Growth is rebounding, while being linked to public debt. This gives central banks a dominant role once again?
Bruno Colmant. - Growth suffered a major shock in 2020. We will have a small growth this year, because globally we have been in negative growth for two years. And what has supported the economy is public debt. This money has come from central banks, whose role is therefore becoming predominant.
You talk about a change in the shape of the global economy linked to this assumption of power by central banks. But which system are we moving from?
"Gradually, we are leaving the market economy to enter a more nationalised economy. In this configuration, public debt, which is the result of state intervention, is no longer financed by the markets but by the central banks, which have now taken control of part of the short-term monetary and long-term financial circuits, but also control of the entire interest rate curve. So we are no longer in a spontaneous economy, where the market decides on the formulation and quantity of money. It's really the central bank that has the main role. And this is an extraordinary paradigm shift but one that has already saved the economy in the past (Bruno Colmant refers to the Chicago School, the mother of the quantitative theory of money, which explains price movements by the variation in the money supply, inflation revived in the 1980s).
When digital currencies are imposed by central banks, there will be violent competition between decentralised cryptocurrencies and centralised digital currencies.
In that case, how will private banks survive?
"If this Chicago School theory becomes reality, money will take another form--digital--and will be issued directly by central banks. This will pose a profitability problem for non-diversified, retail banks and an existentialist problem. This is why we are now seeing the most innovative retail banks becoming commercial platforms, real providers of a whole series of non-banking services such as the purchase of train tickets, plane tickets, etc. We can very well imagine that one day they will approach the model of Amazon or something else, and that there will be a sort of juxtaposition between large-scale banks and the large commercial platforms. I think that's part of the future of banking.
Do you make a difference between digital currency and cryptocurrency?
"Crypto, etymologically, means 'hidden'. Crypto-currencies are hidden currencies that are not legal tender. This is a notion that has been somewhat forgotten. That is to say, you cannot refuse a legal tender in repayment of a debt. You can refuse gold or diamonds, but not euros. However, the digital currencies that will be proposed by the central banks will be legal tender. They will be in the majority and imposed by default, not the crypto-currencies. When digital currencies are imposed by central banks, there will be violent competition between decentralised cryptocurrencies and centralised digital currencies. States will not tolerate these currencies at the margins for very long and I think that in the long term, as in China at the moment, there will be a ban on the use of bitcoins for example. In the end, it's a bit normal because a state wants to have control over its currency for two reasons: to raise taxes and to get into debt.
So, for you, the future of money will not be in cryptos?
"Some people say so! It's a huge debate. I don't think we've seen many parallel monetary experiments in history that have been tolerated by states in the long term. At the moment, there is de facto tolerance because the states are observing, wondering. Perhaps this could change if a country decided to borrow in bitcoins and a bank accepted. But intuitively, and having held positions in the public domain, I don't see that happening."
This article in Paperjam. It has been translated and edited for Delano.