Preserving the dollar: Role of CBDCs in securing economic stability for future generations

YOUNGER generations in the United States and other developed nations increasingly worry about economic trends that threaten to jeopardise their financial futures. The United States struggles with rising national debt, sparking fears that the US dollar might lose its dominant status as the world’s reserve currency. This issue is further complicated by policies that favour easy money and significant budget deficits, potentially leading to skewed approaches to political economy such as Modern Monetary Theory (MMT).

Issuing central bank digital currencies (CBDCs) can help developed countries including the United States counteract these trends. CBDCs are digital forms of money issued by central banks, unlike decentralised cryptocurrencies such as Bitcoin. They come in public and institutional forms, serving as a digital replacement for physical cash and facilitating smoother interbank transactions.

Major economies around the world continue to rack up large budget deficits each year, primarily to sustain existing entitlement programmes. They use fiscal stimulus as a short-term fix for sluggish gross domestic product growth without a matching increase in tax revenue.