The Case for a Central Bank Digital Currency

Whether the U.S. should have its own central bank digital currency (CBDC) is hotly debated. Several countries, including China, already have CBDCs in operation; but the U.S. Federal Reserve is proceeding with caution. Prof. Saule Omarova, President Biden’s nominee for Comptroller of the Currency, is in favor of a CBDC and has made a strong case for it; but many conservative commentators are opposed, and her nomination remains in doubt.

Omarova sees the CBDC as an extension of public banking, but even some public banking advocates are concerned about that development. One such advocate is British Prof. Richard Werner, who laid out his cautions five years ago in a paper presented at the 14th Rhodes Forum in Greece . Werner  argued that central banks are in the process of consolidating their powers. Having achieved total independence from government and total lack of accountability to the people, they now want to eliminate competition in the form of both paper money and bank-created credit-money and control the issuance of money completely. To do this, he said, they are driving both cash and bank credit out of business by imposing negative interest rates, which have already been tested in some European countries. Werner argued that negative interest rates were designed not to stimulate the economy but to create deflation and wreak further havoc — “havoc that they intend to instrumentalise to accelerate their goal of becoming the complete masters of our lives, by allowing only digital currency that they issue and control – and that they can monitor in terms of all transactions, and that they can switch off, if, for instance, some pesky dissident criticizes them too much.”

In 2016, that may have sounded radically conspiratorial. But as libertarian commentator George Gammon observed in a podcast episode this past summer called the “The Future of America: Social Scores, CBDC, Health Passports,” the technology is now in place to take us to that very dystopian future.  Federal governments already have the tools and legal framework to see everyone’s transactions and to order bank accounts closed. But a CBDC could facilitate the process, as Agustin Carstens, a member of the Financial Stability Board in Basel, observed at an annual meeting of the International Monetary Fund in October of last year. Carstens said that CBDC, unlike cash, gives the central bank absolute control over the rules and regulations respecting its use and the technology to enforce those rules.

Cause for Caution or Haste?

Those are serious concerns, but while the U.S. delays, George Gammon argues in another podcast that China could overtake the U.S. dollar as global reserve currency by issuing a “DigiYuan” through the Public Bank of China. It could then require its commercial partners in the vast Belt and Road Initiative to open accounts at the PBOC and take payment in that digital currency. In a third podcast, Gammon discusses another challenger to the dollar, the digital SDR (short for “Special Drawing Rights”, the currency issued by the International Monetary Fund). The digital SDR is preferred by the World Economic Forum as global reserve currency.

But Fed Chair Jerome Powell does not appear to be concerned. During a virtual panel at the Bank for International Settlements (BIS) Innovation Summit in March, he said, “Because we are the world’s principal reserve currency, we do not need to rush this project, and we don’t need to be the first to market.” More important, said Powell, is to get it right. At the October, 2020 IMF meeting at which Carstens spoke, Powell also said there were difficult policy and operational questions yet to be resolved, including protecting the currency against cyber attacks, counterfeiting and fraud; determining how it would affect monetary policy and financial stability; and preventing illicit activity while protecting user privacy and security.

Financial blogger Tom Luongo thinks the Fed has broken away from the Europe-centered central banking cartel and is actually our bulwark against it. Luongo points to Jerome Powell’s clash with Christine Lagarde in May over her insistence that central banks require private banks to monitor the business of their clients, and to the Fed’s raising its repo rate to 0.25% in June. Though an apparently insignificant percentage, 0.25% was enough to attract large investors hobbled with zero rates in Europe away from the euro and into the U.S. dollar.

Also noteworthy is that Powell is treading carefully in the CBDC space, acknowledging the need to protect user privacy and security. The Fed Chair said at that IMF meeting, “The real threshold question, for us, is does the public want or need a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments system?”

Democratizing Money

Those questions were addressed by Prof. Omarova in an October white paper titled “The People’s Ledger: How to Democratize Money and Finance the Economy,” which does an excellent job of laying out the issues. She has been criticized for saying that the system she was proposing would “end banking as we know it,” but she clarified in that paper that she did not mean that private banks would disappear. They would just revert to being what they profess to be: intermediaries between depositors and borrowers. As the Bank of England has confirmed, today banks are not merely intermediaries. They actually create the money they lend as deposits on their books. In fact most of the circulating money supply is created in that way.

In Omarova’s model, the pooled deposits would be held at the Fed and would be borrowed by “qualifying lending institutions” (chiefly banks) from the Fed’s discount window at preferential rates. This idea is not so radical as it sounds. Banks have traditionally met their liquidity needs by borrowing deposits (“reserves”) from each other through the federal funds market. But that mechanism broke down in the 2008-09 credit crisis, because banks no longer trusted each other to be good for the loans.

