An interesting article in Reason, the US magazine, about central bank digital currencies, which appear to the reverse of the libertarian, ground-up approach of Bitcoin’s original champions:
You know who thinks that cryptocurrencies are the future? Central banks, that’s who, and they’re jumping on board the crypto bandwagon. But that doesn’t mean you should anticipate the folks at the Federal Reserve stepping aside to make way for Bitcoin adoption—far from it. Instead, central bankers want to displace grassroots cryptocurrencies with central bank digital currencies (CBDC) of their own design that absolutely will not protect privacy, and that will let governments control private transactions.
In the race to adopt state-sponsored digital currencies, the United States is behind the curve. China recently banned the use of private cryptocurrencies to make room for the digital renminbi. Cambodia launched its digital currency, the Bakong, in 2020. Nigeria plans to introduce the eNaira this month. But America lags, and for very good reason.
“Depending on its design, CBDC accounts could give the Federal Reserve access to a vast amount of information regarding the financial transactions and trading patterns of CBDC accountholders,” Christopher Waller, a member of the Board of Governors of the Federal Reserve System, commented (PDF) in August. “The introduction of a CBDC in China, for example, likely will allow the Chinese government to more closely monitor the economic activity of its citizens. Should the Federal Reserve create a CBDC for the same reason? I, for one, do not think so.”
It should surprise exactly nobody that China’s digital renminbi promises only “controllable anonymity” between private parties, and that the state retains the ability to monitor transactions.
This raises the old debate that I have read about and been involved in over the years – can technology tools really help free us from the State, or will the State simply adjust and use said tools for its own purposes? Down the years I have seen how entities such as the Internet, 3-D printing, social media platforms and so forth will empower individuals at the expense of Big Government, but that’s not always worked out.
The brute fact is, in my view, is that to push back against the State, it is necessary to win battles of ideas, and that is a slog. No wonder some hope that technology can help. Maybe it has to be a mix: good ideas that are spread, and new ways of living and working that feed off them.
A few years ago, David Friedman (son of Milton Friedman) had a good book out, Future Imperfect, where he wondered about such matters. Strongly recommended. He gave a talk on the issues here.
“Central Bank Digital Currencies” are a con, they are essentially what we ALREADY HAVE.
Most “money” is not token notes and coins – it is just entries on bank ledgers backed by government Central Banks (the “private ownership” of the American Federal Reserve makes-no-difference to this). These ledgers (account books) are, these days, computerised – so that is what is (really) meant by “digital currency” in this dishonest conception.
The whole point of the “special numbers” of “Bitcoin” was to free money from bankers (government fraudsters or private fraudsters – as every schoolboy used to know, every banker is running a shell game whether it is Mr J.P. Morgan lending out three Dollars for every Dollar of physical gold he actually had, or the incredibly more extreme games of today – games that make Mr Morgan look like a saint by comparison).
There is no real difference between a “Central Bank Digital Currency” and what we already have – which is fiat credit money which mostly only exists as computer entries. It would continue to be inflated to enrich an elite at the expense of everyone else – not so much a “Cantillon Effect”, as a “Cantillon Economy”.
As for the Davos (WEF and UN) plan of an international digital currency to replace the fiat Dollar – this is NOT a new plan. This goes back to J.M. Keynes and his original plan in the 1940s.
Even Harry Dexter White (a Soviet agent of influence) thought Keynes was being too extreme (or rather that the United States Congress would not accept such extremism) – and so we got the Dollar as the “world reserve currency” instead.
Everyone from Joseph Biden and K. Harris to Tucker Carlson thinks having the Dollar as the “world reserve currency” is a wonderful thing for the United States.
Sadly Mr Carlson (and everyone else) is quite WRONG – having the Dollar as the “world reserve currency” has led to it being chronically over valued, and is the cause of the structural trade deficit that the United States has been running for decades.
