The Central Bank Digital Currency Tracker shows the evolution towards central bank sponsored digital currencies.
Nearly 80% of central banks are engaged in work related to national digital currencies, according to a 2020 Bank of International Settlements survey.
Last month, China announced a pilot project of its digital Yuan in four cities. This month, the US is considering implementing a digital dollar.
Country Specifics
Digital Currencies are Coming
There are advantages to digital currencies especially in terms of payments.
But the push for digital currencies is also nefarious. Once cash is banned, governments can and will track every penny of every person 100% of the time.
And I do expect a ban on cash, starting with Sweden.
Once in place, digital currencies open up new avenues of control especially in regards to negative interest rates and wealth taxes.
Mish
I’ve always read this valuable blog in order to obtain financial advice. I think Mish is right, becouse even me is able to connect the dots. What I would hear is a path to survive in this scenario. There are most doctors able to diagnose… but nobody knows anything about the cure
On a country basis, is there a correlation between a certain virus and central digital currency?
I think digital currencies will make it easier to launder money. Bankers won’t have to explain where all that pesky paper came from. Humans are very inventive and where there’s a will there’s a way.
“But the push for digital currencies is also nefarious.”
That’s the reason they are doing it.
When you get a paycheck and it is deposited in the bank, it is the bank’s money. With a digital currency and no cash, you can no longer own the profit from your own labor.
“Once you have digital currency, using cash will have the aura of illegality, only suited for transactions involving drugs or sex or something shady.”
Cash will be banned – period
I expect Sweden will be first
Yes, they want to ban it, or at least a powerful faction wants to. But there are also powerful factions that would be seriously inconvenienced by a ban of cash – inter alia the spook agencies and all other arms of the government that have “black budgets”. I guess they could always use Monero, but in the third world that might not be so useful. Also, if you think about it, a good lawyer should be able to challenge such a ban on constitutional grounds. The fact that the banking system is fractionally reserved is the linchpin – any money deposited with a bank is an unsecured loan. You cannot be forced to become an unsecured lender to banks, the right to withdraw your property from them has to remain in place, otherwise property rights become meaningless.
Once you have digital currency, using cash will have the aura of illegality, only suited for transactions involving drugs or sex or something shady.
The idea of being able to force people in the informal economy to pay income, transaction, and payroll taxes seems a great idea, until you stop and think why people are ready to take the risks of not doing these things in the formal economy: In most cases you will not be collecting more taxes, you will be killing off this activity, since it is no longer profitable. Less freedom always translates to less activity and less initiative.
How will this affect digital payment processors like V and MA? Govt backed digital currency likely will have security at least as good as V and MA probably would be without any transaction fees…
Reducing transaction friction, and costs, are a big benefit of a centralized digital currency. Big payment processors already reap big benefits from settling transactions where both parties are on their network, so they don’t have to go out to the wider network and incur costs.
If the government provided the whole thing as a “free” service backed by “the full faith and credit….”, there’d be little need for today’s middlemen.
“But the push for digital currencies is also nefarious. Governments can and will track every penny of every person 100% of the time. “
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Zero doubt Big Government heading in this direction as it benefits Big Business. Big business already operates in “digital sphere” concerning income statement. Many small marginal businesses, however, survive by skim (cheating on taxes) … a push to digital would put some out of business … and their “surviving” customers / clients migrate to Big Business.
Cyber attacks have been known to wipe out accounts. Digital currencies will guarantee a system-wide failure sooner than later. Who needs a standing army when a couple of hackers can shut down an entire country’s financial system?
This is the path to total government control of our lives. If the government does not like something Mish has to say, they just block his account and no one will be able to send him money. You give this kind of power to someone like Hitler, Stalin, Lenin, Mao Tse-tung or Pol Pot, the consequences would be unimaginable, especially if we have a global government.
Ultimately that is the whole point. Total control. Biblical. How did he know?
And, by the way, if you talk to a NWO socialist and mention Hitler, Stalin, etc., they just roll their eyes. They truly believe that today’s democratic socialists are different. ROFL if it weren’t so horrible.
” You give this kind of power to someone like Hitler, Stalin, Lenin, Mao Tse-tung or Pol Pot,…”
Or Trump. Or Obama. Or Reagan. Or FDR. Or Thatcher. Or Olof Palme. Or Xi….