Pooling deposits at the Fed, wrote Omarova, would eliminate the threat of bank runs (since the Fed’s deep pocket cannot run dry) and the threat of “bail-ins” (confiscation of private funds to recapitalize failed “too big to fail” banks, a requirement of the 2010 Dodd-Frank Act). It would also eliminate the need for massive bank regulation and “stress tests” to ensure adequate capital and liquidity, and the need for FDIC insurance, “ending the intractable TBTF problem.” It would stem the troubling wave of bank consolidations in order to acquire deposits; stem speculative trading by banks and hedge funds in financial instruments; shrink the derivatives casino to a small private market; and end the need for the Fed to engage in massive repo operations. The reasons are complicated, but Omarova explains them at length in her paper.

Private lending institutions could still take investor funds and make loans, but they would be “narrow banks” or “mutual funds,” limited to lending only the money they actually had. They could not create money on their books but would be “mere intermediaries” as they purport to be now.

Free FedAccounts for all would solve other pressing problems: they would service the unbanked and underbanked, would pay interest on deposits, and would avoid the sort of widespread failure to get timely relief payments to recipients seen in the 2020 crisis. For servicing depositors, says Omarova, community banking institutions (CBIs) could be licensed to assist.

Postal banks or local public banks (if we had them) would be other good alternatives. During the Great Depression of the 1930s, federal postal banking was a very popular public option, and there is renewed interest today in restoring that system. 

The People’s Ledger

As interesting as the deposit (liability) side of the Fed’s ledger is what could be done on the asset (or loan) side. Omarova calls it “The People’s Ledger.” Her white paper begins:

In 1896, William Jennings Bryan delivered his historic “Cross of Gold” speech, making a passionate plea for a monetary system that served the interests of the working people and increased the nation’s prosperity. Today, the precise contours of that political ideal are once again intensely contested. After decades of rising inequality, systemic instability, and relentless concentration of economic power, ordinary Americans are demanding a greater say in the distribution and use of financial resources. The Reddit-fueled GameStop rally, the dramatic rise of Bitcoin and other cryptocurrencies, the “universal basic income” and “public banking” movements—these are all discrete manifestations of the broader quest for more equitable and inclusive modes of finance.

Ultimately, however, it takes a system to beat a system.

This Article takes up the challenge of “beating” the currently dysfunctional U.S. financial system by reimagining its fundamental structure and redesigning its operation. It offers both a conceptual framework for analyzing the core structural dynamics of today’s finance, and a blueprint for reform that would radically democratize access to money and control over financial flows in the nation’s economy. [Citations omitted.]

Today, private banks rather than publicly accountable financial institutions are the chief creators of a national currency backed by “the full faith and credit of the United States.” The banks and their prime customers get the advantage of the “Cantillon effect”: those closest to the source of new money benefit first and most handsomely. They get the money cheaply and have control over where it goes. They can leverage it and speculate with it, pocketing the “seigniorage” as their own private profit; and they have no public mandate to invest it in a way that serves the people. Newly created money goes into speculative ventures, driving up demand without increasing supply, resulting in bubbles and busts, inflating consumer prices and widening the “wealth gap.”

A “People’s Ledger,” says Omarova, can limit the loans created with our deposits to truly productive endeavors. Under her proposal, “the Fed’s principal asset holdings would fall into three categories: (1) redesigned ‘discount window’ loans to qualifying lenders; (2) securities issued by existing and newly created public instrumentalities for purposes of financing large-scale public infrastructure projects; and (3) an expanded portfolio of trading assets maintained for purposes of financial-market stabilization.” Banks could still finance “non-qualifying” loans, but it would be “by issuing corporate debt and equity securities in capital markets, much in the same way as other corporations do.”

She clarifies that the Fed would not be making direct investment decisions, easing the current pressure on it to use its balance sheet for political purposes. Individual and business loans would be made by “qualifying lending institutions” drawing their liquidity from the Fed’s discount window. Loans characterized as “national development” would be made by an independent public institution she calls the National Investment Authority, “envisioned as the modern-day equivalent of the Reconstruction Finance Corporation (‘RFC’), the New Deal-era public institution that successfully led a massive nationwide capital mobilization campaign to aid Depression-struck sectors of the American economy.” That role could also be filled by the National Infrastructure Bank currently proposed in HR 3339, which is also modeled on the RFC.

