I don't get how a payment system - Pix or any other of the many similar others in the large world - is the future of money? For sure it's the future of payment systems, but what it is transacting is still plain old money, just in a faster way.
I also don't see the advantages of a central bank stablecoin, wouldn't it be exactly the same as the actual currency? When I pay with Pix/Twint/BTPay I'm not handling printed notes either, so behind the scenes it could transact anything for all what I care - dollars, stablecoins, gold, potatoes...
Institutional faith in Pix has been rocked recently, as earlier this month, hackers using credentials purchased from a C&M employee were able to generate unauthorised PIX transactions on client banks and steal at least BRL$ 500 MM and maybe as much as BRL $ 5 BN.
Although funds are already being recovered, it has highlighted the opacity of Pix security, which has flown somewhat under the radar due to the closed nature of the system.
This is funny. Most of the "positive" attributes of the Brasilian Pix that are praised in the article are the same as for IBAN-to-IBAN ("wire") transfers in Europe.
Reminded me of UK Faster Payments which I use frequently to send money around at zero cost and typically reaches destination in a minute at zero cost to either side. Only works with a dozen or so banks in the UK.
If I understand it correctly, Pix is the same as digital euro [1].
No common bank account needed, just move digital money from one to another wallet from the federal bank.
Kugman seems to be holding himself to a fairly low standard in this article for explaining himself - I can't figure out what he is trying to articulate unless he is trying to write an ironic headline. A key observation with blockchains is that the only thing they bring is the trust model. Otherwise, all their capabilities can be captured more efficiently with a database and a trusted central server.
Brazil seems to have introduced a system with low transaction fees that Krugman likes. Ok. If it has no trusted central authority then it is something that you can just bring over to the US, today, and use and an exciting future may be incoming. The Fed getting involved and researching CBDCs wouldn't do very much. But he seems to be selling the central role of the Brazilian government is playing here so I don't think that is what is happening.
If it has a centrally trusted institution then we've gone 50 or so years without discovering whatever this innovation is it which seems like it'd be bigger news than a blog post. The whole story here seems to be that Brazil has implemented something with marginally improved transaction costs in their financial system. That doesn't sound like a "future" to me; it sounds like the same technologies we've all known about for decades being used in ways we've known about for just as long. Whats the news in terms of novelty? Is he just saying he likes how Brazil manages their money? Why are CBDCs involved in this?
Seems to me that this a story mostly about the very long settlement process that is specific to US, and less to the rest of the civilized world.
Regarding the use of a digital currency, what Pix is missing, and what a cryptocurrency has, is the decentralization mechanism. All the ops are still controlled by a centralized entity, in this case the Brazilian Central Bank. Am I missing something?
> I can’t help noticing that Pix is actually achieving what cryptocurrency boosters claimed, falsely, to be able to deliver through the blockchain — low transaction costs and financial inclusion. Compare the 93 percent of Brazilians using Pix to the 2 percent, that’s right, 2 percent of Americans who used cryptocurrency to buy something or make a payment in 2024.
I would expect a Nobel prize winner, MIT and Princeton professor and New York Times contributor to be able to construct proper arguments not emotional outbursts:
> Republicans say that they’re worried about invasion of privacy, that a CBDC would open the door to widespread government surveillance. But remember, these are the people who have handed over personal Medicaid data to ICE to facilitate arrests and abductions
Instead of providing an argument for why CBDC is not invading privacy and enables government surveillance he goes for ad-hominem of "they're bad and don't care about what they say they care about".
I don't need Republicans to care about privacy. CBDC would be a privacy and surveillance nightmare and if Republicans ban it, it's a good thing regardless of their motivations or thoughts.
Imagine a giant bank, potentially mandatory for citizens, run by government.
Today if government wants to look at your bank account and transactions they have to convince the judge to sign a warrant.
With CBDC they'll just have this information, they'll control your ability to send money which is essential to modern living.
We'll inevitably be one supermajority away from your ability to use money will vanish because you say something government doesn't like or call a politician fat.
This is not future dystopia, this is today dystopia.
In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
In Brazil the new government just made it criminal to do and share interviews with previous president.
In Germany they're prosecuting someone for calling politician fat.
Governments will abuse any power they get so it's best to give them as little power as possible.
Politicians love it because they love every tool of control.
I don't know why Krugman loves it but you should be against it.
Sending money is not a problem and it doesn't need government to provide a "solution".
