When I read about an executive order issued by the Biden administration last year regarding a plan for digital currency, I naturally suspected something quite dire. Generally speaking, whatever the modern, self-described “liberal democratic” administrative state claims to be doing to help supposedly disadvantaged people is actually intended primarily, if not exclusively, to increase government control. Whenever that regime, moreover, claims to be assisting the lowly, we may safely assume that our freedom and property rights are under assault.
A story that appeared in The New York Times on July 22, 2021, describing a plan to help the “unbanked” engage in financial transactions told the discriminating reader all he needed to know about government-run digital currency. Banks right now throw their services at just about anyone who enters their facilities, save for the most unreliable deadbeats. How many people out there really don’t have the means of filling out a banking application due to some insurmountable difficulty? Possibly a number equal to those who can’t show voter identification but feel excluded from the “democratic process” when their votes for the Democratic Party aren’t certified.
Another clue about the government’s intention in pushing for Central Bank Digital Currency (CBDC) while cutting back on the use of paper money is that this policy is being introduced “bigly” in China, a country not well-known for its high regard for personal freedom. The Chinese are no longer required to trade in paper yuan but can access electronic allocations of credit, which allow them to buy commodities and engage in business transactions. A similar process would be open to us in this country if central banks on instruction from the government were authorized to issue digital currency. Although we might be told differently, sooner or later it might become feasible to ditch paper currency entirely. We’ll then carry out all financial dealings electronically with government-issued electronic currency and receive electronically issued compensation for our labor. A further benefit of this innovation, or so we’ve been assured, is that it wouldn’t be necessary under the new system to worry about unauthorized digital currency, like Bitcoin. The government and central banks would be making a safer product available to us, which would benefit particularly the “unbanked.” We should also hope that Bitcoin would then vanish as a fake alternative to real, that is, government-guaranteed digital currency.
The problem with this argument is what it fails to reveal. CBDC can expand the market for unauthorized credit because it will drive investors to operate outside the purview of public administration. It is precisely the government’s involvement in digital currency that will cause traders and investors to look for alternative means of issuing credit and even to create makeshift currencies without having the government breathe down their necks.
The government’s intention to control financial markets and investments should be obvious here. Who invests where, how much, and when will depend on obtaining the needed capital from state bureaucrats perhaps under the influence of party functionaries. The attempt to present CBDC as a courtesy the state is extending to grateful citizens is patent nonsense. The government’s digital currency issued through central banks will more likely help concentrate financial activity in the hands of the state. Government officials will then drone on about equity while extending electronic credit to some but not others. This will have the predictable effect of creating clandestine financial activity.
Eswar Prasad, an economist at Cornell University and the author of the best-seller The Future of Money, can hardly be accused of being a right-winger. Prasad is a frequent consultant at Brookings and seems generally in favor of extensive government economic planning. But when it comes to government-run digital currency, he points out its downside even while noting plans for it may reflect the “noble purpose” of “banking inclusion.” Prasad warns that government-issued digital currency will destroy privacy, allow the government to track every transaction individuals make.
A government could make it impossible to spend the digital currency on things that the ruling party deems problematic. The government could also make transacting with certain people difficult or impossible—China already has a social credit system that ranks citizens algorithmically and punishes them in various ways.
Does anyone care to speculate about those political outcomes that CBDCs will likely produce? What will happen to Latin Mass Catholics or to those who protest the sexual transitioning of their children in our present not very democratic democracy after the introduction of government-run digital currency? In all probability the government would weaponize digital currency to suppress those who resist its rule and its continuing woke transmutation of America. Given what we’ve already observed of Democratic Party governance since 2021, should we imagine that anything else would happen with this further acquisition of state power? And why would I believe that Republican politicians would prevent that outcome if the GOP were allowed to win the next presidential race? The Republican record of reining in government overreach has been something worse than anemic.
From CNN we learn the following about the eventual widespread use of digital currency:
The rise of CBDCs could potentially threaten the status of the US dollar as the global reserve currency. Different countries will have a much easier time transacting with each other directly, removing the need for the US dollar or SWIFT, a global financial messaging system.
The takeaway here is that the government is considering plans to introduce digital currency to offset the effects of this possible move by other major countries. But it’s hard to see how government-controlled digital credit would benefit most Americans. Many of our commercial transactions are already conducted through digitally transmitted credit, even without the state overseeing who receives this service. An article in The Wall Street Journal on Feb. 7, 2023 makes clear that “A CBDC Dollar Would Empower the Fed, Not Americans.”
