IMF Head Foresees The End Of Banking As Bitcoin Surges Above $4400

Tyler Durden's picture

Authored by Jeffrey Tucker via The Foundation for Economic Education,

In a remarkably frank talk at a Bank of England conference, the Managing Director of the International Monetary Fund has speculated that Bitcoin and cryptocurrency have as much of a future as the Internet itself.

It could displace central banks, conventional banking, and challenge the monopoly of national monies.  

Christine Lagarde–a Paris native who has held her position at the IMF since 2011–says the only substantial problems with existing cryptocurrency are fixable over time.

In the long run, the technology itself can replace national monies, conventional financial intermediation, and even "puts a question mark on the fractional banking model we know today."

In a lecture that chastised her colleagues for failing to embrace the future, she warned that "Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies."

Here are the relevant parts of her paper:

Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.

 

Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.

 

For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.

 

But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.

 

Better value for money?

For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.

 

IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008.

 

And yet, why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable.

 

For instance, they could be issued one-for-one for dollars, or a stable basket of currencies. Issuance could be fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored…or even a “smart rule” that might reflect changing macroeconomic circumstances.

 

So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.

 

Better payment services?

For example, consider the growing demand for new payment services in countries where the shared, decentralized service economy is taking off.

 

This is an economy rooted in peer-to-peer transactions, in frequent, small-value payments, often across borders.

 

Four dollars for gardening tips from a lady in New Zealand, three euros for an expert translation of a Japanese poem, and 80 pence for a virtual rendering of historic Fleet Street: these payments can be made with credit cards and other forms of e-money. But the charges are relatively high for small-value transactions, especially across borders.

 

Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender.

 

So, when the new service economy comes knocking on the Bank of England’s door, will you welcome it inside? Offer it tea—and financial liquidity?

 

New models of financial intermediation

This brings us to the second leg of our pod journey—new models of financial intermediation.

 

One possibility is the break-up, or unbundling, of banking services. In the future, we might keep minimal balances for payment services on electronic wallets.

 

The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms with an edge in big data and artificial intelligence for automatic credit scoring.

 

This is a world of six-month product development cycles and constant updates, primarily of software, with a huge premium on simple user-interfaces and trusted security. A world where data is king. A world of many new players without imposing branch offices.

 

Some would argue that this puts a question mark on the fractional banking model we know today, if there are fewer bank deposits and money flows into the economy through new channels.

 

How would monetary policy be set in this context?

Today’s central banks typically affect asset prices through primary dealers, or big banks, to which they provide liquidity at fixed prices—so-called open-market operations. But if these banks were to become less relevant in the new financial world, and demand for central bank balances were to diminish, could monetary policy transmission remain as effective?

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Sir SpeaksALot's picture

I wonder what cryptos does she have.

YUNOSELL's picture

"It's a trap" says the guy from Star Wars whose face looks like a vagina

Rubicon's picture

Of course she says that... it is their get out clause and their future. Bitch.

VD's picture

naive crypt0-muppetz unable to comprehend the IMF's endgame in their SDRcoin more at SDRcon. props to Deep State for suckering so many "crypt0-'anarchists'".

 

hint: in the end there will not be any "coins"; but, rather, units of SDR.

 

 

Bulgars's picture

Cryptocurrencies are already controlled by the banks as they own most of it..

DWD-MOVIE's picture

I'm making over $14k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...  http://disq.us/url?url=http%3A%2F%2Fwww.Jobzon3.com%3Ab8eR_DQLwGRPVGtFvv...

Yog Soggoth's picture

Maybe by the ones that support the current banking system. The Pheonix is a real plan, and it is digital. How else could they disenfranchise anyone who bucks the system with a keystroke. She is just throwing seeds of evil to the wind, hoping they will sprout.

old naughty's picture

sounds like race to get Fed-coin is on.

holgerdanske's picture

You listen too much a certain economist, me thinks.

If i can help put a bullet in the head of banking, I will do it. With pleasure!

Economiffed's picture

The down votes are from ignorant trolls or people that don’t want serfs to know the truth. Either the Rothschilds created the crypto currency ot they will be the ones that squash it!

Can’t compete with the star of david (Rothschild family star)

OverTheHedge's picture

".....could be issued one-for-one for dollars, or a stable basket of currencies"

SDR perhaps? New world currency perhaps? Looking to reinvent themselves, with the IMF and the BIS at the forefront (i.e. head of the queue for the trough).