> I would expect a Nobel prize winner, MIT and Princeton professor and New York Times contributor to be able to construct proper arguments not emotional outbursts:
¿Porque no los dos? This is is popular culture newsletter, not a peer reviewed journal. He can write articles that are more or less wonkish, geared more or less to academics or the general public, as he feels.
> In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
They did not shut down bank accounts of protestors but of occupiers. Occupiers that did not disperse when ordered and were deemed a threat to public order. An inquiry mandated by the legislation found the events met the threshold for invocation:
Mandatory comment pointing out the "Nobel" in Economics is not a real Nobel Prize. It was made up by the central banking cartel to reward economists who say the things they like. From MMT to ideology stuff.
> established in 1968 by Sveriges Riksbank (Sweden's central bank)
> Some critics argue that the prestige of the Prize in Economic Sciences derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel, a great-grandnephew of Alfred Nobel.
Pix has become virtually liquid cash here in Brazil. We use it for everything from tipping a waiter to buying an apartment or house in seconds.
Before the release, when I read about the system, I was skeptical, but after its release (approximately 5 years ago), it has worked seamlessly, and adoption is now nearly 100% across the economy.
> Republicans say that they’re worried about invasion of privacy, that a CBDC would open the door to widespread government surveillance. But remember, these are the people who have handed over personal Medicaid data to ICE to facilitate arrests and abductions. If you think they’re deeply concerned about potential surveillance, I have some Trump family memecoins you might want to buy.
I know it seems like he's insulting Republicans here, but it's clear Krugman thinks so little of his readers.
There's a huge error in the article. It says Pix doesn't lead to kidnapping and torture. It absolutely does.
Kidnapping people then forcing them to unlock their phones to make a Pix to the kidnapper is such a huge problem here in Brazil that banks have instituted layers upon layers of safety measures, such as reduced nightly transfer limits, different limits on whether you're sending money to someone you know vs someone you never sent money before vs businesses etc. So if a criminal sees you have a lot of money they keep you kidnapped for days until you transfer everything a piece a day. And their colleagues then withdraw the values or transfer them through several accounts, making it impossible to recover.
Part of that also involves forcing the kidnapped person to make all the loans their banks provide them, conveniently easy to do in the same app you use to make a Pix, and then send them the money.
Due to that we also have insurance specifically covering forced Pix transfers, but with limits above which the bank isn't responsible.
Some people defend themselves via alternative means. I myself, for example, keep a cheap phone exclusively for bank transactions at home, never installing the app on my main phone I carry with me. Which I also keep rooted, as that prevents baking apps from being installed (they refuse to run).
Oh! And there's fraud to in the form of replacing the fraudster's QR code for a business's, without the business noticing, so payments go to the wrong account.
And recently the government has started threatening big businesses that fail obeying arbitrary pressure due to this or the political reason with suspension from the Pix system, which due to how much it's used would severely cripple them as they'd lost tons of customers who have neither debit nor credits cards, so those businesses end up obeying. So there's that too.
TL;DR: Pix doesn't really solve those safety aspects the author talks about. But other than that, yes, it's extremely convenient and functional.
The first line is straight out of the Hitchhikers Guide to the Galaxy in the same vein as "In the beginning the universe was created. This made a lot of people angry and has widely been considered as a bad move." Love it!
30 comments
[ 5.0 ms ] story [ 45.6 ms ] threadI also don't see the advantages of a central bank stablecoin, wouldn't it be exactly the same as the actual currency? When I pay with Pix/Twint/BTPay I'm not handling printed notes either, so behind the scenes it could transact anything for all what I care - dollars, stablecoins, gold, potatoes...
Although funds are already being recovered, it has highlighted the opacity of Pix security, which has flown somewhat under the radar due to the closed nature of the system.
What does that have to do with any ---coins?
https://www.hsbc.co.uk/current-accounts/what-is-faster-payme...
[1] https://www.ecb.europa.eu/euro/digital_euro/html/index.en.ht...
Brazil seems to have introduced a system with low transaction fees that Krugman likes. Ok. If it has no trusted central authority then it is something that you can just bring over to the US, today, and use and an exciting future may be incoming. The Fed getting involved and researching CBDCs wouldn't do very much. But he seems to be selling the central role of the Brazilian government is playing here so I don't think that is what is happening.
If it has a centrally trusted institution then we've gone 50 or so years without discovering whatever this innovation is it which seems like it'd be bigger news than a blog post. The whole story here seems to be that Brazil has implemented something with marginally improved transaction costs in their financial system. That doesn't sound like a "future" to me; it sounds like the same technologies we've all known about for decades being used in ways we've known about for just as long. Whats the news in terms of novelty? Is he just saying he likes how Brazil manages their money? Why are CBDCs involved in this?