This is not “free trade” – free trade is to export some goods so you can import other goods. Free trade is NOT an artificially (politically) valued “world reserve currency” which (in reality) is just a fiat nonsense – which keeps being created (from nothing) to pay for endless imports, while towns and cities fall apart because people in them do-not-make-things-any-more.
I do not understand Bitcoin – in the sense that I do not know why anyone would value the “special numbers”, but people DO value the “special numbers” and I must accept that.
I do not know whether the future will be gold (which old reactionaries like me cling to) or Bitcoin (which the young and fresh swear by) – but I do know that the future will NOT be government and banker fiat currencies (called “digital” or not called “digital”) – the point of Bitcoin is to get AWAY from governments and bankers (who are joined at the him). A “digital currency” that is is mixed up with governments and bankers is a wonderful thing is one is a follower of Saint-Simon (French socialist thinker from two centuries ago – who taught that socialism should not shoot the bankers and Big Business types, but rather than the bankers and Big Business types should be IN CHARGE OF the socialist society – in the name of “science”) – but awful if one is not a Collectivist.
One fiat money fan who wishes he had not been might be Mr PUTIN.
Mr Putin for years had the chance to establish a real gold currency (physical gold – even if ownership of it was moved about electronically so that people did not have to carry sacks of coins) – and he FAILED TO DO SO.
Instead Mr Putin relied on fiat money – his own “Ruble” (which is no more gold, or anything, than the Dollar, Pound or Euro are) and a great “War Chest” of overseas Fiat Money of various nations.
Well the fiat “Ruble” has been exposed as worthless – and the great “War Chest” of overseas fiat money has been exposed as worthless as well.
It never existed – other than as entries on computers, and if the international (Klaus Schwab “Great Reset”) says it will not honour those entries – then that Putin “War Chest” is the contents of an empty bag.
Note to the wise – what can be done to Mr Putin and to the “Oligarchs” (contrary to what is often said – the “Oligarchs” do NOT rule Russia, Mr Putin would have them killed if they tried to rule) can be done to you.
Fiat money is utterly the creature of governments and bankers (essentially, Saint Simon style, the SAME THING) – if they do not like you, then all that fiat money you thought you had suddenly does not exist any more. Like Mr Putin’s “war chest”. They (governments-bankers) can make the fiat money not exist – because it never really existed in the first place.
If the vile Mr Putin had established a real gold (physical gold) currency he might be in a strong position – rather than waiting to be killed (or die in an “accident”).
And the young would say at this point “Mr Putin should have gone for Bitcoin – if he owned that he would have something real now”.
Perhaps the young are correct – I do not know.
Look how the governments of the world (and the bankers of the world – but I repeat myself) boast about how they are taking the assets of the “Oligarchs”,
Not “this person has been convicted of a crime and the court is fining him” – no “this man is rich, he is a Russian Oligarch – so we are taking his stuff”.
That is what Civil Asset Forfeiture (and “freezing”) is really all about – POLITICS (being targeted because the powerful people do not like you), not the Common Law.
I despise Mr Putin and his associates. But this sort of “Great Reset” politics can be applied to anyone.
One day you may find policemen taking your stuff – because you are a “Transphobe” or whatever. And no one will speak up for you – for fear of the same thing being done to them.
I believe that the late John Enoch Powell was the only man in the House of Commons to stand up against “Civil Asset Forfeiture”.
As Mr Powell said – what is first applied to “drug dealers” and other such, will end up being applied to anyone who it is fashionable to dislike.
Money or goods should only be taken if they are proved to be the result of crime, or as a fine imposed by a court AFTER someone has been convicted by a jury of a specific crime.
As for digital currencies meaning government (and allied Corporations in the Corporate State) knowing exactly what you are doing – and being able to impose a Chinese style “Social Credit” system….
This is ALREADY HAPPENING – it is at the heart of the “war on cash”, and Reason should know that it is happening in the United States.
If you go about with lots of cash the government police can rob you RIGHT NOW (they have been doing this for years in the United States – and it will come here), and using debit cards and so on means that the government (and corporations) know what you are spending money on.