Picking favorites among turds in a sewer, is always unbecoming.
Great news if you’re a telecom company. Now not only will you need to have all the electronic paraphernalia needed to maintain a wallet (although technically a QR code on a sheet of paper could suffice), you’ll also need to have a network connection.
I’ve got digital currency already – debit and credit cards. No cash required. Also wire transfers. This seems to be a non-story unless physical currency was to be done away with.
Agree. People are avoiding cash transactions during the pandemic (I know I am). The Fed is “printing” digital 1’s and 0’s to add liquidity to the system. Digital currency is here already.
The only question is, will they somehow “improve” it so that every digital dollar contains a record chain that shows where it has been for its entire existence such as blockchain does. That’s something not even Orwell considered. No doubt “private” digital currencies such as bitcoin will be made illegal at that point. Remember that in the history of the US, there used to be private physical currencies until they were all done away with.
“People are avoiding cash transactions during the pandemic (I know I am)”
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Yes … and a source of misread by White House on economy.
They are touting gains in cc transactions as sign of economy (rapidly) improving. Not so fast.
Also, banking is all digital. You don’t have cash in your savings account, but merely digital credits. Online purchases don’t involve mailing currency to Amazon, just the authorized transfer of digital dollars. One misplaced decimal point keystroke in either direction, and triumph or disaster.
You’re missing the point if you think this is just about getting rid of paper. Digital currency has been around a long time and there is far more digital currency in existence than cold hard cash. This is about control. Think of the ramifications when your “Fed Digital Dollars” not only can be tracked but can be programmed to be spent within a certain time frame, or spent on certain things, or inactivated depending on if you’ve been a good boy or a bad boy. To the unaware that may sound like conspiracy stuff, but there’s nothing stopping it.
Financial Repression will be the order of the day for years.
It will probably require some form of capital controls.
Digital currencies = perfect for the role.
It’s a done deal in my opinion for that reason alone, when not if.
2nd and 3rd order impacts will occur, even in value of PMs. May not be PM positive in med-long term as there could be conversion ratios if PMs converted to necessary currency needed to buy/sell.
All power will be with Big Brother running the digital system.
Sounds like a colossal waste of energy.
It’s a double edged sword with blockchain type currency’s. They can be tracked. But the that’s everyones problem. The people may not have the power to see everything but the evidence is there to be revealed at some point.
It could bring accountability at some point.
What is important for all possible freedom, is that power relations are symmetrical.
As in, people are free, to the extent they’re not vastly outgunned by their government.
Wrt currencies, things are no different. It’s OK for a central bank to print dollars, AS LONG AS it is also OK for anyone else to do so. Ditto Gold. As long as anyone can dig for it, it’s OK for government to do so as well.
Decentralized digital currencies are hence OK. AS LONG AS there are no privileged actors. Such that either all transactions are public, as in Bitcoin (probably ideal for a “national” currency, as graft is hard to cover up, and any “leakage” is easy to spot), or they are all equally anonymous to anyone.
It is, as everywhere, the in-betweens, the asymmetries, which are problematic and destructive. When The Fed can print, but you or I are thrown in jail, should we do the exact same thing. When whites (or regime employees) can carry guns, but not blacks (nor others not in direct employ of the regime).
Could Covid nonsense cover for something much more sinister?Removal of all paper currency that way big govt/central banks have total control of what and where you spend money!And they’ll take what they want,and throw a few crumbs your way like that $1200 handout while they pump trillions into wall street and the big banks!
All the more sinister since as of yesterday it’s been found Covid-19 does not really spread via coins and paper money (maybe one documented case from touching an inanimate surface); the main form of transmission is family and friends talking and coughing close to you.
My thoughts, I started writing and it ended up long:
Good post. Hope more people read it.
Reminds me of the story of Jesus being asked by the Pharisees if people should not pay taxes. They were trying to trap him and label him a rebel if he said that people should not pay them.
Instead, he asked them whose face was on the coins. Of course, the answer was Caesar and from that Jesus famously replied: “Render unto Caesar that which is Caesar’s.”