Freeing the “Free” Market

What of Prof. Werner’s concerns about the centralization of power under a central banking system? His proposed solution is to reverse that agenda and decentralize power, by abandoning the big banks and supporting local not-for-profit community banks. This could also be done with decentralized cryptocurrencies. But it will be hard for either approach to gain the consumer and commercial confidence commanded by the U.S. dollar.

Omarova writes:

In part, depositors’ privacy concerns should be alleviated by (1) the continuing availability of physical cash, and (2) the CBI option for deposit services.A more complete solution, though, would likely require technology enabling sufficiently anonymous digital-dollar payments, subject to amount limitations and other conditions necessary to prevent criminal transactions. [Emphasis added.]

If Chairman Powell is indeed bucking the “globalists,” as Luongo contends, the Fed is likely to need its own CBDC to compete with the PBOC’s digital yuan and retain the U.S. dollar’s status in global markets. There are clearly reasons for concern, but if a program can be designed that protects against the risks perceived by its critics, a CBDC could be a powerful tool for “democratizing” money and credit; and Omarova’s academic paper lays out how this could be done. She argues that removing private banks from their privileged position as money creators and returning them to their traditional role as specialized intermediaries would return markets to their original state of “freedom.”


This article was first posted on ScheerPost. Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of DebtThe Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at

13 Responses

  1. Government is raising the conversation so that the free market wakes up and does what is best for both by monetizing debt-free, sovereign market money directly from the free market.

    In a script that has some necessary evils, government is often charged with the dubious role of “carrying the stick” because we’re creatures of habit.

    Take the karat because if not, the stick will only get heavier.

  2. Omarova attended a communist Soviet university in Moscow and her thesis was on Karl Mark. But even worse is why biden chose her.

    • Good. Means she knows a thing or two. Most who criticize Marx never even attempted to read him. It’s a tough read, truth be told. And I’m not saying I agree with him. But he was a serious thinker on economic processes. Folks you often call “Marxist” in the US, usually liberal-progressives, know next to nothing about Marx either.

      A good start is the Intro (only the intro, yes) on the Critique of Political Economy. I couldn’t continue The Capital with its dry obtuse language, but that little intro is definitely accessible.

      • Utopiaiexistente, RE: ‘DRY & OBTUSE’ (‘for those whose hearts & minds are strategically disconnected from community’). I appreciate your response to Marlene, which is right on all counts.
        I read the Communist Manifesto, 57 & Das Kapital 53 years ago at 12 & 16 years old. With my background in accounting starting in 1968, I find Marx’s analysis of the labour origins of ‘capital’ (Latin ‘cap’ = ‘head’ = ‘collective-intelligence’) fascinating. Such a ‘labour’ analysis perhaps grew from Marx & Engels’ read & communication with Lewis Henry Morgan in his ‘Ancient-Society’ on the ‘Haudenosaunee’ (Iroquois = ‘People of the extended rafters’ aka ‘Welcome’ for the Longhouse model of collective living. Engels mirrors Ancient Society in his ‘Origins of the family, private Property & the State’, 1884. All humanity’s worldwide ‘indigenous’ (L ‘self-generating’) ancestors & 1st Nations here were applying very detailed: time-based, equivalency accounting on the various ‘String-shell’ (eg. Wampum on Turtle-Island, Quipu in South-America & Cowrie in indigenous Europe, Asia, Africa, Australia & all of the islands) in order to recognize, valorize, empower & unite the diverse contributions of Multi-stakeholders.
        All humanity’s ancestors lived intentionally within the ~100 person Multihome-Dwelling-Complex (eg. Longhouse-apartment, Pueblo-townhouse & Kanata-village) with privacy for personal sovereignty & proximity for intimate, intergenerational, female-male, interdisciplinary, critical-mass, economies-of-scale collaboration, where it matters most. . Today 70% of people still live in Multihomes. Although we don’t recall our indigenous community practices, we have same average of ~100 (50-150) people.
        Humanity’s indigenous peoples integrate Capital, Currency, Condolence (Social-Security), Collegial mentored-apprenticeship educational Credit, time-math Communication & professional Costume identification all into one accounting cycle. Universal ownership grows from contribution, experience, expertise & decision-making acumen, each in one’s specialties.
        The issue, which most empire colonized Americans, Canadians, Brits etc have with ‘Communism’ derived from ‘Community’ etymology being ‘com’ = ‘together’ + ‘munus’ = ‘gift-or-service’, is the ‘community’ part or sharing & caring together intentionally. We are so subconsciously divided, beholding & subservient to our oligarch masters that; we aren’t able to look at our own relational fragmentation & loneliness.
        The false Russian ‘revolution’ was a multi-million dollar, top-down, violent American & German perversion of Russia’s 1917 non-violent bottom-up ‘community’ movement. Violence was planned & paid for by American Jacob Schiff Wall-Street icon & a founder of the US Federal Reserve. Schiff arms & finances Trotsky (Lev Davidovich Bernstein) with millions of $, the hiring of a few 100 New York city armed goons, shipped over in the Luxury Liner ship, SS Kristianiafjord to start the killing, looting & destruction. Read or watch this short interview of Antony Sutton in Wall-Street & the Russian Revolution
        Simultaneously German Warburg arms & finances Vladimir Lenin with the same.
        ‘Political’ (‘poly’ = ‘many’ + ‘tic’ = ‘workings-of’) Democracy needs a universal foundation of ‘Economic’ (Greek ‘oikos’ = ‘home’ + ‘namein’ = ‘care-&-nurture’)-Democracy or otherwise be bought & captured.
        I lived.& worked for the 1970s decade with Russian Dukobour, German Mennonites & English Quakers to understand their bottom-up ‘Community’ economies.

