consumption or savings, and to decide to deflate or inflate the economy by simply acting on interest rates. In the end, this would trigger a profound change in the shape of the global economy.
"Are private banks aware of the magnitude of the coming change?", asked Bruno Colmant. "Intelligent bankers are totally aware of what is happening", he answered. "They are already transforming their banks into commercial platforms - such as Belfius and KBC in Belgium - offering not only banking but also a whole range of new services. The banks that will survive in the future will be niche players, but it will be difficult for retail banks to adapt to the new environment", he said.
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