When I was growing up a hardcore Southern Baptist, every preacher I knew said that Jesus was telling Christians to pay their taxes and obey the laws. It wasn’t until I was much older and had been away from the church life for a long time that I realized that Jesus was actually giving them the answer they wanted, but in a rather obtuse way.
Coinage created by a government belongs to that government and if they want it back, they will take it – either directly or by subverting the value through inflation – so you may as well give it to them when they ask.
So find a way to trade that doesn’t include coins issued by Caesar…
Much easier then than now of course.
It in no way implies that you need to pay taxes. It was a genius answer, a parable, a paradoxical, dark saying with a twist; it functions as a mirror, people project what they want but ultimately say more about themselves than about Jesus’ maxim.
For Jews, the head of Caesar on the coin meant idolatry, and anybody using it, including the people who thought they had trapped him (as a revolutionary he could hardly approve of taxes to the Roman oppressors but opposing them publically would mean insurrection, a capital crime), using the Roman coinage was a daily act of treason and idolatry. At the same time, what is Caesar’s forever remains a question: What does in fact belong to Cesar? The coins are obviously his, but what else is actually Caesar’s, rightfully speaking? The elites also demanded silver coins minted in Tyrus for payment of Temple taxes, but these coins were only exchanged for a premium compared to the nominal value, because they contained more silver. The authorities were making a killing selling temple tax coins and officially sanctioned doves to pilgrims and holiday observers for far more than the nomiinal value. Besides, the shekels from Tyre were also idolatrous, featuring symbolism of the pagan city as well as Melqart, the son of Baal, consort of Astarte (fertility goddess denounced by all the prophets). The institutionalized theft and hypocrisy is what fueled Jesus’ anger at the bankers in the temple, who he chased out of there. An incident that led to his being put to death within a week.
Kings used to clip coins, to save metal, but of course it amounted to a tithe on the real purchasing power sooner or later. Imagine the possibilities of forcing people to pay bills (or would all bills be instantaneously settled), or to claim money automatically for state spending, or to “demonetize”/banish/shun people for all kinds of trivial behavior deemed at odds with social or political demands and fads.
It might be beneficial to quote the entire response Jesus gave to see that the primary focus of the response was not really about money/taxes …
And he said unto them, Render therefore unto Caesar the things which are Caesar’s, and unto God the things which are God’s.
The map needs updating as Venezuela has already launched its digital currency. I haven’t heard how it’s been going for them, but with the decline in oil prices and loss of faith in the government, I don’t expect much.
https://www.foreignaffairs.com/articles/china/2020-05-20/could-chinas-digital-currency-unseat-dollar Here we go ! China’s digital currency could blow up US sanctions and soft power.
Doubtful, but interesting article nevertheless. Notice US regulators shot themselves in the foot by helping kill Facebook’s Libra with over-regulations, while China moved forward.
Capital Controls will be easy to implement, whenever “deemed’ necessary, with digital currencies. Humans are innately analog not digital; but have been ‘trained’ to despise physical currencies. Long Live Gold! Lest we become slaves to the central bankers madness.
Only just send this post. What about control of conversion ratio of PMs to digital infrastructure currency? May also be controlled.
They can’t completely control that.
Example, you are buying my for sale by owner home. Want 20% off my asking price? Have any hush hush gold?
You would also be able to pay someone digital currency for gold or silver while pretending it was for a service.
Anything paid for a service digitally can be taxed automatically. Gold exchange outside of the system (for assets) will also crimp the value.
I still see digital as a back door way to isolate PMs from exchange, limit their market and in time corral them.
Its complicated but digital will completely change the landscape ivrr time – PMs, Art market, classic cars – you name it. There might be a case for some markets to fragment and for instance have some Art paid for in PMs (a quick example) but this is not mass market and over time Gold would be corralled unless there is an exchange into digital and back again. How that exchange rate is set is critical and how it might be taxed on any exchange into the digital realm.
Needs some thought as to implications. The people running the system will not like the freedom PMs offer the plebs to opt out.
Only a matter of time.
New make-believe “money” to replace the old, printed-to-infinity-soon-to-be-worthless, make-believe “money”. But it’s “digital” and “crypto”. So cool and modern (as in MMT)!
Will the rubes fall for this?
Probably.