Write 2 Paragraphs on the Following Article: https://www.cnbc.com/2017/11/29/fed

Question

Write 2 Paragraphs on the Following Article:

https://www.cnbc.com/2017/11/29/federal-reserve-starting-to-think-about-its-own-digital-currency-dudley-says.html

The paragraphs needs to have:

1. A discussion of how the article relates to or illustrates macroeconomics and other economics terms

2. A brief discussion of how this article relates to you personally

The Article:

Federal Reserve starting to think about its own digital currency, Dudley says

Jeff Cox | @JeffCoxCNBCcom

Published 11 Hours Ago  Updated 9 Hours AgoCNBC.com

As the price of the cryptocurrency continues to soar, the Federal Reserve apparently is giving thought to having a product like bitcoin for its own.

William Dudley, president and CEO of the Federal Reserve Bank of New York, said at a conference Wednesday that the Fed is exploring the idea of its own digital currency, according to reports from Dow Jones.

Any product likely would be well off in the future, he said, adding that it would be "very premature" to estimate when the Fed would come up with its own offering, according to Bloomberg.

That sentiment comes even though Dudley said he views bitcoin is "more of a speculative activity" and not a stable store of value.

As the central bank official spoke, bitcoin struck a new high. Just a day after hitting $10,000, it eclipsed the $11,000 mark.

Dudley is not the first Fed official to address the surging popularity of bitcoin.

Philadelphia Fed President Patrick Harker, in remarks made at a conference in September, said he doubted bitcoin would ever undermine the U.S. dollar, primarily because it lacks the backing of a government.

"The paper that's in your pocket, that we call money, only has value because we believe it has value, because we believe the government stands behind it. It's all trust issues," Harker said, according to a Coindesk report.

Earlier in the year, Minneapolis Fed President Neel Kashkari also expressed skepticism about bitcoin ever emerging as a currency, though he said the blockchain technology behind it has "potential" for further development.

Blockchain records digital transactions, key to the trading of bitcoins, which are not actual coins but rather a payment system created online.

The New York Fed did not immediately respond to a CNBC request for additional information on Dudley's remarks.

Explanation / Answer

In macroeconomics monetary policy plays a vital role in the economic development. Monetary policy is generally implemented by central banks. Central banks are responsible for interest rate decisions & maintaining currency fluctuations in order to balance inflation. The continuous rise of bitcoin’s value for a long time suggest that there is a huge demand for cryptocurrency. Though we are not sure about the real demand & speculation taking place, but speculation itself helps in creating demand. Remarks by William Dudley president of Fed New York regarding creating Fed’s own crypto currency suggest that this may become an important factor in day to day functions of Fed.

The continuous surge in the valuation of bitcoin suggest that People are interested in a decentralized currency. As bitcoin is not owned or supported by any government, we are not sure of its fate in a long run. Since bitcoin is a digital currency, there is a lack of control over it which could have effects on financial security of a country. The block chain technology behind bitcoin is tampered proof as it records every transaction & they can also be verified by anyone. Whether bitcoin will emerge as a parallel currency or not is a question in itself. From the article we can say that bitcoin pose a challenge to central banks’ ability to influence the credit for whole economy.

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