  3. When a shift is made to digital currency someone will be inevitably left out; apparently that does not matter to the crypto’ proponents!

  4. LET’S REFRAME THE NATIONAL DIGITAL-CURRENCY QUESTION To begin with our false/fake ‘money’ (Greek ‘mnemosis’ = ‘memory’ is a violence-enforced centralized-deception for command & control over colonized populations during these past 7000 years by ‘exogenous’ (Latin ‘other-generated’) oligarch-run empires. Printing metal-coin false money has always been a way to grab wealth & control. Previously all humanity’s ‘indigenous’ (L ‘self-generating’) ancestors on every continent & island cultivated bottom-up integrated String-shell value systems such as the Wampum of Turtle-Island/North-America, Quipu of South-America, Cowrie of Europe, Asia, Africa, Australia & all of the world’s islands.
    String-shell as a time-based, equivalency accounting value system, integrated: 1) ‘Capital’ (L ‘cap’ = ‘head’ = ‘collective-intelligence’), 2 ‘Currency’ (‘flow, money’), 3) ‘Condolence’ (‘social-security’), 4) Collegial mentored-apprentice educational Credit, 5) time-math Communication for measuring equivalencies among trades, 6) professional Costume identification & more. These integrated values enabled all our indigenous ancestors to cultivate rational, loving, inclusive, welcoming Relational-Economy societies everywhere.
    Finance & Economic historians as well as colonial anthropologists & archaeologists have no clue as to the indigenous period because they adhere to the colonial oligarch propaganda, hierarchal libel against all our indigenous ancestors & 1st Nations here. History for those who worship those who pay their salaries, starts with celebration of everything theft, colonial & empire. Digital Blockchain ‘currencies’ don’t meet any humane value criteria although as digital records, yes, they have potential, if humanity had one iota of intimate ‘fractal’ (‘fraction, multiplier, building-block, where-the-part-contains-the-whole’) control over its oligarch owned & controlled present system. We know how Bitcoin among the others, have all become cause-celebre for kidnappers, extortionists, off-shore banking, drugs, money-laundering, thievery, ransom demands & every other kind of chicanery ever since their founding. The majority of value within Crypto-currencies is estimated by most to arise from volumes achieved in the above illegal trades.
    The very best modern day address to oligarch & banker control, came from India’s ‘Swadeshi’ (Hindi ‘indigenous’ aka ‘self-sufficiency’) movement as exemplified by Mohandas Gandhi in his advice to a British governor, “Regard human labour as more even than money & you have an untapped & inexhaustible source of income, which every increases with use.” Gandhi was still vague as to many coordinated ‘economic’ (Greek ‘oikos’ = ‘home’ + ‘namein’ = ‘care-&-nurture’) factors of the Swadeshi movement but successfully implemented these over 30 years from his return from South Africa to the collective attainment of India’s ‘Swaraj’ (H ‘self-rule’) in 1947. Indigenous Participatory multistakeholder equivalency accounting as once common among the world’s Production-Society-Guilds, was barely employed as a key motivational strategy to encourage Swadeshi’s participants. As India began to achieve self-sufficiency for essential goods & services such as food, shelter, clothing, warmth & health, by affecting just 5% of the British import & export market, 100s of top-heavy inefficient 5-eye(Britain, USA, Canada, Australia & New-Zealand) companies were going bankrupt & hence Indian independence was recognized.
    Indigenous society worldwide places its primary value within the collective-domestic economy of the ~100 (50-150) person Multihome-Dwelling-Complex (eg. Longhouse-apartment, Pueblo-townhouse & Kanata-village) with both privacy & proximity for collaboration. Gandhi implemented ‘Multihomes’ through the ‘Ashram’ (Economic mutual-aid, not religion) collective housing. Intimate, intergenerational, female-male, interdisciplinary, critical-mass, economies-of-scale are the foundation of human ‘economy’.
    If humanity is to heal its relations with each other & the biosphere, that we begin understanding our long many 10s of 1000s of years of indigenous productive & peaceful origins as well as the practical day-to-day steps which enable us to employ our experiential intelligence. We don’t benefit by being passive consumers of the latest fake monetary technologies & associated theories. These ancient indigenous practices empower us all in our personal & community lives today, by creating that tiny essential bit of love, belonging, inclusion & welcome which overwhelms destructive systems from the bottom-up in both quality & very small leverage-quantity. We have more economic power than most believe.

