Money as a means of social control.
Banning cash is a Statist dream come true.
[I made this post free because it’s such hugely important topic. My next post will be subscriber-only, and will be way better, but on different topics.]
Important new piece out from the great Mike Shedlock I want to highlight:
The Fed Proposes a 4th Function of Money: Means of Social Control
Mike highlights a 2019 Fed paper titled, Docket No. OP - 1670. Federal Reserve Actions to Support InterbankSettlement of Faster Payments, which includes this incredible passage:
But there is a fourth function of money: as a means of social control. The centralized monopoly over the functions of money held by sovereign governments and central banks has generated great income and wealth imbalances. Concerns about a lack of central bank performance with respect to financial inclusion, income inequality, economic system stability and the tendency of central banks to intermediate on behalf of large financial institutions supported the creation of cryptocurrency"
As we noted in a second paper " Is FedCoin Feasible?" another confidential, not-for-distribution research paper sent to select members of the House Financial Services Committee, we suggest the Board focus on using an enhanced Bitcoin blockchain to "support depository institutions' provision of end-to-end faster payment services and would provide infrastructure to promote ubiquitous, safe, and efficient faster payments in the United States."
Shedlock highlights this:
The Fed is sending "confidential, not-for-distribution research" to select members of the House Financial Services Committee espousing money as a means of social control.
The confidential Fed research express concerns over income inequality and fears of Bitcoin.
First off, if the Fed were actually concerned about inequality, they would’ve ended QE over a decade ago.
And it seems the author has a definite personal financial interest in the topic:
William Michael Cunningham holds a Master's in Economics and an MBA in Finance, both from the University of Chicago, and is also a graduate of Howard University. Mr. Cunningham manages an investment research firm, Creative Investment Research. The firm researches and creates Environmental Social and Governance/Corporate Social Responsibility/Impact and socially responsible investments and provides economic analysis services.
There’s this from the IMF annual meeting in 2020: Cross-Border Payments—A Vision for the Future, we get BIS head Agustín Carstens quite bluntly stating the central banks goal:
"Central banks will have absolute control on the rules and regulations that will determine the use [of digital currencies]...and we will have the technology to enforce that.”
And here’s the IMF, a year earlier: Cashing In: How to Make Negative Interest Rates Work
“a recent IMF staff study shows how central banks can set up a system that would make deeply negative interest rates a feasible option.”
The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money.
To illustrate, suppose your bank announced a negative 3 percent interest rate on your bank deposit of 100 dollars today. Suppose also that the central bank announced that cash-dollars would now become a separate currency that would depreciate against e-dollars by 3 percent per year. The conversion rate of cash-dollars into e-dollars would hence change from 1 to 0.97 over the year. After a year, there would be 97 e-dollars left in your bank account. If you instead took out 100 cash-dollars today and kept it safe at home for a year, exchanging it into e-money after that year would also yield 97 e-dollars.
At the same time, shops would start advertising prices in e-money and cash separately, just as shops in some small open economies already advertise prices both in domestic and in bordering foreign currencies. Cash would thereby be losing value both in terms of goods and in terms of e-money, and there would be no benefit to holding cash relative to bank deposits.
This dual local currency system would allow the central bank to implement as negative an interest rate as necessary for countering a recession, without triggering any large-scale substitutions into cash.
Negative rates counter recessions? These people are insane.
Don’t worry, the fascists running the ECB are on board too:
There is no regulatory alternative that promises to eliminate the threat to the two‐layer monetary system. Since cash is only available in physical form, it is by construction not “fit” for the digital age. Regulations that aim at maintaining its large‐scale use are likely to imply large economic costs without clear benefits. Accordingly, the introduction of digital cash in the form of a CBDC appears to be the only solution to guarantee a smooth continuation of the current monetary system.
The Fed’s also been trying to push this totalitarian move for years.
Then there’s this from the Kansas City Fed in a now deleted 2015 paper:
“The most straightforward way to unencumber interest rate policy completely at the zero bound is to abolish paper currency.”
Jeff Epstein's Davos Crowd has also been pushing the ‘ban cash’ and negative interest rate delusions forever, with one example here: The Hidden Agenda of Davos 2016:
For weeks, Haruhiko Kuroda, the head of Japan’s central bank, repeatedly denied plans to adopt negative interest rates.
Kuroda was at the January 20–23 summit in Davos.
A few days later, on January 29, he decided to impose negative interest rates in Japan for the first time ever. Something must have changed his mind.
I don’t think this was an isolated incident. I’m quite sure global leaders secretly discussed ramping up the War on Cash in Davos.
There was a flurry of related activity during and immediately after Davos. Here are some of the most noteworthy incidents:
January 20: Deutsche Bank CEO John Cryan predicted cash won’t exist in 10 years.
January 22: Norway’s biggest bank, DNB, called for the country to stop using cash.
