Why CBDCs are emerging as the new political currency
Ric Edelman: It's Monday, October 30th. When did money become political? You know, I've been in this business for 35 years. There was a wide gap historically between Wall Street and Washington, D.C. but all that changed back in 2008 when the banks collapsed and the market crashed and real estate slumped. Wall Street turned to Congress for a massive bailout. You remember TARP, the Troubled Asset Relief Program? It was a $700 billion bailout. It was unheard of. And so many people were angry about it. Boy, they didn't see anything and it became $8 trillion.
But anyway, suddenly in 2008, investors began looking for market signals from Congress instead of from Wall Street. It's been that way ever since. The home of the financial markets is now Washington DC, not New York. Sure, New York has the NYSE and it's got Nasdaq and it's got the United Nations, but Washington is the headquarters of the Federal Reserve, the Treasury Department, the International Monetary Fund, the World Bank, Fannie Mae, Freddie Mac, Sallie Mae, just to name a few.
You think bond prices are set by traders in New York? Nah, they're set by policymakers in Washington. So is that at all surprising that the latest financial technology innovation, central bank digital currencies are caught up in a political war? CBDCs are gaining momentum around the world. Every major bank and virtually every government is exploring or developing a CBDC.
China already has one. So do several other countries. Russia plans to launch theirs within a year or two. Our own Federal Reserve has been working on this for years. The Boston Fed and MIT have completed a project on it in the United Kingdom. The Bank of England is planning to launch a digital version of its currency in Sweden. The country is already almost entirely digital. You pay a fee if you want to withdraw cash from your bank.
Digital dollars are simply the next step in our technological advances. We're already digital with all of our finances. When's the last time you paid for anything using cash? You do online banking and bill paying your paychecks and your pension checks, your Social Security checks. They're all direct deposited into your bank account, your brokerage accounts online. So is your 401(k) or TSP or 403(b). Your airline miles. Your loyalty rewards. They're all digital. So why is the government still printing money? It costs a lot to print that cash, to ship it to banks who stuff it into ATMs or lock it up in vaults? It's a pain for you to go to the bank to get to that ATM. So you use PayPal and Venmo and Zelle. So much easier and safer too, because you don't get mugged. Muggers know you're not carrying cash anymore.
In China, beggars on the street have QR codes. They don't expect you to give them cash either. A digital dollar, it's the same as a paper dollar. It's just digital. You've got a digital wallet on your smartphone. It's the same as PayPal or Venmo or Zelle. In the beginning, when CBDCs were first introduced, everybody was worried that the tech might not work. Nobody's worrying about that anymore.
Now, some are worrying that the tech might be used maliciously by the very government that creates it. Remember, one of the great things about crypto digital money leaves a digital footprint. That's why the FBI, the IRS, the Defense Department, they all love bitcoin. It lets them fight tax evaders and drug dealers and terrorists. But it also means that the government knows how you're spending your money.
Is privacy gone when you go digital? No, not according to the United Kingdom. They said the UK Treasury Department said “The digital pound will be as private as the card payments and bank accounts that millions use every day. This means that neither the government nor the Bank of England can access anyone's personal data or see how people are spending their money.”
But here in the US, a lot of people who focus on privacy rights aren't buying it. Governor Ron DeSantis recently said, “One of the things we're going to ban in Florida this year is the idea of a central bank digital currency.”
Well, thanks, Ron, but first of all, states can't block currency. That's a federal issue. But that's beside the point. DeSantis is drawing a line in the sand. He's making it clear that if he's president, there won't be a CBDC. He's not the only one. Congressman Tom Emmer (R-MN) and Patrick McHenry (R-NC), both huge supporters of crypto, hate the idea of a CBDC.
They all point to one big example of why we need to hate this idea the trucker strike in Canada back in 2022. Remember when they blocked the bridge into the US? Canadian Prime Minister Justin Trudeau froze their bank accounts to get them to stop their protest. And he did this with no due process. Just bam, your money's locked up. Republicans in the US are worried that a CBDC would let the government do the same thing here, since the government would be the one issuing the digital money, the government would be able to freeze your access to it. Even if they didn't do that, the government would know where you're spending it. Privacy would be out the window.
And guess what? [Senator] Elizabeth Warren (D-MA), she hates bitcoin. She wants to ban it, but she loves CBDCs. Same with Congresswoman Maxine Waters (D-CA). So Democrats and Republicans are arguing over this. They have politicized a financial instrument.
Vivek Ramaswamy, who's running for president as a Republican. He says CBDCs are a Trojan horse. He's accusing Treasury Secretary Janet Yellen, a Democrat, of kowtowing to the Chinese. Robert F Kennedy Jr, he's running, he says, “CBDCs grease the slippery slope to financial slavery and political tyranny.”
And Tulsi Gabbard, who ran for president back in 2020, she says CBDCs are “the latest effort by those in power who are intent on taking away our freedom.”
All of these people are nuts. A CBDC is just software. We can encode it to operate however we want. Just like the officials in the United Kingdom say, the government already has the ability to know how you're spending all your money. All your data is already sitting in databases at your bank, your credit card companies, your insurance companies. Your car is already tracked by your GPS and your E-Z Pass. The IRS already has all your income and investment information. The FBI and the NSA already have access to everything. So why would a CBDC be anything new or different? This is all just a political show designed to scare people and win votes.
In fact, CBDCs are so popular with governments around the world because they offer greater inclusion than the traditional financial system. Banks are expensive. You need minimum amounts of money to open an account. You incur fees to use them. You need to live near one. Banks are only open several hours a day, Monday through Friday. But digital money, a CBDC, they don't require a bank account, no minimums, no fees and they work 24/seven. All you need is a phone, not even a smartphone. An ordinary cell phone will do.
Banks aren't afraid of CBDCs. In fact, they're already creating their own. There's the JPM Coin [ONYX] created by JPMorgan for its institutional clients. Citi has the Citi coin. Back in May, Mastercard said they're not worried that CBDCs are a competitive threat either. So watch for this conversation to grow as the presidential campaign heats up.
And in the meantime, you need to learn more about crypto so that you can understand these conversations and decide for yourself whether you need to be worried or not. I think you'll discover the more you understand, the more you learn. The more you know, the less fearful you'll be. You know, a lot of people call it the holy grail of crypto, a Bitcoin ETF. Bitcoin's been around since 2009, and we don't have a Bitcoin ETF. At least not yet. But there are now nine new applications in front of the SEC. Any day now, the SEC may very well approve one or more of these Bitcoin ETF applications. Guess what's going to happen when the SEC really does give approval?
It's coming soon. You don't have a lot of time to wait. You need to get the knowledge you need right now about crypto, so that you're prepared and ready to help your clients. When these ETFs enter the market. Your clients are going to see and hear and read all about these new ETFs. And they're going to call you asking you for your opinion. Right now all you can say is sorry, I don't know anything more about bitcoin than you do.
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