There is a major shift happening right now regarding monetary systems. Central banks around the globe are in different stages of researching and developing central bank digital currencies (CBDCs). In fact, as a recent Bank for International Settlements report indicates, 90% of central banks around the world are currenctly studying the feasibility of issuing their own CBDC. This is not just something being put into place in one or two totalitarian countries, but in nearly every country in the world.
As you may have heard by now, the Biden Administration issued an Executive Order on Ensuring Responsible Development of Digital Assets this past March. At the time this announcment caused a lot of buzz in the financial sphere about how the administration was clearing the way for a digital dollar, it should be noted that the Federal Reserve has been actively exploring the concept for some time now; the "go ahead" from Biden was more of a formality than a substantial policy shift. Specifically, the Boston Fed has been collaborating with the Massachusetts Institute of Technology (MIT) on Project Hamilton - a multiyear research project on CBDCs - since the summer of 2020. A report on Phase 1 of the project was released this past February.
What is a CBDC?
In a paper released earlier this year by the Federal Reserve, Money and Payments: The U.S. Dollar in the Age of Digital Transformation, a CBDC is defined as a digital liability of a central bank that is widely available to the general public. There is a lot more to CBDCs than this simple definition and I encourage you to read the paper in its entirety. When you do read the paper, you will learn that this will take control of the money out of the hands of the local banks and centralize it to the Federal Reserve. It will be programmable money and like our current fiat system it will also be backed by nothing. Put another way, a CBDC grants totalitarian control to anyone who wields it and as a notable banker so eloquently put it, "Give me control over a nations money and I care not who writes the laws."
Brief History of Banking
Historically, banks kept gold and silver as money. Because you do not own what you cannot protect, banks were initially used as a security measure for protecting money. After enough people felt safe keeping their gold stored in banks, they began to exchange the paper receipts. People treated these paper receipts as redeemable for gold because they were. However, soon the bankers realized that not everyone was redeeming their paper receipts for gold, so they caved to greed and began lending out more paper receipts than there was gold to back them up with. Put another way, the banks were lending your gold to somebody else and if you tried to get access to your gold you would discover that it was no longer there. This discovery of fraud would consistently lead to bank runs which woulld cause the criminal banks to collapse. This type of behavior should have been outlawed, but instead it was nationalized with the invention of the Central Bank. In order to prevent a local bank from collapsing when it commits fraud the powers that be decided to create a bank for the banks. A centralized place where local banks can store some gold so that they are no longer susceptible to bank runs. This builds into the system a place for the local banks to turn to when they need to be bailed out because they are caught commiting fraud.
Risk is like energy; you cannot eliminate risk you can only transfer it. So instead of decentralizing the financial risk within the system that was isolated to individual banks at the local level the creation of the central bank centralized all the risk. This makes the whole financial system very fragil because now fraud that was previously a local problem becomes a national problem.
Fast-forward and soon the Federal Reserve, the central bank of America becomes the central bank of the entire world. As has always been the case, the Federal Reserve isued more receipts than they had gold to back it up and so a worldwide run on the bank of the United States began. So, when the countries of the world asked for their gold back in 1971 President Nixon told them no and he severed the connection of the dollar to gold. This action set the fiat currency system into motion, a system where governments can create as much currency as they want, and this is the financial paradigm we are currently operating within.
While fiat currency is technically backed by nothing the same is not entirely true for our banking system. Our banking system is built upon legacy systems that were created when currency was restrained by physical gold. Our banks still operate as if they require on site reserves. As if they could still fail and go out of business. Any semblance of checks and balances in today's banking system is a remnant from when currency was constrained by physical gold. It was the backing of something real that held the financial system accountable.
Unfortunately, today your bank account is digital, it is nothing more than some ones and zeroes on a computer. Banks used to take your money and lend it out to somebody else when they would go to the bank to take out a loan. In reality banks lend money into existence. Every loan banks make is money that did not exist prior to the loan being made. This money will continue to exist in the monetary system until the outstanding loan is paid in full.
Our current system is bad. It is highly fragile. It accelerates the concentration of wealth. It rewards going into debt and punishes those who save. As a result, it acts as a transfer of wealth from the savers to the borrowers. There is a lot to dislike about this system but as bad as this system is it is nothing compared to the evil that the Central Bank Digital Currencies will be capable of. CBDCs are a categorically different system and once we embrace them there is no going back.
