Swedish Crown, CBDC and real money

The interest in Central Bank Digital Currency (CBDC) has grown globally, as well as in Sweden. The push towards CBDCs and e-krona is making financial analytics look deeper into it, and there are some big fundamental questions and concerns arising.

• Is the intense dedication and implementation of CBDC-s radically changing the understanding of “money “?
• Is it even a bigger change than when Swedish Crownswere decoupled from gold? Let’s dive into it.

What is money?

It is a simple question, but the answer is not straightforward. Of course, we could answer that money is a tool for exchanging values for different goods and services, but what is money fundamentally?

“Money” must meet three conditions to constitute as money, according to economists. They are:

• It must be possible to pay with
• Prices must be stated in their units
• It should store value over time

Money is a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.

(Table 1. The struggle of Money from Affärs Världen)

Does Swedish Krona constitute as money according to these rules?

1. As a means of payment – Yes, it works…to a degree. It’s easy to swipe the card in restaurants and grocery stores. There are also many beneficial factors for digital payments, but what happens if the power goes out or systems face other disturbances? In these scenarios the Swedish crowns in the bank account in a digital form stops being money because one can not pay with it. In contrast, simple physical cash is not affected by these electricity or infrastructure issues.
2. As a unit measure – The prices are set in crowns.
3. As a store value –Fiat money definitely does not store value over time, especially when inflation is extremely high like it is currently. EU average inflation is 10%, and Sweden’s inflation in October is 10.5%, according to TradingEconomics.
   With the Riksbank inflation target of 2%, the Kroner purchasing power will be halved in value in 35 years. With the inflation of 10%, the purchasing power will be halved already in about 7 years.

Interesting perspective: Real estate in Sweden has increased significantly over time, right? Well, when measured in gold terms, housing prices have fallen for more than a hundred years, according to Affärs Världen.

How is the financial system going through changes, and how does it affect “ordinary people “?

The financial system is going through changes due to increasing inflation, geopolitical uncertainties, and sky-high debt burdens.

The more “money “gets digitalized, the more it affects regular people because control is taken away. Digitalized money in banks can be frozen, and access to one’s money can be taken away with a couple of clicks. This was evidenced by the freezing of funds and bank accounts of Canadian truck drivers in February 2022.  The funds collected from fundraising campaigns on GoFundMe and GiveSendGo were also frozen.

It is a complex topic of right or wrong, also ethical and philosophical, which needs much more discussion and debate.

Coming back to our article’s topic of money. In this scenario, their money turned out not to be money in terms of the three rules listed before.

Swedish Riksbank kept 311 500 SEK of Stockholmers money

Stockholmer Gunnar Ljungh submitted 311 500 SEK in ’invalid’ banknotes to Riksbank, which the bank kept because it cannot rule out that the money may have come from criminal activities. It also should be noted that the concept of ’validity’ of money itself is quite contradictory the basic nature of money (store of value).

According to SVT, Riksbank does not think Gunnar has submitted any satisfactory documentation showing the origin of the banknotes and how he got the money.

Based on the high amount and the lack of documentation regarding the origin of the notes, the bank believes there is reason to assume that the notes originate from crime or criminal activity. The Riksbank has therefore decided to keep the money.

Harsher rules and regulations might end up in a dystopian future.

The financial system is changing as more money is digital than ever before. It is quite evident that we are heading towards—a completely digitalized financial system.

With further digitalization, the control of one’s financials is entirely given away to a third party – a bank, a central bank, or another form of financial institution. That, however, is a fertile ground for even further bureaucratic rules,restrictions and dystopian future.

No one knows what digitalization holds and what is the future of CBDC and “money” overall. One is sure; everyone should keep an open mind and see both sides of the coin – potential good and evil.

Gold and Silver

Gold and Silver are great investments to diversify your portfolio. In light of the significant digitalization of money, it is good to know that you can still physically hold value in some assets and away from financial institutions, keeping complete control in your own hands.

Gold has always been a safe haven in uncertain times; today, one might say the times are more uncertain than ever before.

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