Regarding the use of a digital currency, what Pix is missing, and what a cryptocurrency has, is the decentralization mechanism. All the ops are still controlled by a centralized entity, in this case the Brazilian Central Bank. Am I missing something?
We do not need crypto, the technology is here and implemented, and bank transfer fees are archaic rent-seeking structures.
Well done Brazil, wake up America.
Fair if you’re already in his camp on Bitcoin being BS, but just a quick recall his epic misses:
- dismissing the internet as a fax-machine bubble back in ‘98
- his endless rants against stablecoins that keep proving him wrong.
> Republicans say that they’re worried about invasion of privacy, that a CBDC would open the door to widespread government surveillance. But remember, these are the people who have handed over personal Medicaid data to ICE to facilitate arrests and abductions
Instead of providing an argument for why CBDC is not invading privacy and enables government surveillance he goes for ad-hominem of "they're bad and don't care about what they say they care about".
I don't need Republicans to care about privacy. CBDC would be a privacy and surveillance nightmare and if Republicans ban it, it's a good thing regardless of their motivations or thoughts.
Imagine a giant bank, potentially mandatory for citizens, run by government.
Today if government wants to look at your bank account and transactions they have to convince the judge to sign a warrant.
With CBDC they'll just have this information, they'll control your ability to send money which is essential to modern living.
We'll inevitably be one supermajority away from your ability to use money will vanish because you say something government doesn't like or call a politician fat.
This is not future dystopia, this is today dystopia.
In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
In Brazil the new government just made it criminal to do and share interviews with previous president.
In Germany they're prosecuting someone for calling politician fat.
Governments will abuse any power they get so it's best to give them as little power as possible.
Politicians love it because they love every tool of control.
I don't know why Krugman loves it but you should be against it.
Sending money is not a problem and it doesn't need government to provide a "solution".
¿Porque no los dos? This is is popular culture newsletter, not a peer reviewed journal. He can write articles that are more or less wonkish, geared more or less to academics or the general public, as he feels.
> In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
They did not shut down bank accounts of protestors but of occupiers. Occupiers that did not disperse when ordered and were deemed a threat to public order. An inquiry mandated by the legislation found the events met the threshold for invocation:
* https://en.wikipedia.org/wiki/Public_Order_Emergency_Commiss...
Mandatory comment pointing out the "Nobel" in Economics is not a real Nobel Prize. It was made up by the central banking cartel to reward economists who say the things they like. From MMT to ideology stuff.
https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom...
> established in 1968 by Sveriges Riksbank (Sweden's central bank)
> Some critics argue that the prestige of the Prize in Economic Sciences derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel, a great-grandnephew of Alfred Nobel.
Before the release, when I read about the system, I was skeptical, but after its release (approximately 5 years ago), it has worked seamlessly, and adoption is now nearly 100% across the economy.
I know it seems like he's insulting Republicans here, but it's clear Krugman thinks so little of his readers.
Kidnapping people then forcing them to unlock their phones to make a Pix to the kidnapper is such a huge problem here in Brazil that banks have instituted layers upon layers of safety measures, such as reduced nightly transfer limits, different limits on whether you're sending money to someone you know vs someone you never sent money before vs businesses etc. So if a criminal sees you have a lot of money they keep you kidnapped for days until you transfer everything a piece a day. And their colleagues then withdraw the values or transfer them through several accounts, making it impossible to recover.
Part of that also involves forcing the kidnapped person to make all the loans their banks provide them, conveniently easy to do in the same app you use to make a Pix, and then send them the money.
Due to that we also have insurance specifically covering forced Pix transfers, but with limits above which the bank isn't responsible.
Some people defend themselves via alternative means. I myself, for example, keep a cheap phone exclusively for bank transactions at home, never installing the app on my main phone I carry with me. Which I also keep rooted, as that prevents baking apps from being installed (they refuse to run).
Oh! And there's fraud to in the form of replacing the fraudster's QR code for a business's, without the business noticing, so payments go to the wrong account.
And recently the government has started threatening big businesses that fail obeying arbitrary pressure due to this or the political reason with suspension from the Pix system, which due to how much it's used would severely cripple them as they'd lost tons of customers who have neither debit nor credits cards, so those businesses end up obeying. So there's that too.
TL;DR: Pix doesn't really solve those safety aspects the author talks about. But other than that, yes, it's extremely convenient and functional.