The “Environment and Social Governance” (ESG) system is supposed to only target corporations – but the ESG system will hit individuals – via those corporations.
Ever bought porn? How would you like your wife and children and everyone else to know exactly what you have bought? They will – if they government (or the corporations – but I repeat myself) do not like you. A “Me To” rent-a-mob can be at your door (your home) within minutes – to scream at and spit on you as you leave your house or flat. And you deserve it – you women hater.
Ever said something “transphobic” or “culturally imperialist”? Well you can not have a job then – as you will harm the reputation of your Corporate Employer.
“Run you own business?” – try that when your bank account vanishes and you find that you have no access to payment services, and are starving to death in the street.
Welcome to the future – and it is the near future. And not just in the United States – here to.
Paul Marks – top comments!
As for Bitcoin – this really is pretty much the ONLY piece of new technology that gives me hope in this mess the world is in at the moment. Unconfiscatable, easily transferable, provable limited supply.
I reckon a lot of those Ukrainian refugees are now able to keep at least a part of their wealth – they can keep it in their brains! Never before humanity had this kind of technology.
Japanese organised crime used to be very powerful – they no longer are.
What happened?
Did the Japanese government take them out and shoot them – as Mussolini did with the Mafia?
No they did not – the Japanese government and the banks and finance houses (which are really joined at the hip with government) made it impossible for organised crime people to use the financial system – to have bank accounts, to use payment services, and so on.
“Excellent – just what should be done to Mr Putin and his cronies, jolly good show!”.
Except that what can be done to Japanese gangsters, or Russian “Oligarchs” (notice how just calling someone a name “Oligarch” makes them a hate figure – without any need to charge them with an offense or have them tried by jury) can be done to ANYONE ELSE.
Dan – you are most likely younger than me (most people are). You understand Bitcoin whereas I do not (not really) – so all I can say is….
I hope you are correct Sir!
This is a foolish article. Central banks were created with the explicit purpose of controlling the supply and value of money, and of assigning credit to favourites. It’s what they do.
They’ll just use the financial system to ban people form cashing in or out of Bitcoin if it becomes too much of a challenge to the fiat fraud. While Bitcoin may be anonymous, every transaction is available to monitor and as has been shown by a recent Bitcoin laundering case if you can be connected to a transaction then hopes of anonymity are seriously challenged.
https://www.cnbc.com/amp/2022/02/28/accused-bitcoin-launderer-heather-morgan-in-talks-with-prosecutors-to-avoid-trial.html
I’ve heard people talk positively about government digital currency because it could also be on distributed ledger, failing to realise that without a limit on coin mining you are just exchanging one form of unlimited fiat for another.
Staghounds – I am still waiting for your apology for your claim that I said that eastern Tennessee was Democrat – when I said the opposite. Not just was your claim false – but your tone was abusive. I am sure, that as you are a Gentleman Sir, you will take this opportunity to apologise. Of course, if you have already apologised elsewhere (and I just have not seen your apology) then the matter is settled Sir.
As for your comment here – Central Banks were normally created to help governments borrow money, that is certainly why the Bank of England was created in 1694. Even when my father was born (1913) the Bank of England did not really control the supply of money (of course no entity can control the “value” of money), if more gold mines opened up – then the amount of money tended to go up. It was a matter of finding gold and the economics of mining – although Credit Money was important (even in 1913) it tended to go up and down with the monetary base (the actual physical gold). The “boom” in Credit Money was always followed by a “bust” with the “broad money” (the credit money) shrinking back down towards the monetary base (the physical gold). But an actual increase in the supply of physical gold meant more money – money that did not go away.
However, YOU ARE QUITE RIGHT SIR to indicate that Central Banks tend to be abused to favour certain financial interests at the expense of everyone else. The Cantillon Effect in terms of the Credit Money.
The vast change now is that we have moved from a Cantillon Effect (abuse on top of a basically sound system) to a Cantillon Economy – the abuse is-the-system now (there is no foundation at all – none).
