Interview with David Wilson
MJ:
Welcome David, it’s great to see you again. We’re going to talk about banking today. I sent you a very interesting piece by Senator Rennick in Australia and one of the commentaries he’s made in the central bank digital currency space on a bill of legislation which he does not agree with.
And I thought what we might do is we might just go through that and get your commentary along the way. And how does that compare to New Zealand? And then also, if we could just talk about generally the creation of money in New Zealand. Is that a good thing? Does that help New Zealand? Or is it a situation where we’re being dictated to? Do we actually have the freedom that we should have with the ability to grow?
DW:
Yeah, I don’t know about the veracity of that. It would not surprise me. But, you know, cryptocurrency is a really interesting challenge to the banking system because essentially it’s private individuals or companies that are creating credit rather than just the banks, which has been the situation for well, as long as I can remember, all of my life, banks have created money.
Cryptocurrency is suddenly this new form of money, if you like to look at it from that perspective. And, you know, governments are having difficulty trying to constrain or restrain or understand it so that they don’t lose control of the exchange of goods and services through the private sector, which is not through banks. So, yeah, really interesting situation. And now, of course, you’ve got banks, particularly reserve banks or central banks talking about central banking cryptocurrencies. So those that would be created by the banks. Fascinating entering the market themselves. Not sure I like the idea of a central bank entering the market.
MJ:
Well, it’s also an interesting, if I might say, what we’ve got here is a scenario here, which I feel we have in the same in New Zealand, which I think is mostly the same in all Western countries where we have the central banks that have assumed control of our monetary system and the bulk of our monetary system.
We have our governance, this government system in cash, which is only a very, very small proportion of it, which they can actually control. And then we’ve got the cryptocurrency, which is a currency which is completely untraceable. And you got to wonder why that was designed in the first place. You know, I mean, a lot of, I bet a lot of criminals use it, you know? So, and they’ve been allowed.
It’s been in play for a long time and nobody knows where it actually was developed from either. It’s a fascinating thing. But yet here we’re talking about the integration of central banking and cryptocurrency all at the same time. And none of it has any relevance to anything other than demand, which again is frightening.
DW:
Yeah, I mean, it’s all about the means of exchange, isn’t it? So a really good economist friend of mine said to me that, if you think about, you know, back in the day, when you went into a closed market within a walled city or town, and to go into that town and trade and exchange in barter with others in the market, in the marketplace. But when you got to the marketplace, you did that on the basis that there were rules.
there were rules that governed that market. And if you didn’t abide by the rules, then you were turfed out. So your markets are much the same now. You get turfed out if you’re not abiding by the rules. But the control and the flow, and of course the medium of exchange was money. They printed coins or whatever it happened to be, or if it’s gold, if you didn’t trust the coins that were being profited at the place you were trading, you could ask for exchange in a medium called gold, or you could just do bartering. So what we’ve got now is a completely different situation because it’s digital money. And just as the bank when they write you a mortgage creates digital money, cryptocurrency creates digital money, but it’s not the bank.
It’s some organization, someone that owns Bitcoin or whatever the cryptocurrency is, that are issuing you that credit and that digital enablement to purchase things. So actual coins are not being traded here, neither is gold. Hence kind of the, you know, because they’re untethered. Back in the day, as you know, you would remember the gold standard, that all currencies were measured against the gold standard.
That’s gone now, but anyway, that’s another story. With cryptocurrencies, well, the value is measured by the demand, as you say. If people have faith in that particular cryptocurrency, then they will purchase it with their purchasing power and will trust that it will give them the value that gold would or New Zealand dollar would or any other thing. And then of course, demand runs ahead and people think, well, this Bitcoin or this cryptocurrency is looking like it’s holding its value quite well. Actually, demand’s pushing the price of it up just the same as if you’re looking at your exchange rate between the New Zealand dollar and the US dollar. So I’ve been watching recently how New Zealand dollar is buying more in US dollars than it has been especially under the previous government. So our dollar has been strengthening, which is quite fascinating. I’m not surprised by that, by the way. People are getting more confidence in the New Zealand economy turning around because of the new government. So that’s reflected in how we trade our dollar. And yeah, it’s fascinating thing. So cryptocurrency, no different really, except that it’s not tethered or controlled by a central bank.
So there’s the major difference.
It’s some organization, someone that owns Bitcoin or whatever the cryptocurrency is, that are issuing you that credit and that digital enablement to purchase things. So actual coins are not being traded here, neither is gold. Hence kind of the, you know, because they’re untethered.