How CBDCs are Different
As stated above, the Federal Reserve defines a CBDC as a digital liability of a central bank that is widely available to the general public. With today’s system you have an account with your local bank and your local bank has an account open with the Federal Reserve. A CBDC on the other hand will bypass, nationalize, and render obsolete the current traditional banking system. The banking system knows this and its why the American Banking Association sent an open letter in response to the Federal Reserve that said if they come out with a CBDC it could collapse the whole banking system. With the rollout of a CBDC, every individual and business will have a digital wallet or account directly with the central bank. So instead of logging into your Chase or Wells Fargo account, you will have an account directly with the Federal Reserve. On the surface this might not seem any different and you could make a good argument that our current interactions with money are already exclusively digital. However, an account directly with the Federal Reserve is different and it is intensely dangerous.
Central banks maintain a monopoly on both the creation and the destruction of a nation’s currency. This power is already the most dangerous power on planet Earth today. Now pair to that power, the ability to directly control every transaction and account of all individuals and businesses. This power would be centrally concentrated amongst a couple dozen unelected bureaucrats.
Why Governments Want Them
The entire purpose of a CBDC is to control how much money exists and to control exactly where that money exists. This money is programable. This means that it gives the central bankers the ability to make scalpel like changes to the economy at the level of the individual. This capability to enact such finely tuned economic policy is unprecedented and would give central bankers a level of control over your life that has never before been seen in human history.
Right now, the central bank must rely on bank lending and government deficit spending in order to insert new dollars into the economy. They have very little control over where those dollars end up. We still have a degree of decentralization in our monetary system in that the local banks control the supply of dollars in circulation through lending and where those dollars end up based on their lending requirements. Put another way, Jerome Powell does not control the dollar, Jamie Dimon does. A CBDC would give that control to Jerome Powell.
Now if you move to a CBDC then Jerome Powell will have total control over the number of dollars in circulation. He would be able to control the rate of inflation. He could increase or decrease the money supply. He could increase or decrease velocity. He could also issue credit to whoever has political favor. Keep in mind that in order for local banks to operate they must report their profits and loses or PnL. This acts as a check on the banks because they must lend based on an individual’s ability to pay them back. A central bank does not have to do that because they do not have to worry about being paid back. This means they can issue dollars based on your social credit score, or if you have been a good boy or girl and worn your mask. But just the same, if you are caught outside not wearing a mask or not following whatever ritual the authorities deem necessary at the time then that offense could be deducted from your social credit score and the next time you go to the bank to get a loan you will be penalized by having to pay a higher percentage interest rate. That is assuming that you were approved for the loan to begin with. Because the Federal Reserve is not concerned with being paid back, they could enforce equality of outcome.
Now if you really are a bad boy or bad girl, say you are a trucker in Canada, or you donated to a trucker in Canada, then you can be completely excommunicated from the entire financial system. Now if at some point cash is banned, which can happen faster than you might think, then you are left with zero purchasing power outside of the system and you are done, absolutely cut off. There is nowhere for you to go. You cannot move to another country as a financial refugee because that purchasing power is trapped within the financial system, and they have eliminated the off ramps.
Programmable Money
Because CBDCs will be programable they could hypothetically give everyone a stimulus check that would expire in one month in order to boost spending that month to hold off a recession. They could give everyone a food bonus, money that could only be spent at a grocery store who also has a wallet/account open with the Federal Reserve. They could limit how many dollars you spend at a gas station during a specific time of the month if gas is getting too expensive or if supplies are running low. They could overnight, shut off any person’s ability to make any transactions whatsoever if they were deemed dangerous, or a criminal, or a terrorist. If the stock market was crashing, they could deposit dollars into your account that could only be used to purchase stocks. They could restrict certain transactions such as buying specific stocks if that stock looks to them like it might be in a bubble.
Right now, our neighbors up north are seeing their banks turn into muscle for the state and it is proving to be pretty effective. Now imagine if a couple dozen unelected bureaucrats can do all of this with a couple dozen strokes of a keyboard. No more international wires, no usage of an ATM, no more approved business licenses without an account open with the Federal Reserve. No more buying from any businesses unless you use your CBDC.
