CBDCs

CBDCs. No it’s not cannabis oil; those are CBDs. CBDCs, Central Bank Digital Currencies, are far worse. In fact they may be the most dangerous tool ever conceived, and if successful, would allow the state to weaponize the financial system against its population. The unfortunately reality is that they are probabilistically inevitable. As many people know inflation has gotten out of control. Go to any grocery store and this is glaringly obvious. Chances are that annual inflation adjustments you get at work are not going to keep pace with the rising costs of living, let alone affording a home. In a rather frankly condescending opinion piece published under Bloomberg, the author (Teresa Ghilarducci) had the audacity to provide a solution whose TL;DR can be best summarized as “stop being poor.” I encourage you to read the article; then the comments. For the record, you would need to be in the top 2% of American household income earners for “inflation not to sting.” Check out this calculator and play around for yourself. Way to tell hundreds of millions of hardworking Americans to suck it up. So, quick history lesson to explain WTF is happening: * Our money used to be backed up by gold, something of actual value. * In 1971 as countries started calling in their gold being held by the US, President Nixon performed a soft default on the USD by removing the gold peg. * The last country to leave the gold standard was Switzerland in 1999, though now the country is looking to go back (thank goodness). * As of 1999 for the first time ever the world is fully running on a fiat standard where all economic value is backed by nothing more than government debts in the form of treasury bonds. * This effectively allows for unlimited money printing by central banks. * Inflation due to the nature of compounding growth in an economy not tied to a gold standard is inherently exponential, whereas commodities and supply chain growth are comparatively linear. * 50 years into the fiat experiment, and it’s all starting to breakdown. So how does a government get out of this? * If interest rates rise to curve inflation the interest expense of most companies (and individuals) will trigger massive levels of bankruptcy; wiping out pensions ahead of the biggest retirement wave in history. * If interest rates are kept low expect the cost of living and housing costs to continue spurring out of control leading to greater civil unrest. The government and central banks are damned if they do, and damned if they don’t. So they came up with a ingeniously concerning idea that makes me personally uncomfortable should it come to pass. The Central Bank Digital Currency. The idea is that the money you have wouldn’t be in custody with your bank but rather through the state’s central bank. The money would be fully programmable and centralized, with records of the ledger being kept most likely by the commercial banking sector. Given the programmatic nature of the money which would solely be under the control of a government chartered entity, these new CBDCs would allow for: * instant issuance of new money as required, no change to our current system * direct transfer payment to recipients * direct tax with-holding * direct garnishing of money owed to the state * an expiration date of money not spent by a certain time * money earmarked for certain purchases (i.e. education, not food) * the ability for the state to target your financial assets programmatically rather than through due process of the law * the ability for the state to change the features of money based on potential discriminatory features of the account holder * the ability of the state to directly see every transaction you have ever made * the ability of the state to assign you a social credit score based on your transaction history * the ability of the state to seize funds for suspicious criminal activity or protests that the current government may not agree with * the list goes on I think you get my point. If money is supposed to be the medium of exchange and store of value for the fruits of our labour, the prospect of a CBDC in the hands of a malicious or incompetent group of people can only spell for greater economic disaster at the expense of tax payers. Worse yet is the consequences this can have for personal privacy or the specific discriminatory targeting of a segment of the population that a government may not like. I’m all for technological process and development. These CBDCs are a regression, a step backwards, that will only serve as a medium for greater irresponsibility. The fiat money system we have is failing, and will continue to do so as long as our money is not backed by anything. The spirit of fiat money is that it is on the basis of trust. In case you haven’t noticed, global trust is at an all time low at all levels of society and is only going further down that path. The need to have hard assets backing up our money weather it be on the basis of gold, silver, Bitcoin, commodities or land has never been as great as the need today. These CBDCs will not save us; they will only serve more of the same, a system that fails the majority of its people for the benefit of a few. Before its debut this initiative will come in the form of universal basic income, when people are at their most desperate financial point. Then once the state has the population hooked on these transfer payments, they will become digitized in the form of CBDCs. By then it will be too late; you will have handed the government the keys to the kingdom and risk being of indentured servitude until your final days. Until next time, HODL on. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit bitsandsats.substack.com