    • Interesting, thanks. But how would you apply that to today’s national economy? Our money is already 95% digital.

      • Ellen Brown, RE: “Apply that to today’s 95% digital economy”.
        PRACTICAL STEPS & RESOURCES within the means of all people.
        I’m describing ‘Bottom-up’ or ‘Organizing-from-the-tree-roots’ in humanity’s natural worldwide collective associations in Participatory-ownership of the ~100 (50-150) person Multihome, where 70% of people live today or investment & ownership in our workplaces.
        INDUSTRIAL & COMMERCIAL ECONOMY You might not be aware that; basic accounting within most corporations is actually time-based ‘Human-Resource-accounting’ on time-sheets, inventories, contracts etc. Most inner corporate accounting is ‘human-resource-flows, not charting money flows. Digital money capture is between corporations (not-always), governments & multiple exterior stakeholders, hence the largest economic portion is accessible.
        DOMESTIC ECONOMY It actually takes only a small number (~10) of families in the average 32 dwelling Multihome economically organized in a Rent-to-Own program. We have tremendous economic control particularly within the Domestic economy, which is the natural building-block for Industrial & Commerce. Some 75% of present day landlords would sell given market-price on their properties & buildings. In decades past, I’ve successfully helped to initiate 1975 Multistakeholder ‘PARTICIPATORY’ (Latin ‘part’ = ‘share’) based investment & ownership in Pulp & Paper, then 1983 in a Natural Foods store. I’ve lived among: 1st Nations, Russian Dukobour, German Mennonite & English Quakers over many decades. Like India’s ‘Swadeshi’ (Hindi ‘indigenous’ = ‘self-sufficiency’) movement with Mohandas Gandhi’s advocacy & success in the 30 year period between 1917 to 1947 to ‘Swaraj’ (H. ‘self-rule’)
        Digital currencies such as Block-chain enhanced accounting is not nefarious in itself, but with the present day onerous top-down control of books & the entire centralized false ‘money’ (Greek ‘mnemosis’ = ‘memory’) issue, acts to anonymize (creating economic amnesia) or obfuscate oligarch trickledown command & control.
        As active ‘PARTICIPANTS’ organize our own ‘fractal’ (‘fraction, multiplier, building-block, where-the-part-contains-the-whole’) positive, proactive contributions to our-own local essential home, community & livelihood infrastructure, then we form multi-million dollar (average multihome) ‘economy’ (Greek ‘oikos’ = ‘home’ + ‘namein’ = ‘care-&-nurture’ ‘corporations’ (L ‘corp’ = ‘body’) through which we collectively invest & control at all other levels.
        Our Sustainable Development Association (Canadian non-profit since 1994) & Indigene Community since 1983 have developed ‘DO-WE-KNOW-WHO-WE-ARE-?’ a web-based Community Economy software designed to: 1) Catalogue our talents, goods, services, resources & dream, 2) Map individual & business relations locally, 3) Account for local buying, selling & investment together, 4) Communicate, agreements, contracts, record-keeping & library. As worldwide digital technology becomes more sophisticated, dynamic humans will correspondingly organize locally so as to be able to engage the system /c full privacy & sovereignty.

  5. Hi Ellen,

    It’s posted here:

    Thanks, John

    Sent from Mail for Windows

  6. […] source | Ellen Brown | Nov 23, […]

  7. Please comment on the financial crisis in China ans your previous articles that they were using public banking. Much appreciated. Cheers

  8. Richard Werner is a German guy. He has unfortunately the habit to see centralization of banking as a “Road to Soviet-style totalitarism” which is not only laughable but makes him a disingenuous person. He once said that the Communist Manifesto was all about centralization of banks. Well, if you read Marx’ short pamphlet he mentions ‘banks’ only one time…which makes Werner a complete liar.

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