ECB Waterfall. Don’t question – just Jump!

The spectacular Angel Falls in Venezuela is the world’s tallest waterfall but the European Central Bank (ECB) is fixated on creating a ‘waterfall’ that will make the Angel look like the cute dribble flowing from the Mannekin Pis, in Brussels.

The ECB is hell bent on creating a Central Bank Digital Currency (CBDC), although their reasons for doing so subtly change with every voluminous report (remember bureaucrats, unlike Mannekins, are rewarded on volume not value).

So where does the ‘Waterfall’ come in? Let’s step back a second.

[Annoying person] ECB spokesperson, what’s ?going on?

[ECB Spokesbot] The big idea here at the ECB is that everyone would have a digital ‘wallet’ into which they would transfer money from their bank account as shiny new Digital Euros.

And then?

You will be able to pay for things with the new digital Euro – neat, eh?

So, what is the advantage of doing that??

Once you have moved the money it will suddenly ?be safer as it becomes a liability of the ECB – neat, eh?

Great idea! So now everyone in Europe is going to take their money and move it all into their Eurowallets?

No, no, cannot have that! ?That would ?destroy the banking system, which we need for a few other tiny things, like making loans to businesses and homeowners

So how are you going to stop that?

Wait - we have just had a great idea (we just don’t sit around producing papers nobody reads, you know) !

What we have come up with is a ‘Holding Limit’, or the maximum amount that anyone can hold in their Eurowallet – neat, eh?

Good idea, but a picky point! What if a person puts more money in their wallet than the Holding Limit - that will put them over the limit - No?

Give me a moment! ?Of course, once the balance goes over the limit, we (the ECB) will automatically move the excess back into your bank account – neat, eh?

And we are calling it the ‘Waterfall’, dah dah!

Great , so you go to Aldi to buy some yummy Belgian chocolates, and pay for them in digital euros and that’s it, great.

You got it!

Well not quite, because Aldi will have millions of customers every day, they will exceed their holding limit very quickly and as a result they will have to pay what you have just paid into their own bank account.

But don’t you worry, you won’t see it – it will all be done behind the scenes by ‘the waterfall’, dah dah!

So, are you saying that five minutes after opening, Aldi will have to do a second payment (to themselves!) ?almost every time anyone in the Eurozone buys something from them with Digital Euros?? And every other large retailer, and most small ones, will have to make a second payment for every purchase – just to fix the central bank’s books? And also, bars, hotels, bicycle hire companies ….. ?

Yes, what is your problem?

Surely, doubling the number of payments at peak time will kill any system?

No, of course not, we are economists, we know how to build huge, super-reliable real-time systems!

But Mr Fabio Panetta (ECB Executive Board member and Chair of the High-Level Task Force) said about the digital euro “A digital euro would increase the efficiency of European payments and contribute to Europe’s strategic autonomy.”

https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr231018~111a014ae7.en.html

Just how can doubling the number of payment transactions plus all those needed to fill wallets, be more efficient?

Dunno, but ask Fabio, I am sure he knows.

But no! I forgot Fabulous Fabio ?has just been made Governor of the Bank of Italy and from now on can deny all knowledge – “OK when I was running it, guv”!

But tell me again why the ECB is doing all of this?

To allow European citizens to hold the safest money there is – a central bank liability!

But you do know that the ECB already guarantees €100,000 for every citizen through their deposit insurance scheme? How many people will be going to Aldi with over €100,000 in their current account, so they can put more into their Eurowallet?

Not that many I guess but you know the goody goodest thing of all, this will all be ready to go by 2025 – great eh!

Now you are just taking the Mannekin!