Failure of Banks Sets the Stage for Digital Currency

We sit on our hands while the push for digital currency is moving through our State legislatures. With bank failures, the power move is on for the Biden henchmen to make their move. Some argue that with digital currency there would be no more bank runs.

Unlike a traditional deposit or checking account at a commercial bank, the depositor supposedly carries no risk, as a central bank is a sovereign credit, backed, at the end of the day, by the government’s ability to tax, not on a cushion of reserves and equity capital..  How true is this?  The question is at what price.

“If there anything we should’ve learned the last several years that the Government cannot be trusted.” -Gov. Kristi Noem

Gov. Kristi Noem: This is a threat to our freedom

South Dakota Gov. Kristi Noem explains why she vetoed a central bank digital currency bill on ‘Tucker Carlson Tonight” last Friday.

Mustang picks up the story and how this will work and why you should care.

by Mustang

Central Bank Digital Currency.  If the United States government decided to shift to digital currency, it would replace the U.S. dollar.  Some people think this would be a terrible idea.  Why?

The official term is CBDC

Converting to digital currency would threaten our privacy and open the door to government surveillance of the private sector.  There is neither privacy, protection, nor finality that cash provides.  This means that private citizens are tethered to the central bank — which is quite different from using credit cards, debit cards, and other prepaid cards.  Some people call this “digital liability.” in any case, digital currency has garnered the attention of politicians, central bankers, and the tech industries. 

Now, when consumers deposit money into their bank accounts, the deposits are liabilities of the banks — the banks owe their customers the money deposited in their accounts and are responsible for transferring it.   In the case of a digital currency, the money would be a liability of the central bank.  The government (Federal Reserve) would be directly responsible for holding, transferring, or otherwise remitting those funds to the owner.   This feature creates a direct link between the Fed and this feature that makes a radical departure from the U.S. financial system. 

Those who support digital currency argue that it promotes financial inclusion, provides for faster payments, protects the value of the U.S. dollar as a reserve currency — and makes it easier to implement monetary and fiscal policy.  But even proponents recognize that digital currency poses risks, threats to financial privacy, freedom, and challenges to the banking system. 

Another problem is that most consumers need help understanding digital currency.  They do know that in May 2022, the so-called stablecoin crashed — and wiped out more than $600 billion in investment and consumer funds.  I don’t have the personal wealth that would allow me to take such risks.  I suspect most Americans are just like me.  Many folks argue that digital currency would not provide any unique benefits to Americans.  What it would do is increase risks that outweigh any potential benefit. 

What do I mean when I say I worry about financial security?  Americans are entitled to privacy — it’s one of our Constitutional rights.  Still, there are laws designed to counter terrorism, deter money laundering, and collect taxes — and these laws allow the government to conduct warrantless surveillance of citizens’ financial information. 

Switching to digital currency could remove what little privacy protections that remain because it would give the federal government complete visibility into every financial transaction by establishing a direct link to each citizen’s financial transactions.  Do we, as Americans, who value our inalienable rights, want more or less government intrusion? 

Related to security is the issue of individual freedom.  If the government had unfettered access to consumer financial information, it could seize and control a citizen’s financial transactions.  Examples include:

• Prohibiting or limiting purchases.
• Denying access to personal funds.
• Seizing funds.

Moreover, the government can program digital currency. 

Suppose we assume that the federal government would stoop so low as to impose house arrest on its citizens because of some health crisis, for example.  In that case, digital currency could be programmed to refuse any exchange beyond “essential business” or alert federal agents when citizens’ expenditures include travel beyond the lockdown area.  We call this warrantless digital surveillance. 

Why would I think such a thing possible inside the United States, the land of the free?  Because governments have used financial systems to control citizens for years.  You know — keep them in their place by taxing them to such an extent that they have no disposable income. 

And what about financial markets?  If people lost confidence in digital currency, would there be a “run” to close bank accounts?  What might happen to bank deposits, the foundation of bank loans and investments?  Credit unions have thought about this, leading them to conclude it’s a bad idea. 

Finally, what should we think about cyber security?  Placing digital currency in a central location, such as the federal reserve, would make it a desirable target for hacking.  Indeed, though, the federal government is immune from computer hacking!  In 2015, the Federal Reserve was successfully hacked by a bank in — of all places — Bangladesh. 

True, private institutions are also targets of computer thieves.  Still, the difference is that a bank hack exposes only a few citizens, while a breach of a federal database could jeopardize everyone’s private information.  Let’s ask the Pentagon or the Office of Personnel Management how they fared against hackers from China. 

FACT SHEET:  White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets

Here’s what the White House says about digital currency.

And the IRS? Check out yesterday’s post and what 87.000 Brown shirts may have in store for us and what their role may be.

Biden: ‘Surprised GOP Wants To Stop Dems 87,000 New IRS Agents’

Here is the wrap up. Tucker Carlson gave it a whirl on the banking crisis and where it is headed. A portion:

The best of the swamp.