Dialing for Dollars: Solving CBDC’s Equality Conundrum

By Karen Petrou

  • CBDC advocates tout its inclusiveness, but the digital divide is a profoundly exclusionary impediment to CBDC access for LMI, disabled, older, and rural households. 
  • Centralized deposit-taking and payments via the Post Office and/or Fed pose challenges to personal privacy and even freedom of expression that, if not averted in initial design, could come to pose significant political and governance risk.  Lack of private competition also presents discrimination risk based on pricing or other terms not subject to outside scrutiny.
  • If CBDC succeeds as some envision it, then lending will come either from the federal government – Big Brother problems of still more concern – or capital-markets sources outside the perimeter of safety-and-soundness and often also consumer-protection regulation and enforcement.
  • A CBDC in which the Fed acts as an open-source utility corrects for many current inclusion, governance, and intermediation obstacles to payment-system speed and efficiency. 
Continue reading “Dialing for Dollars: Solving CBDC’s Equality Conundrum”

Trying to Get By While Black

By Karen Petrou

  • African-Americans were better off before the civil-rights era began than they were in mid-2019.
  • Truly huge disparities lie between white and black Americans in terms of income, wealth, and inter-generational mobility.
  • And that was before COVID eviscerated low-income households of color from both a health and economic point of view.
  • It’s past time for equality-focused financial policy, starting first with Equality Banks.

Continue reading “Trying to Get By While Black”

Bad Things about the Good Place and How to Pretty It Back Up

By Karen Petrou

  • Pre-COVID inequality evidenced itself instantly in post-COVID consumer-finance extremis.
  • A unique construct of ground-up recovery policies is an essential, urgent response.
  • Regulatory revisions would help and long-overdue equitable liquidity facilities would do still more.
  • New public guarantees are critical.

Ever since the U.S. economy crept out of recession, the Fed has represented its slow, inequitable recovery as a “good place.”  Its own 2018 economic well-being survey contradicted this and the latest data released on May 14 are no better before COVID came and a lot worse thereafter.  These data make it still more clear that the Fed must quickly reorient its trickle-down rescues to move money starting at ground level, but even that won’t be sufficient given the magnitude of COVID’s economic impact.  The combination of macroeconomic harm and financial-system hurt also requires a reset in which new public guarantees for prudent private financing fully recognized by new rules play a major part. Continue reading “Bad Things about the Good Place and How to Pretty It Back Up”

Inequality Rising

By Karen Petrou

As the COVID crisis continues, some have speculated that wealth inequality will drop because it did in the 1400s during the Black Death.  However, this cure is not only of course considerably worse than the disease, but it’s also no cure.  Economic inequality is a cumulative process – the worse off you are, the worse off you get unless something positive reverses this compound effect.  Conversely, the better off, the still more comfortable unless something comes along to redistribute your gains, however well or ill gotten.  Given how unequal the U.S. was before COVID, it will surely get only more so now, especially if the Fed stays the course with trillions for financial markets and pennies for everyone else. Continue reading “Inequality Rising”

The Family Financial Facility: Urgent, Overdue, Equitable Fed Support for Those Most in Need

By Karen Petrou

As I write this, thousands of small businesses are clamoring for urgent SBA loans and so many Americans are filing for unemployment insurance that systems have crumpled across the country.  At the same time, the S&P rose over three percent since Monday’s open.  The reason for this dissonance lies in the fact that key parts of the financial market have been bailed out while ordinary borrowers are stuck and then some.  Saving markets won’t salvage the economy – at its root, the U.S. is a consumption-driven economy.  If consumers can’t survive, neither will the economy.  The Fed must add a Family Financial Facility to all those it has crafted for the financial market and it should open one fast.  In this crisis, time is truly money and money is what most families don’t have.

Continue reading “The Family Financial Facility: Urgent, Overdue, Equitable Fed Support for Those Most in Need”