As for the Reason article – it might have been better worded, but it was not foolish (for the following reason).
The article was not foolish because it was pointing to a new danger….
Bank of England notes or Federal Reserve notes are not systematically tracked – so called “digital currency” would be.
In the 19th Century Water Bagehot (third editor of the Economist magazine) was famous for calling upon the Bank of England to bail out banks that got into trouble (under certain conditions – even Walter Bagehot was not just calling for blank cheque bailouts) – and the then Governor of the Bank of England rejected Walter Bagehot’s call and denounced him (and rightly so – Bagehot’s advice was wrong, just as his advice on most matters was normally wrong).
However, staghounds would reply that even then the Bank of England did some bailouts – in a sly (under the counter) sort of way. And staghounds would be correct.
staghounds – do you want the powers that be to know every detail of your spending? Exactly where and what you spend money on?
That is what the “war on cash” is all about – it is about establishing totalitarianism by the back door. And expect the usual “arguments” to be trotted out by the establishment – “we want digital currency in order to fight drug dealers and child sex traffickers ..”
I do not understand Bitcoin – but have read on the Web (certainly true!) of hackers and scoundrels making off with millions and billions in other peoples’ bitcoin. All other considerations aside, this does not sound like a good movement to join.
Ellen – Bitcoin’s defenders say that is why people should store their own Bitcoin and not hand it over to Third Parties (at least not hand it over to Third Parties without insurance). And they would also say “people also steal gold and silver – and gold and silver are more difficult to hide from robbers such as the state”.
But, like yourself, I do not really understand the “Special Numbers”.
Elon to Lex regarding current fiat system. “The government has editing privileges on the money database”.
https://youtu.be/NPATmaprDRI
They won’t be giving those privileges anytime soon.
I think this is the essence of the situation. What we see now is simply a large-government effort to co-opt what little benefit bitcoin has to offer most of us, while trying to appropriate some of that bitcoin cachet.
Bitcoin as an effort to remove government control over money flow was a worthy attempt, but that’s a fight that government cannot afford to lose. As an effort to increase privacy, it failed. Bitcoin is traceable. If it was to make your wealth more secure, it remains only as secure as your best anti-hack efforts.
If your desire to find a better currency has anything to do with the difficulties that brittle systems will have if anything goes wrong, then bitcoin was the wrong answer. It’s a wealth vessel in only the highest-functioning of systems. Any degradation in the system wipes out the utility of your wealth.
I think the two ideas of strong wealth protection and universal usability are incompatible.
bobby b – yes, the only twist that the “government digital currency” offers is that it makes easier for government to track what people do, in order to blackmail them unleash “Woke” activists to drive them from their jobs or destroy their business. And anyone who thinks that governments would not do that has never met the “Justice” Department, or the rest of the American government.
HOWEVER – fiat money has a downside for governments.
Take the example of Mr Putin – he could have established a real gold currency (physically stored in Moscow with electronic transfers of ownership), he DID NOT DO SO – he wanted to be “modern” to rely on his fiat “Ruble” and his “war chest” of billions of zillions of foreign fiat money.
A few clicks on computer keys and that fiat money that Mr Putin relied upon is WORTHLESS.
If Mr Putin has a mind left (and I suspect that he has gone insane – which is rather scary), then he will be wishing he had not been so “modern” and had, instead, established a gold currency (physical gold, stored in Moscow, with electronic transfers of ownership) when he had the chance.
Sanity is not so long ago. For example, in the 1960s the ruler of Abu Dhabi still insisted on being paid in physical gold for his oil – and on keeping that gold in his physical possession (not London or New York), of course we removed for him for that, but even as late as 1991, under the old Swiss Constitution, one tenth of Swiss Francs by gold.
Once things were sane – your could not destroy an entire economy by pushing a few computer buttons and making their currency worthless.
And we can only make fiat currencies worthless so easily – because they always were, in truth, worthless (to start with).
