All USD flow from a single institution, the central bank. Other banks can create debt, but only with permission (the initial money supply) from the fed. You'd have to really squint to consider that decentralized.
I fail to see how the monopoly of the central bank on money creation affects in anyway the centralised or decentralised nature of private banking.
It’s like arguing construction is a fundamentally centralised business in your local area because every builders buy their bricks from the same factory. It doesn’t make much sense.
Because those "private banks" can only practice banking with the authority and funding that flows from the central bank. The structure is completely hierarchical.
This is factually incorrect. Evidence shows banks can operate without the oversight of a central bank and without a lender of last resort. It's more convenient and safe for everyone to have those, but it's not required.
A bank that isn't a member of the federal reserve by law needs to keep a portion of deposits in a federal reserve bank, so I wouldn't consider it independent from the fed.
Regulations require banks to keep a certain amount of capital and reserves, and these reserves are typically kept in a deposit with the central bank, so that the regulator, i.e. the central bank, is able to monitor the reserves to ensure the minimum reserve requirements are met at all time. It's got nothing to do with centralisation. Businesses are subject to all sorts of regulations. Some are required to have fire extinguishers in their premises. That doesn't mean they are centralised.
They are forced not only to keep money, but to keep it in a bank who is a member of the centralized authority. Regulations in general do not make it centralized, this specific one does however.
How does the fact that banks are required to keep a deposit with the central bank limit their autonomy (i.e. become centralised)? As I see it what limits the autonomy of banks is not that the deposit is with a central bank but that they have to satisfy a reserve requirement. But according to your argument the reserve requirement itself is not what makes the banking system centralised, but the specific fact that banks have to keep a deposit with the central bank. How does that make sense? What does the word 'centralised' mean to you in the context of the banking system?
While they can technically accept money without being a fed member, they must keep that money with a fed member.
They need to keep money (printed by the fed) with a bank controlled by the fed. If you don’t see why that is a centralized system then not sure there’s much to discuss.
It’s distinct from reserve requirement, which doesn’t force you to store your money with a member of a single organization.
So, if they had auditors to check that banks comply with the reserve requirements (instead of requiring them to hold a deposit somewhere), the banking system would cease to be centralised? Is that what you're saying?
And what about a smart contract that requires participants to make a deposit with the smart contract itself? According to what you're saying such smart contracts are by definition centralised. Am I getting this right?
That would be less centralized, yes. The fact that one organization, the fed, has the unilateral and exclusive authority to create more money (essentially unlimited) would still be a very important point of centralization though.
> And what about a smart contract that requires participants to make a deposit with the smart contract itself?
What do you mean "requires"? Is there forced participation? Presumably anybody could make a competitor to this smart contract. I think I'd need a more specific example to understand exactly what you mean here.
It also depends on the contract itself. A contract that has an owner encoded into it who can make unilateral decisions is more centralized than an ownerless / immutable one.
> All USD flow from a single institution, the central bank.
Hmm, no.
> Other banks can create debt, but only with permission (the initial money supply) from the fed.
More like a license. But it's no different than me creating supply by promising you to pay. That's really how it works in the banking world (and why the big guys have an advantage: they have a reputation).
> You'd have to really squint to consider that decentralized.
The current system is still relatively decentralized which is why governments and central banks depends on banks (and love them). Which is also why they want to try their hand at a CBDC (because it removes the role of banks)
