Written by Derryl Hermanutz

This commentary is a follow-up to Elliott Morss’ Dec.7 GEI article (Blockchains – What Are They? What Can We Expect?) questioning the hype around blockchains, digital money in general, and bitcoin in particular.

Digital Money

The whole world already uses a globally-integrated digital money system: bank deposits. We pay each other bank deposits by check, wire transfer (direct deposit), online banking, debit card, etc; within the central/commercial bank-operated payments system of debiting payments out of payers’ bank deposit account balances and crediting the payments into payees’ bank deposit account balances.

The users – payers, payees, and banks – already have a secure record of all transactions. We can see our transactions by looking at our bank account statement online, and we can make a paper printout.

We can even convert our bank deposit account balances into cash withdrawals (at ATMs or bank teller windows), to hold spendable money outside the banking system. But only about 3-5% of our total money supply is physical currency (banknotes and coins: cash money). 95-97% of all money is bank deposits: the spendable, savable deposit account balances in our commercial bank accounts; and the investible cash account balances in our shadow bank accounts (brokerage accounts, investment bank accounts, hedge fund accounts, etc).

Bank deposits are electronic digits in banking system accounting software, that can be instantaneously paid by a payer anywhere on Earth, to a payee anywhere else on Earth, within the bank-operated electronic payments system. Bank encryption technology is secure enough that hacks are rare.

Electronic bank deposits are overwhelmingly our main form of payments money; our main form of savings money; and our main form of investible capital.

Who Should Create and Allocate Money?

Are bitcoin advocates assuming that the world’s present money system is physical cash money, and encrypted “digital money” that can be spent electronically is a revolutionary new concept? If so, then they don’t understand our present money system.

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