Couple a CBDC with an individual social credit score and they can be used to train you like an animal through a system of rewards and punishments. They can make an individualized sales tax. For example, if they see that you are drinking too much, they can add an additional sales tax to each additional drink you might order at a restaurant. This type of scenario might seem hyperbolic, but your imagination is the limit because it is programable money. If your social credit score is below a certain threshold then they might limit your means of travel like they do in China to only slower options like trains and cars as opposed to airline travel. They could ban you from using Uber or Lyft or even from booking a hotel.
Say for example, that a climate crisis is declared. Well, if you want to grill out this weekend then when you go to the grocery store and try to check out with hamburger meat then you might find out that your allotted personal carbon allowance has been used up for the month and now you can only purchase proteins sourced from plants and bugs. Mastercard has already come out with a tool for banks to calculate customers carbon score based on what you buy and if you have booked a flight recently with Google Flights, you will have noticed that they are already calculating carbon emissions per flight. When viewed from the level of the individual It does not take a Notradamus to realize that this will be used to manipulate everyday people’s behavior by restricting travel and purchases.
Viewed from a more macro level, if the government is at say a hundred and fifty percent debt to GDB and the Federal Reserve needs to bail out the government then they can increase velocity by inflating their way out. Inflation is nothing more than the theft of purchasing power from the existing money supply. So, in order to increase velocity as mentioned above, they can program a timer into your monthly stimulus that forces you to spend those dollars within a week or else it disappears. This forces people to purchase goods and services sooner than they otherwise would have which results in increased velocity and in turn increases the rate of inflation and lowers the debt burden for the Federal Government. However, because the inflation raises the price of those goods and services that were just in such high demand and the wages of the middle and poor Americans always lags behind this results in decreased purchasing power for everyday Americans.
This is the situation we find ourselves in today. While the government admits that inflation is eight percent, real inflation is likely double that. If wages increase at say five percent per year and inflation increases at fifteen percent, then the difference is ten percent per year. When you compound that delta over years then that means peoples real wages are being decreased significantly and the government is doing this intentionally to bail themselves out to pay back their debts. With a programmable currency they can lock you into the system and cause as much inflation as they want and there is nothing you can do about it.
With foreknowledge of this you need to have some purchasing power outside of the banking system incase you or your group become the next Truckers. This can be accomplished by owning precious metals like gold or silver or some cryptocurrency, specifically Bitcoin or Monero. You can get creative with forms of purchasing power outside of the traditional financial system but ideally it would have the qualities of being both highly liquid and relatively stable in terms of retaining its purchasing power in relation to the dollar.
Just like pandoras box, once they get their hands on this much power there is no turning back. It will be too late when the masses wakeup and realize what has happened. You will not be able to back peddle and exit the system. They are right now actively shutting down all off ramps from the financial system, be it with cash withdrawls or deposits or KYC/AML regulations in cryptocurrencies. You won’t be able to use your CBDC to buy gold. You won’t be able to buy Bitcoin or other decentralized cryptocurrencies. In China, you cannot buy Bitcoin with their CBDC, and you could not do so even before they outlawed Bitcoin. You will not be able to transfer any of your wealth out to make an investment in a different country in order to purchase citizenship through investment. You will not be able to rely on CBDCs in times of crisis to buy an airplane ticket out of the country. This is being sold to the masses as a necessity for economic stability all in the name of preventing money laundering, increasing efficiency of cross boarder payments, and of course, national security. In reality CBDCs will be used as the chains that will enslave humanity and all future generations.
This is a line that once crossed cannot be uncrossed. Right now, there are people around the world that said this could never happen here. Then they woke up and they realized that it did. Certain businesses like Marijuana, firearms, or gold and silver dealers are already having their business accounts shut down by the existing banking system. If we move to a CBDC there will be no alternative bank turn to in order to continue doing business. The amount of control that will be given to any entity that is able to issue and control Americas CBDC will be unprecedented. This is a power that we do not want to exist regardless of whether or not it ends up being used for good or not. The capacity for it to be used for evil is too great. In the Federal Reserves open letter to the public, they explicitly stated that they want Congress to authorize the use of CBDCs. Unfortunatly, the submission window has closed to respond directly to the Federal Reserve but that does not mean you cannot contact your representatives to tell them absolutely not, this is a bad idea, and we do not want anything to do with them.
If you found this article interesting and would like to share a comment with me, please feel free to reach out to me directly via my personal email at (drew@drewredifer.com).
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