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A Central Bank Digital Currency is a Threat, Not a Promise

Posted on Sunday, July 23, 2023
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by David P. Deavel
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16 Comments

AMAC Exclusive – By David P. Deavel

central bank

My seven-year-old daughter asked me an interesting question this week. “Dad, you know how when you die, your kids get your money. How much will I get?” After asking her if she had any plans to bump off the old man, I explained that it would depend on a number of factors—how much we manage to save, how long we live, our health, how the economy goes. Left unstated was a dark question I’ve been mulling over for some time now: will the money we are saving be vulnerable to governments adopting digital currencies that can be controlled through a social credit system?

This thought was foremost because of the report from Reuters about the results of a Bank for International Settlements (BIS) survey of central banks released this week. Two dozen central banks plan to have a digital currency by 2030. Many are already starting pilot programs. For example, the Swiss National Bank and the European Central Bank are beginning pilot programs ahead of scheduled launches of their digital currencies. India and Brazil are planning to launch such currencies soon, while China already has 260 million people participating in a regulated digital currency.

That China has such a currency is a pretty important indicator of why this is a bad idea. That country has long had a number of social credit systems operating at the regional level and aspires to have one that covers the entire country. In a Newsweek report on the various kinds of social credit systems operating in that country, John Feng writes that, as of 2019, about 70% of China’s population—that’s 1 billion people—were under some kind of social credit system, according to the Chinese central bank: “By July of that year, 2.5 million people across the country had been barred from flights, 90,000 people had been restricted from high-speed rail services, and 300,000 people had been deemed untrustworthy by Chinese courts, according to the National Development and Reform Commission.” That the Chinese social credit system is a patchwork series of systems, not all of them with teeth, may be comfort of a sort. But that’s the equivalent of saying that the guy who bullies you gets tired easily. Even Feng admits that there is trouble already and ahead: “The ill-defined category of ‘picking quarrels and provoking trouble,’ for example, is often used to round up hooligans, human rights lawyers and political dissidents alike. Here, the long-term implications of China’s social credit system may act as an incentive not to oppose the state.”

How would a digital currency help those taking control? It’s not just any old digital currency that would do so. Digital currencies, which are currencies that can only be accessed electronically and have no physical counterparts such as coins or banknotes, are not necessarily bad in and of themselves. The advantages of digital currencies are that they can make cross-border payments easier and save money in exchanges. Whether one thinks digital currencies are good or bad, one can at least see that the ones that are decentralized (think Bitcoin) allow a source of wealth outside of the control of the government. In contrast, a Central Bank Digital Currency (CBDC) is completely under the thumb of the government—which means the money one has in that form is vulnerable not only to manipulation (as our current fiat currency is) but vulnerable to complete control by the government.

First, there is the difficulty that banks could impose negative interest rates by simply shrinking the balances in everyone’s accounts, a possibility raised by trade policy scholar Eswar Prasad in a New York Times essay. Prasad ultimately approves of a CBDC. But he also admits that such a move would mean anonymity in exchange was almost impossible. But there are worse things. Imagine not merely being prevented from flying but having your wealth disappear if you don’t use it when the government wants some financial stimulus or you are spending it on the wrong things.

Think that’s far-fetched? Prasad himself suggested such possibilities in a speech at the World Economic Forum (WEF): “If you think about the benefits of digital money, there are huge potential gains…It’s not just about digital forms of digital currency; you can have programmability—units of central bank currency with expiry dates.”

Have you spent the money the government told you to spend? Sorry, but it’s expired.

Prasad further explored the possibilities of “a potentially better — or some people might say a darker world — where the government decides that units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography.” Even he called this “extremely dangerous.” While his examples—at least the pornography and drugs—might tempt some people to approve this, our current moment of censorship in the U. S. and the dominance of environmental extremists in our administrative state should lead us to consider what else a government might not let us buy—or might take our money for buying.

In an MIT Technology Review article published this Friday titled “Is the Digital Dollar Dead?”, Mike Orcutt noted that plans for a digital dollar are nowhere close to being implemented in the U. S., though a bill called the Electronic Currency and Secure Hardware Act (ECASH), which commands the Department of the Treasury to create a digital currency, was introduced by Massachusetts Representative Stephen Lynch last year. Though it didn’t get out of committee, Orcutt writes, the congressman plans to introduce it again this year. Not only that, but the Boston Fed worked with a private company to figure out how to build a CBDC and continues to do research on the possibility.

Orcutt seems a bit puzzled why politicians such as Ron DeSantis and Representative Mike Emmer of Minnesota (he could have mentioned Chuck Grassley, too) have been so adamant that a CBDC not get any footing in the country, though both are in favor of digital currencies that are not controlled by the government. Perhaps the reason is that he doesn’t take into account the tyranny that other proponents such as Prasad actually admit.