VD's picture

absolutely correct. see my above. this IMF gambit also removes all cash from equation, and hence everything is perfectly tracked.

Ghost of PartysOver's picture

Exactly!  For all the countries that want to shitcan paper currency and coin this is their way to achieve it.  Next up will be some government agency, either sovereign or international will dictate the rules and if the sheeple don't like it then a kill switch will be activated.  This could easily turn out to be Big Brother on steroids.

Oracle of Kypseli's picture

She forgot to mention how easy it will be to tax every transaction that involves gain.

VD's picture

precisely. the SDR pre-dates that 88 economist article. btw the Rothschild family are class-a shareholders in the economist as per their masthead. the irony of ironies. in plain sight.

Shlomo Scheckelstein's picture

...And we are already heavily invested in this technology hehehe let the shekels flow in..

The goyim don't know what's good for them, so let us control it and it will be all fine...hehhe trust us

Cash2Riches's picture

The power that cryptos possess cannot be denied. Just like gold and silver, they have the elites scared to death, as they know that it will result in them losing control over their greatest form of power, the fiat money system. They cannot and will not allow it to succeed without a fight.

DoctorFix's picture

I don't know why they'd need to be afraid of anything.  It's much like Obamacare... designed from the beginning to usher in something far worse.  It's a global financial "head fake" and then you'll be fucked.  The game is rigged and they're running the show much like a D&D dungeon master.

Scuba Steve's picture

Dont let them have the GUNS, Dont let them have the GUNS .... be smart people.

It all comes down to that, its the only way they have a chance to have total control.

Barter and PM's can be alter-economy even if they go crypto BUT if you let them take the GUNS its all over but the shouting. Local clans can control their small barter economies off the books as long they can defend that right.

Forget the courts, they went out with the Hoola-Hoop.

MEFOBILLS's picture

The power that cryptos possess cannot be denied.

Yes it can.

Crypto currency is an asset class.  National currencies are traded for crypto with an exchange rate.  Crypto are an escape valve from national currencies, and cryptos have "value" due to imposed scarcity.  Crypto value is largely due to their security (and scarcity) - allowing transactions to avoid taxation, and to move purchasing power around the world outside of "one world government" scrutiny.

Asset classes are not money, even if they take on a form of purchasing power.  Money gets its power from the law.  National monies are "good for taxes, and the payment of debts."  Crypto currencies do not have any legal basis, and are not good for taxes.  Good luck getting goods and services priced in a crypto unit.  Money's true nature is law, and cryptos do not have legal sanction - cryptos are an asset class invented by the market.

LaGarde is a total dumbass if she doesn't understand that private corporate bank money gets its entire money power by law, by an act that says their "bank money notes" are good for paying all taxes and debts.  Yes, the sovereign rights of the people were usurped when private banking corporations took the money power for themselves. The power of the state will step in and enforce legal contracts denominated in the national private banking unit.  Cryptos are not a legal device.

LaGarde is either casting hypnosis, or is fundamentally confused on the nature of money.

tmosley's picture

>Asset classes are not money

Money is an asset class.

>Money gets its power from the law

Money gets its power from the works of mankind.

MEFOBILLS's picture

Money is not an asset class.  It is a legal device that is used to transact.  It can transact goods and services.  Or, money can be used to buy asset classes.  In the case of crypto, it is bought with money via an exchange rate.  Crypto is PRICED as an asset class - it is not money.  Don't be cofused because crypto has purchasing power.

The works of mankind, are what mankind produces, and his product is PRICED.  Prices are denominated in a legal monetary unit.

Money is related to goods and services by way of volume of said money.  Too much money chasing after goods and services - inflation.  Too much money chasing after asset classes e.g. crypto, makes crypto price go up.

If you store money as savings, it is not an asset.  It is latent demand.  Money serves both as demand in the now (for transactions in the now) and latent demand, which demands from the future.

 

tmosley's picture

>It is a legal device

Wrong. You don't need a government or laws to transact goods for money.

TBH, you are hardcore word thinking. Your time would be better spent masturbating.

MEFOBILLS's picture

Your wrong, and it is fundamental.

Take a bill out of your wallet and look at the wording on it.  It says this note is legal tender for all debts public and private.  No amount of hand waving and ad-hominems make reality go away.

