Senate Republicans at Odds With Democrats on Banning This Digital Currency
Peter St. Onge /
If you’re a fan of the U.S. dollar, you can keep it from turning into a surveillance tool of the federal government—at least according to a new bill introduced in the Senate.
A few days ago, Sen. Ted Cruz, R-Texas, along with four other senators, reintroduced the CBDC Anti-Surveillance State Act. The bill would ban a dystopian tool called central bank digital currency, or CBDC.
The bill improves on past CBDC bans by also banning so-called “intermediated” CBDCs, where the Federal Reserve uses commercial banks as intermediaries, effectively outsourcing the surveillance state by putting a glove on the fist.
In case you’re unfamiliar with a CBDC, it’s a blockchain-based digital currency that would replace the U.S. dollar with a centralized database of who owns what. That makes it easy for federal agents to see every dollar you spend, every dollar you own, and every dollar you donate to what the government considers the wrong political cause.
In fact, a CBDC would let bureaucrats block any transaction they don’t like at the push of a button. CBDC champions such as Lael Brainard, director of the National Economic Council, already have bragged that they would use machine learning, where artificial intelligence tools are used for mass surveillance. This means bureaucrats could see—and block—any transaction made by anybody the government doesn’t like.
Think of it like getting kicked off Facebook, but because of your grocery bill. You might go to a political rally and come home to find you can’t pay the mortgage. You can’t even feed the kids.
If this sounds like science fiction, that’s exactly what happened in the Canadian trucker protests of 2022. Protesters’ bank accounts were frozen; some literally couldn’t buy food.
Bitcoin activists parachuted into Ottawa to enable donations outside the government-controlled banking system, but it was too little too late.
Now take that same totalitarian power and apply it literally to every dollar you spend, receive, or own. There is no opting out once a CBDC replaces the dollar.
The fun doesn’t stop there: A giant database of all the money is an open invitation to redistribute infinite amounts. After all, if all the wealth in existence is just a collection of numbers on a government spreadsheet, why not move things around to help the people you’ll need in the next election?
Poof, your life savings are gone—but some activist is shopping for a mansion.
The risks are even bigger zooming out to the U.S. economy as a whole. A CBDC means that all money is effectively held at the Federal Reserve as an entry in its spreadsheet. That means your bank becomes a façade, a glove to hide the bureaucratic fist.
The problem is that banks have spent decades behaving like licensed casinos, wiping out in 2008 and nearly wiping out again last year. Meanwhile, the Federal Reserve can never go bust; it literally owns the money printers.
In a crisis, irresistible public pressure will grow to cut out the banks altogether so people can keep their deposits safe at the Fed. This would turn routine banking into an explicit government service.
If that happens, lending decisions automatically devolve to the Fed. No more going to the bank for a mortgage or business loan; you’ll have to get in touch with your assigned federal loan officer.
That bureaucrat, we can imagine, will be eager to help so long as you tick the right demographic or ideological boxes.
Finally, a CBDC will contribute to inflation and recession. Central banks today cause inflation and recessions by manipulating interest rates. But there’s a natural ceiling to their mayhem, because the central banks can’t force negative rates, where your money loses value just sitting there.
With central bank digital currency, they absolutely can do this. Already, China has bragged about using its CBDC as “use it or lose it” money that loses value every day it isn’t used.
So if consumer spending isn’t hot enough for the upcoming election, just push a button. Not only would this drain the nation’s savings, but if the Fed imposes interest rates below zero it could dramatically worsen the cycle of inflation and recession that it just got done botching to a historic degree.
At the moment, the CBDC Anti-Surveillance State Act stands little chance of passing. Senate Democrats apparently are in universal agreement with a surveillance state—despite, it’s worth noting, overwhelming opposition among the public, even among Democrats’ own voters. One study from last year found that just 1 in 6 Americans support a central bank digital currency.
The way to increase understanding of CBDCs is to spread the word before it’s too late, and to counter media efforts to minimize the catastrophe that central bank digital currency would become.
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