Multi-Currency Organizations and CBDCs

Central Bank Digital Currencies (CBDC) are a hot topic and for good reason. They’re absolutely critical for mainstream adoption of blockchain technology as they will become the primary asset governments, the private sector and citizens alike will use to stimulate the economy. As I talk about users having a primary chain asset, this would be the primary chain. However, their values relative to other currencies will become more automated than ever before.

Businesses to creditors to government functions will each have their own liquidity pools providing yields for their own functioning. However, each entity’s asset will be linked to a given government’s currency. For some businesses having operations across borders, their aggregate asset total will encompass other CBDCs and their associated creditors within that currency.

This would now introduce the ability for companies to enter into that particular currencies automated market maker. As such, investors would be purchasing ownership of yield relative to the business’s dealing within that country and up to the country’s own debt to cash ratio.

In practice this would mean that investors would be purchasing fractions of yield relative to that business’s total business dealings within the country. The given asset’s yield would then be paid out in the investor’s currency but with the fees adjusted for each currencies operating expenditures which would include taxes.

As each currency would be capped at its debt to cash ratio, this would ensure that investors using that currency would only be receiving yield payouts relative to the firm’s usage of said currency. Although they may have a higher ownership of yield in one currency than another, its yield would instead stay relative to the firm’s holding of said asset and keep all fees relative to the native CBDC.

Pricing Currencies: It’s All Relative

Currencies will receive their values as a relative ratio towards all yielding events within the global economy. As asset values will be composed of many different CBDCs, each will have its own yield ratio relative to how much yielding is occurring given its usage. In essence, it will no longer matter how much of a given currency exists but instead its allocation within markets.

In short, in which currencies provide the highest opportunity for yield. This will be an all encompassing metric using asset’s yield payouts as measurement. For example, a firm’s USA denominated yield may be 15% but its Ireland based yield may be 20% due to lower taxes. However, because the USA has more total assets its yield payout would still be greater than Ireland’s.

The metric would then be looking at the total amount of an asset’s CBDC and then assign an average of its total yield across all assets. Its weight would fluctuate in real time relative to all firm’s interest payouts for the given CBDC.

This would then give the ratios required for valuing currencies against each other as it reflects how much opportunity exists holding an asset across all others. No matter whether holding $1 or $100 of a given currency it would only be able to generate so much yield relative to all the assets it would be comprising. Using the above Ireland example, their yield may be higher but due to firm’s only doing so much business within the currency, its value would always be less regardless of how much money was associated with it.

To thereby maintain a dominant currency position relative to all others, CBDCs must have high allocations of their values within other yielding positions. In order for value to be created a currency must have high throughput within its given economy. Money staying stagnate only decreases its overall yield.

Government Spending: It’s All About Allocations

Governments such as the United States in the current system have the power to print new money as it is needed. However, in a blockchain based CBDC money would only be “printed” once. It’s therefore up to the government to dictate where exactly yield operations would go while delicately balancing its utilization rate.

For example government functions such as Medicare require their own ongoing funding. In this case each government funded event would become its own asset. However, instead of these functions producing their own positive transactions, yield triggering instead would come in the form of tax collection. As taxes would be collected, automated market makers would then produce yield off each transactional event. As the capital would be fully owned by the government, all yields would then go towards paying for the ongoing expenses associated with the asset.

As these entities would not have credit adding to their total, they instead would be entirely capitalized through government allocations. So for instance when Medicare's requirement for payouts increases, the government would have to shift capital from elsewhere to increase the overall yield pay out to pay for the flux in requirement.

Where the balancing act would come to a head would be that although initiatives could be entirely self-sustaining, the capital required to do so would pull away from other initiatives. Raising taxes and likewise fees from all assets would help fund new initiatives but would likewise lower the overall yield of the country and therefore its exchange rate.

This is where heavy prioritization of assets would need to be instituted. For instance, COVID-19 stimulus checks would become its own asset for yielding. However, in order to start yielding, capital would need to be shifted from other government assets to enable a high yield. This would then lower the yield elsewhere, reducing another asset’s potential for ongoing expenses. However, it would be temporary as once payouts are made the capital could then be reallocated back to where yields are most desired.

This, then, hits on the age old problem of the government managing its budget more efficiently. As operating costs now become primary drivers, making them more efficient will be critical. Instead of simply increasing fees (taxes) for all, governments will be able to allocate their capital towards initiatives that may need more temporary boosts for operating.

In times where the government isn’t fully utilizing their yields, the money would instead lower fees (taxes) for all in real time and therefore positively impact the currencies exchange rate for other assets. Balancing how much capital they have will then be a balancing act between lowering taxes (increasing yield aggregate) or by investing capital elsewhere into the economy where it has the potential to create even greater yield and thereby increase the ability to affect global yield even more so than a mere aggregate.

Tax Write Offs and Government Aid

Within the blockchain system described above, taxes would be paid instantly through the form of fees businesses incur as transactions flow through the system. This keeps the government in full control of ensuring the proper ratios are maintained relative to all ongoing expenses. However, this also enables the government to inject excess capital back into the economy where it has the potential to yield higher returns than merely reducing the aggregate exchange rate described prior.

Instead of having taxes reduced, businesses would instead receive their tax breaks back in the form of raw capital ongoing. This enables firms such as those in heavy research and development to instantly receive funds and have their own yield rates amplified by the excess capital.

This then empowers the government to have data insights into how their continued investment into industries affects the overall yield of the economy. Just like with private investors ensuring their ongoing investment starts to produce higher yields, the government will be doing the same across all their own funding.

Again, looking at an AI company it may be receiving a high capital injection through government funding but still not producing any yield. Investors would shy away from it as their own funding is better spent producing yield elsewhere. However, once they do start producing yield, thanks to the government funding it would produce a higher yield for the overall economy. As it begins yielding on its own, investors would start to replace the needed capital previously provided by the government and thereby allow the government to shift more funding to other government sponsored areas.

The government would then be looking at a measurement per each capital allotment category on where funding starts to pay off sooner and more steadfast. This would then give politicians the ability to see where tax allocations directly impact the economy.

For instance, AI may prove itself to be more impactful to the economy after roughly 3 years of continual investment. This would be 3 years of the global exchange rate taking a hit to its yield but then the exchange rate would start to take into account the AI firm’s now producing their own yield rate. Capital allotment would then automatically adjust reducing taxes (fees) while simultaneously boosting overall yield rate giving the exchange rate an even more boosted multiplier.

More strategic, though, would instead be the reallocation of capital into other areas of the economy at the same rate other initiatives start to increase global yield. This would then keep taxes relatively the same but instead provide a more gradual increase of the aggregate yield of all within the economy. Regardless, the government would now have the data around how quickly and to what degree its investment starts to yield benefit throughout the economy.

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