January 29: The editorial board of Bloomberg published an article titled “Bring On the Cashless Future.” It called for the elimination of physical cash.
February 4: The Financial Times ran an op-ed titled “The Benefits of Scrapping Cash.” It advocated the elimination of physical money.
February 8: Peter Sands, president emeritus of Harvard, issued a paper titled Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes. It advocates removing large bills from circulation to help fight the various made-up wars…the war on crime, the war on drugs, the war on terror…
February 15: Mario Draghi, head of the European Central Bank (ECB), announced that he has essentially decided to phase out the €500 note. These notes represent around 30% of the physical euro notes in circulation. With the use of physical cash curtailed, J.P. Morgan estimates the ECB could ultimately bring interest rates as low as negative 4.5%.
February 16: Larry Summers, a Harvard professor and former Treasury secretary, wrote an article in The Washington Post titled “It’s time to kill the $100 bill.” Summers became the latest high-profile “economist” to call for the abolition of cash. Removing the $100 bill from circulation would eliminate the value of 78% of all U.S. currency in circulation.
February 16: Hasbro, maker of the Monopoly board game, announced that, starting in the fall, the famous game will no longer feature cash. The company is replacing in-game cash with special bank cards players scan on handheld “banking units” to make purchases.
February 22: The editorial board of The New York Times published an article titled “Getting Rid of Big Currency Notes Could Help Fight Crime.” It called for getting rid of high denomination notes.
The writing is on the wall. The War on Cash is accelerating. And it’s setting the table for negative interest rates in the U.S.
That should not surprise anyone. Janet Yellen, the chair of the Federal Reserve, recently said, “Potentially anything—including negative interest rates—would be on the table.”
Makes sense Yellen would be open to negative rates, since, as the great Peter Boockvar once said:
"Negative interest rates was the dumbest idea in the history of economics."
A few years ago, Andrew Bustamante, a “former covert CIA intelligence officer” was asked the following in a Reddit “Ask Me Anything” session:
Imagine a world with no cash, only a Federal Reserve Central Bank Digital Currency.
You go to a used book store, to buy a copy of Orwell’s 1984 for your nephew, but your purchase is rejected. The author is not “ideologically sound.” You then mysteriously lose your job as a teacher.
You’re in New York City, and try to buy a 20 ounce soda, your purchase is rejected. You begin receiving coupons in the mail for Organic unsweet soymilk.
You notice a $500 CBDC deduction from your bank account, for “going 45 in a 35 zone.” One more moving violation and your EV won’t start.
Your bank has failed, and since that bank didn’t have the right political donors as depositors, you will be required to participate in a bank “bail-in” (Google ‘Cyprus’). Your account is frozen, and you end up losing 45% of your account when the matter is resolved two years later.
The Federal Reserve decides that, “to fight recession,” they will confiscate 10% of your savings every month, incentivizing you to spend now. After public outrage, the Fed decides to instead make 25% of everyone’s CBDC balances expire at the end of each year.
You’re seen on surveillance at a protest, and your entire CBDC account is frozen immediately and indefinitely, without any judicial action.
You try to donate $100 to your church. Your donation is confiscated, because the church advocates beliefs that are anathema to party in power’s views.
You attempt to pay for a Substack subscription, but your purchase is rejected because the author has been determined by the government to be publishing “misinformation.” He has also been banned by Twitter :)
You start getting very targeted advertisements, online, in the mail, and on your “smart TV.” It’s almost as if every advertiser somehow knows that you often purchase Preparation H.
I absolutely believe all of the above are coming if we get CBDC’s. Some of the above has already happened (e.g., in repressive regimes like China and Canada).
This is an existential threat to privacy and liberty.
With CBDC, the same unelected people who brought us the massive wealth inequality this century will have absolute control over almost every aspect of our lives.
This is one issue you need to contact your “representatives” about.
Costs and benefits to phasing out paper currency by Kenneth Rogoff, Harvard University (2014):
‘If all central bank liabilities were electronic, paying a negative interest on reserves (basically charging a fee) would be trivial.’
Take action on cash, Boris? Would that save the planet?
A man identifies himself with the unit of his money ; doubt cast on it offends him and, if it is shattered, his self-confidence is shaken. He feels slighted and humiliated by the lowering of the value of his monetary unit and, if this process is accelerated and inflation occurs, it is men who are depreciated until they find themselves in formations which can only be equated with flight-crowds. The more people lose, the more united are they in their fate. What appears as panic in the few who are fortunate enough to be able to save something for themselves, turns into mass flight for all those others who have become equals by being deprived of their money.
- Elias Canetti, Crowds and Power
Many people are willing to sacrifice privacy for “convenience” and are too myopic to understand what a world without cash would look like in the long run. It’s truly game over for any level of privacy and freedom in society. Everything will be tracked and I have no faith that any due process will exist when government wants to pull levers on citizens who will be like puppets.
Truly frightening.