Mr Putin could have avoided the trap he is now in – but he was too “modern”. It would have been “reactionary” to have a real gold currency.
So much for Mr Putin being an “alternative” to the Credit Bubble West.
Paul/Ellen
I found this video a very good explanation of Bitcoin. I watched it three times and it got me to a point where I felt I understood it as much as I needed to.
https://www.youtube.com/watch?v=bBC-nXj3Ng4
As Paul pointed out, Trudeau has proved that the government doesn’t need a cryptocurrency to punish people financially for wrong-think. Maybe they’ll lose interest in the idea now!
I share Dan’s view that crypto is one of the few areas where developments are working for us. Intrinsically, crypto favours the individual. Also, I take quite a lot of comfort in the fact that there is a veritable army of young men with 160 plus IQs working on these projects. Many of them are instinctively, sometimes explicitly, libertarian. It’s hard to see governments mustering the same kind of collective brain power and keeping them as motivated.
But a huge upside, also. If I have to rely upon government-issued fiat money that transacts through the fiat system, government has a basis for taxing me. If I do all my business in gold coin, and fail to self-report, I can live tax-free.
That is government’s ultimate problem with losing control of money flow, through bitcoin or gold or cash or any means that doesn’t pass through its hands.
(Someone somewhere is expending huge effort and resources keeping the bitcoin/blockchain currencies functioning, and is maintaining some control over the system. Do they simply become another, competing, layer of “government” at some point?)
Why will people maintain the block chain once all the Bitcoin has been mined? Is the mining not linked to the running of the ledgers?
(I’ll open with: my level of understanding of crypto-c is laughably low.)
But I think of things like, enforcement. If I wake up and check my crypto holdings and they’re gone – through facially valid transactions which are fraudulent – who do I call? If there’s no answer to that, there’s no security. If there is an answer, there’s your governance.
And I think of basic transactional infrastructure. I want to buy a coin. I have gold (or a Visa gift card) in my hand. I go to my computer, open a program – who writes and maintains and improves that program? – I go on the internet – my connection to which is maintained by someone – I contact . . . who or what? (I have no idea, but I bet they exist) and make an offer to buy, and they or their program confirms and makes the necessary block changes on the pertinent files and orders the changes that remove assets from my account – who oversees that process, or even who oversees that software? Any of those points will require maintenance.
It could even be so simple as, my local warlord shuts down my internet access so that I can’t use my coin to buy weapons against him. The people who would help fight that are essentially within this “maintenance” loop.
Unless we have Skynet doing it for us, there are always going to be people maintaining and facilitating crypto transaction. Whether it’s a market-maker body, or a true peer-to-peer system, someone is always maintaining the system. (Had a friend who worked for Napster. P2P system, but he sure as heck was kept busy.)
And the people in those roles seem to always manage to make themselves into governance if there’s power to be had.
The reward for adding blocks to the blockchain comes in two parts currently: you get newly minted bitcoins, and you receive a fee. Once all the bitcoins have been minted you still get the fee. I think you can set the fee yourself somehow so I don’t think there is a risk that you’d run out of people wanting to add blocks.
The problems as I see it are the following:
– Hardware. At the end of the day the government can knock down your door and confiscate your computers. A solution to this is if the programmes that add blocks live like parasites on all computers. (I understand there is a version of this already, but for obvious reasons it is frowned on and probably illegal.) Want to get rid of the block chain? Just knock out all computers and lose 50 years of living standards. Fine with me.
– Interface. It needs to be easy to use. This is probably the hardest part but is it that insurmountable to have some basic open source software that can verify transactions?
– Acceptance. Connected to the above. It could be that in the future a great part of our spending is in online worlds – maybe there are some such worlds that accept crypto even if illegal. Government shuts it down? See first point above.
It’s possible that the barter economy might make a comeback – easier than crypto maybe.
–
I’m not a gold bug type, but wouldn’t going back to gold and silver and copper be a nice compromise between all or nothing? Barter really ______s.