If you want to move to a libertarian  paradise, where you can invent your own legal tender and pretend it is money, there are plenty of countries in Africa to move to.

tion's picture

You are making my eyebrow twitch, throwing around words you don't seem to even comprehend the meaning of.  Much of the power of crypto is founded on it's not being a legal device. It can be owned as a matter of right.  If you really want, you're certainly welcome to keep your privilege/obligation 'money' and enjoy your Stockholm syndrome to your heart's content.  

Edit: I should frontrun the REEEEEE BITCOIN IS NOT MONEY tards and clarify that bitcoin is not money and I'm not claiming it is.  It is a currency that can be held outside of the privilege/obligation statutory paradigm.

Yog Soggoth's picture

So what? You can have a stack of legal tender, and have it devalue while you sleep. The guy with the bitcoin makes a gain even though he was sleeping until noon just like you. Bitcoin is being artificially manipulated to get people to put those FRNs into cyberspace where they can be taken, thus balancing all the debt that was created. You can trade the crypto for another currency, but you would be avoiding the inevitable unless you bought tangible at exactly the right time. In the end the only real money is PMs, even if every country in the world outlawed them. The government can declare land ownership illegal, and you still have your stack awaiting transport to market when that system fails. 

DjangoCat's picture

The elites have most of the gold that ever existed.  They are not fools.  They also control the price, so don't hold your breath on getting any gains until the system resets.

Truly Inspiration's picture

ETH and XRP as a minimum ;-)

BTC will be replaced in the future - too slow

Hyjinx's picture

You forgot NEM/XEM.  Probably the best blockchain out there.

YUNOSELL's picture

"It's a trap" says the guy from Star Wars whose face looks like a vagina

tmosley's picture

And so the first dinosaur looks to the sky and realizes it is fucked.

ParkAveFlasher's picture

LaGarde is on your team.  Ruminate on THAT

Raffie's picture

they all been into gold/silver much longer so Ruminate on THAT.

tmosley's picture

How is her recognition that the technology is probably going to put her out of a job putting her on my "team"?

Raffie's picture

They are desperatly grabbing at straws is all.

In a nutshell, anyone who is bad that gets involved with cryptos means cryptos are bad reguardless of who owns and does what to any and all gold/silver. Because gold/silver are real money that only honest trusting people use.

dasein211's picture

It's at this moment when the T-Rex looked at the sky and with both arms in the air cried "Save me Jesus!"

ali-ali-al-qomfri's picture

You ungrateful wanker,

you've been defending if not promoting _itcoin (I'm not going to say _itcoin)

and now you get the IMF nod and you are complaining?

She's on your team, how proud can you be? ;)

 

 

tmosley's picture

>I'm not going to say _itcoin

Hahaha, oldbugs think if they don't say its name, it will lose its power. Literal magical thinking.

RedDwarf's picture

"(I'm not going to say _itcoin)"

BitCoin, the new N-Word in your eyes.  BitCoin, he whose name you dare not speak.

LOL, How hilarious and silly you are.

DjangoCat's picture

You are right. --tcoi- is really a toxic substance, better to censor its name completely.  Burn the whitepaper!!

Find Satoshi and tar and feather him!

Egad, man, have you gone mad?

RedDwarf's picture

"LaGarde is on your team.  Ruminate on THAT"

Hitler believed the world was round.  You believe the world is round (I presume).  Hitler is on your team.  Ruminate on THAT.

Scuba Steve's picture

Well, Hitler was right .....

RedBaron616's picture

Funny, everything the IMF touches or endorses turn to rubbish. Suddenly, they are brilliant.

You are on the money.

And anyone who believes they will escape the taxman through Bitcoin doesn't understand the IRS. The wheels of government grind slowly, but they grind exceedingly fine.

Mister Ponzi's picture

And Jamie Dimon on the other side.

malek's picture

She told you exactly what you wanted to hear...

BlindMonkey's picture

I have it on good authority that 'fonestar' was in fact Christine the whole time!!!!

 

 

/s

Mementoil's picture

Nope.
If the IMF is interested in Crypto-currencies, it is only in order to seize control over them and assimilate them into the government / CB complex.
This is not good news for the common people.

HRClinton's picture

Never forget, that (((They))) will NEVER EVER relinquish control of their Babylonian Money Magic (aka fiat currency, fiat debt, fiat credit).

Not without losing an all-out war against the People.

If they have to, they will copy and piggyback the Crypto movement, so that they can eventually roll out their own as the New FRN.

It's (((their))) way:  Ignore, Mock/Ridicule, Fight, 'Join'.  Join, to Infiltrate and Take Over.