In the end, it may pay to consider the broader context of the government’s actions in the economic sphere to understand how digital currency would advance long-established political goals. Let us consider how the government is presently handling economic tasks. The Biden administration, to its discredit, has already caused an inflationary spiral through reckless spending and irresponsible energy policies. Biden’s Secretary of the Treasury, Janet Yellen, clearly lied to us when she assured us that inflation would make more disposable income available to more American families. The removal of American energy independence, moreover, was definitely not a move intended to strengthen our dollar; and the predictable effect of that disaster to weaken our currency by necessitating our begging other countries to sell us their energy at higher and higher prices.
In a carefully researched essay in this issue, our foreign policy editor, Srdja Trifkovic, observes that much of the decline of the American dollar as an international currency resulted from the American government’s decision to restrict the use of American currency, lest too many dollars fall into the hands of hostile foreign powers:
A backlash was both predictable and inevitable. In the five years leading up to 2021, the share of the dollar in central bank reserves fell from 70 percent to 59 percent. Dollars held by non-American banks fell from $7.1 trillion to $6.5 trillion between December 2021 and December 2022. The greenback accounted for two-thirds of the world’s monetary reserves in 2003, 55 percent in 2021, and just 47 percent in 2022. The decline of 8 percentage points in the space of one year is remarkable, equal to 10 times the average annual rate of decline of the dollar’s market share recorded in previous years.
In all these activities it is possible to see how the modern administrative state operates in economic affairs. It presses onward even when its policies fail. It is not deterred by these failures but works to take even more control, in the name of equity, climate change, or in the present case, the unbanked. This critical perspective makes more sense than swallowing bromide about the government seeking to help the disadvantaged by introducing CBDCs. (According to Prasad, slightly less than 5 percent of the American population lacks access to banking.)
We might also consider in this vein Michael Rectenwald’s reference in his book The Google Archipelago to “governmentalities,” agencies that appear to have an independent existence, but which function as extensions of the administrative state and carry out state functions. The most conspicuous of these governmentalities is the mainstream media, which defines and affirms the woke state religion and which assails any interest that stands athwart the expansion of state power. Central banks are another extension of the central government. Ditto for major corporations, which serve equally the state and state religion, and which receive in return government contracts and the privilege of not being investigated for such grave offenses as allowing employees to misgender or for failing to produce the stipulated LGBT quota in the workplace. Universities and most thinktanks are likewise included among Rectenwald’s “governmentalities,” something that should not surprise anyone who has bothered to notice these entities and who is even minimally sentient. It is also hard to miss the fact that the Brookings Institution, whose associates move in and out of government, has been among the most enthusiastic advocates of CBDCs.
According to Brookings, CBDCs would facilitate international commerce, reverse de-dollarization, and, contrary to putative misinformation, would not be accompanied by the gradual removal of paper currency. Nor should we in this instance, Brookings assures, fear further government control of financial activity. State actors are there to help us engage in safe transactions during a peaceful transition to a more global economy.
Another obvious example of a government agency claiming to be dealing with finance but really punishing enemies and rewarding friends of the ruling class is the IRS. This may be an even more brazen partisan actor than the Federal Reserve because there is nothing clandestine about how our tax collectors harass and shake down opponents of the state party. The Obama administration engaged in this activity uninterruptedly for years with impunity. And I’m still waiting to see if Lois Lerner and other IRS officials—who targeted conservative religious organizations and Republican and libertarian critics, subjecting them to painful audits that revealed only the most minor tax infractions—will be brought to justice. Perhaps we shouldn’t count on that happening. Lerner and her associates were doing the bidding of the state party, which treats financial activities as one more means of extending its power.
We may note with satisfaction that some presidential candidates namely, Ron DeSantis, Vivek Ramaswamy, and Robert Kennedy, Jr. have expressed their opposition to government-controlled digital currency. All of them view it quite properly as a tool for allowing the federal government to restrict financial activity, to gather information on our spending, and to deny financial resources to those who displease the state party and its minions. Minnesota Congressman Tom Emmer, a member of the House Financial Services Committee, has gone even further in opposing this plan which is already in the works. Emmer is sponsoring a bill that would deny the Federal Reserve the right to produce or manage digital currencies. According to Emmer, this “simple” legislation “stops the administrative state under President Biden from introducing a financial surveillance tool that could undermine the very essence of the American way of life.”
On May 12, Florida Governor Ron DeSantis signed a bill that forbids CBDCs in his state. The explanation accompanying this signing is that the governor and state legislature oppose any attempt by the federal government to oversee our use of money. Let us hope that other governors will follow this worthy example. By now it should be clear that this innovation has sinister motives behind it and is one more effort to increase government control over our lives. Any attempt to present CBDCs as a mere convenience or as an act of generosity toward the unbanked diverts our attention from this obvious danger.