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E-Yuan, E-Euro, and other Es

by on 14/01/2021

A question. What is the difference between a dollar and e-yuan? China can increase the volume of e-yuan, any time it wants?
Bitcon, on the other hand has fixed number of bitcoins, not controlled by anyone, this is a special feature of bitcoin. The block chain is a nice feature, but which government will give up this control to know who sold to who to check if taxes were paid?

EugenR: The difference is what government you trust more, the Chinese government or the US government. Printing money is not an intention but a result of economic policy. If you have a government policy, where income is less than expense, or deficit, the result is either government sector taking over the private sector, by increased interest rate, and it also means shrinkage of the economic basis that pays taxes in the future, or printing money, what is by necessasity dilution of value of the currency against other items, be it consumption items or investment items as shares, real estate, other currencies, crypto urgency, etc. That’s what is happening now in the US. US luck is, that China has no internationally recognised and usable currency, and Europe has also deficit due to Covid-19. But at the moment, the covid will be over, and Euro zone will return to its normality, what is balanced trade balance, and/or China will have an internationally functioning currency, while US will continue its policy of deficit, because it is in the genetic of US economy. Otherwise it would mean increasing taxes, or reduction of government expenses, (less wars, what is imposible), the dollar will lose its relative value.

Unless, unless US global corporations will be forced to bring back to US their enormous profits accumulated in tax shelter countries, and now its called foreign investments, then it is all
“As if”, כאילו.
https://www.marketwatch.com/story/how-did-ireland-become-the-us-governments-third-largest-creditor-2017-09-20

An other question:
About digital currency – if the question is trust – China or the US – why China creates e-yuan instead of regular yuan? Why e-yuan is more trustworthy than yuan?

EugenR: currency is not only about trust. International reserve currency needs behind it a trustworthy payment and deposits system. And if it is possible also an absolute commitment for securing secrecy of information. This third condition, due to the anti terrorist acts, in last decades, was weakened, and the governments started to force banks to supply them information also on tax issues.
Yuan doesn’t have non of these attributes, or at least noone believes it has. On the other hand, Bitcoin do has all the attributes, except the security of the deposits. If someone breaks into your account it can take all your deposits, and it is irreversible and non chargeable. Except of that, if the inflation and interest rate would grow, bitcoin has no instrument to compensate you for loss of value by paying you interest. Except of it, bitcoins value is very volatele and speculative.

Conclusion, it depends what will be the solutions of e-yuan to all these problems i mentioned above. I would rather trust e-Euro, that is ready to be introduced next year too. Euro zone economy is comparable in size to the US and Chinese economy. It will also force the Scandinavians and some other EU countries, as Czechia and Poland to join Euro zone.

Libra of facebook had solution for all these problems, and was based 50% on US dollar and nothing of Chinese Yuan, what would solve the debt problem of the Dollar, but the banks and Federal Reserve didn’t like it, and Trump probably didn’t understand how important this issue is, so just let it be. So US government has no answer for these new developments, or at least i am not aware of, that it has.

The Swiss were the first to understand all this very well, and prepared their own version of reserve e-currency, but there is no economy to collect taxes behind the Swiss Frank, and no military force behind Switzerland, so if foreign governments demand information, they are forced to expose it.

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