Given Trudeau’s behavior recently, is there any debate left to have about this?
Paul Marks’ responses to Staghounds are admirably done. The Bank of England was created to provide the English state with easy finance for the Royal Navy, not for wider reasons of central economic control. And even advocates of central banks might balk at the level of intrusion that digital central bank currencies bring.
China’s Social Credit system is a warning, as is the mad and evil behaviour of Trudeau in Canada this year.
Putting one hopes in technology is a common hope but it seems far too utopian to me. As the OP said the internet, social media etc were sold at first as supposedly being liberating. That may have been the case in some ways but the technologies have been pretty easily co-opted by governments of all stripes and have also exposed us to a level of privatised (corporate) scrutiny that in many ways is as dubious as state power. While I have nothing against bitcoin, I wouldn’t be surprised if today’s crypto entrepreneurs will tomorrow be just what the big tech entrepreneurs are today. The latter were yesterday’s visionaries and supposed liberators, now they’re a very powerful part of the ruling class.
Martin.
Yes – if governments can just break contracts, public and private, then no system will work. Not physical (as in gold) and not electronic either.
In 1933 (in peacetime) the American government ripped up the gold clauses in contracts (both public and private) and in 1935 the Supreme Court (despicably) ruled, five to four, that this was Constitutional (which it obviously is not).
For almost 90 years we have been told this was necessary to “save the banks” and Big Business generally.
And, clearly, if government (and the banks and Corporations) can tear up gold clauses in contracts they rip up BITCOIN clauses is well.
“But you promised to pay me Bitcoin for these goods….”
Reply….
“The Supreme Court says it is fine to pay you in WORTHLESS Dollars, rather than what we contracted to pay, Ha! Ha! Ha!” A modern Corporation would say “Ha! Ha! Ha! – you RACIST!”.
Capitalism needs the RULE OF LAW.
And till we have the RULE OF LAW – it does not matter what form of money we try and use.
That old Puritan Roger Sherman was correct – if the government can spend society to breakdown and money is whatever the government says it is….. then talk of rights and law is just noise.
It is worth pointing out that the 1935 Supreme Court judgements were also during peacetime – and two years after the “Emergency” was declared.
It is just totally sickening.
And people like “Chief Justice” Roberts would have just as much a “pragmatic” view today.
Paul Marks, I’m sorry I typed your name instead of the one I meant to.
You miss my point. Central banks are incapable of permitting the free movement of sound money. Their raison d’etre is to fiddle with the value of money and know/control who gets it.
Now I understand staghounds – yes I often make typing mistakes myself. Think no more about it Sir – indeed I apologise to you Sir, for being so thin skinned.
And yes, I quite agree with you about Central Banking.
They are not all as bad as each other – some are “little crooks” (like Paul Volcker – who really did limit the madness of the Federal Reserve), rather than “big crooks” (such as everyone since Paul Volcker) – but YES the whole principle of Central Banking is perverse (indeed criminal).
I repeat – Mr Putin could have got away from this madness. Russia has lots of gold and he has had more than TWENTY YEARS to set up a gold currency – but he utterly failed to do so.
Mr Putin put his faith in the fiat “Ruble” and in his “War Chest” of foreign fiat money – which has vanished with the press of a few computer buttons. Not been “made worthless” – rather been revealed to have always-been-worthless.
The People’s Republic of China will have taken careful note – the days of the Dollar being the “world reserve currency” will be over soon.
“Paul – are you saying that the world monetary and financial system is a criminal scam?”
Yes – that is exactly what I am saying.
Dan, you are making a fundamental mistake with Bitcoin and crypto in general when you claim that the government can’t confiscate it, trace it, etc.
All the government has to do is say “Gee, Mr Capone, for you to live you need $#### per month. We don’t see that money on your taxes. Where did you get it? All ‘legal sources’? PROVE IT.”
At some point, crypto has to re-enter meatspace and the normal economy. Does your grocery store take crypto?