CBDC opponent Joan Sammon, in an article titled “The Short Sweet Step From Digital Currency to Tyranny,” notes that such financial tyranny has not just been seen in China. Canadian Prime Minister Justin Trudeau froze Canadian truckers’ bank accounts when they protested the Canadian assaults on liberties in the name of COVID. She quotes from the WEF’s Central Bank Digital Currency Policymaker Toolkit: “as policy‑makers navigate this process, they should consider how CBDC may introduce new capabilities that support regulatory goals while also introducing new risks or compliance vulnerabilities.”

Capabilities to support regulatory goals? That sounds like a promise to those with the technocratic mindset. To ordinary people, that sounds like what it is: a threat. We’re ok with a digital currency that allows us to pay from afar and across boundaries, but we don’t want our money to be vulnerable to a government that will take it if we buy too much meat or too much gas for our cars—or share articles about the Biden family “business” in Ukraine, the possibility that COVID was leaked from a lab, or whatever else the government doesn’t want us to talk about. If that’s the idea, they can take my cash—and my daughter’s inheritance—from my cold dead hands.

David P. Deavel teaches at the University of St. Thomas in Houston, Texas, and is a Senior Contributor at The Imaginative Conservative. His Solzhenitsyn and American Culture: The Russian Soul in the West, co-edited with Jessica Hooten Wilson, is now available in paperback from Notre Dame Press.

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Rik
Rik
9 months ago

A Government controlled anything is just Communism in action! Just what we need a Banking system where the Government knows how much money you have for them to take from you. After all, Communism relies on complete Government control of your existence! And Democratic Party Leadership is Communism in control!

Rob citizenship
Rob citizenship
9 months ago

Very good that you wrote this very important article David. It is an issue that is at the foundation of what Conservative beliefs are all about — the importance of limited government. It doesn’t get any more of an over – the limit of government involvement than a banking system described in the article. Sounds like that Joan Sammon is something worthwhile reading — that is what I will plan to do next. Well Done with what you wrote here. In the spirit of defending Faith, Family and Freedom , this topic has to do with the basics of civilization really, at the core of order and organization and liberty.

Lieutenant Beale
Lieutenant Beale
9 months ago

So, the $64,000 question is, what are we going to do about it? (Sadly, probably not much, is my guess)

Rob citizenship
Rob citizenship
9 months ago

Note on the Joan Sammon article — the title of the article — I entered ” A Short , Sweet Step from Digital Currency to Tyranny ” what is appearing on the screen is ” A Short, Sweet Step from Digital Currency to Dictatorship ” by Joan Sammon . I reckon it is the same article, just the one word difference ( those things happen, especially when the meaning of the words involved are similar) just thought I would mention it though. The main thing of importance is that this matter is being explained and the truth is being presented . Praise to you Mr. Deavel and to Joan Sammon for this writing on this issue.
.

Stephen Russell
Stephen Russell
9 months ago

CBDC= Govt Control A-Z
More power

Karen Knowles
Karen Knowles
9 months ago

Excellent article, Mr. Deavel! I especially agree with your concluding sentence.

Kyle Buy you some guns,and learn how to shoot
Kyle Buy you some guns,and learn how to shoot
9 months ago

Nuther comment. Since the Colonies went to one form of money, i65 seems to have been working well. Why mess with it. ??? If it aint broke, dont fix it. Kyle L.

Morbious
Morbious
9 months ago

There’re many serendipities in this for the commie dems. The most obvious is that this would be an end run around the second amendment. Next would be the ease with which they could control our movements. Looking forward to a driving tour somewhere? Only fervent commies need apply. Imagine how many grasshoppers and tofu they would need to eat to qualify, to say nothing of how many sleepless nights sweltering wo ac.

Ann S
Ann S
9 months ago

First they came for the fossil fuels and our cars, then our gas stoves, gas washing machines, gas dryers, gas dishwashers, gas furnaces and gas water heaters and now it is our money and no one spoke up before what makes you think they will now. It is too late people they got us where they want us. You will obey. Orders are orders. The Third Reich had that mantra too. Befehl is Befehl.

johnh
johnh
9 months ago

I am 100% against banks deal in only digital currency. There are enough crooks & scams in the world now & this will only open up another way for the criminals to operate. Why do you think the people that lock up computers only want to be paid in Bitcoin & the answer is that they cannot be identified or traced. Leave US currency in solid form as it exists today.

Kyle Buy you some guns,and learn how to shoot
Kyle Buy you some guns,and learn how to shoot
9 months ago

I dont profess to understand all this, but who wants to run around with 40 or 50 coins in their pocket. Was discussing electronic bit coins with my son a while back. I told him I had a dollar bit coin , and can i put it in a coke machine and get me a coke. ?? He said no, and I immedietly replyed , what good are they.n ??? Personaly i will stay with ole green and gray. > Kyle L. P.S. Why does Joe Avarage need that anyway.

Myrna
Myrna
9 months ago

We are already seeing businesses attempt to curry favor with ads we would never have thought they would run. There is desperation to be popular even if they don’t really like what they have to do to try to attain it. I am thinking of Budweiser.

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