AMAC Exclusive – By David P. Deavel
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.
