Buying Freedom? — The Politics of China’s CBDC

In today’s Money Morning…it starts with this, and ends with this…TradFi is rigged, but you can buy a stake in a future order…freedom doesn’t die in silence…and more…

It was August 2019 and I wrote a Money Morning editorial called ‘China to Fire First Shot in War on Cash’.

It was the most read Money Morning article of the year — and for good reason.

No one in the mainstream media was talking about the launch of central bank-backed digital currencies (CBDCs).

I said the following:

It’s a scary thought to imagine this trifecta in action:

  • The Great Firewall
  • AI-powered state surveillance
  • Total control over a citizen’s wallet

The stated goal of the Chinese CBDC is to have information about every transaction.

The initial plan is to substitute the Chinese CBDC or “digital yuan” for M0 (i.e. all the coins and notes in circulation).

Substituting the digital yuan for M2, which includes bank deposits, would be one of the next logical steps after a rollout.

The article probably got me on some CCP watchlist, but hey, at a meta-level we probably all are in one way or another.

Fast-forwarding just under two years and the digital yuan is a reality.

And now everyone is talking about it.

What’s happening right now in the world of money has deep implications for our financial system, our political landscape, and ultimately how we interact with each other at a personal level.

I may try to be Aristotle at the interpersonal level, but I side with Nietzsche when it comes to money and Kissinger on global politics.

Let me run you through what I think the political dimensions of China’s CBDC are.

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It starts with this, and ends with this

The cascading series of monetary/political events starts with China.

From Reuters yesterday:

China is one of the frontrunners in the global race to launch central bank digital currencies to modernise financial systems, ward off the threat from cryptocurrencies like bitcoin and speed up domestic and international payments.

Continuing:

The yuan internationalisation will be a natural process, and China’s goal is not to replace the U.S. dollar or other global currencies, but let the market make choices, [central bank vice governor] Li added.

Get real.

This is techno-monetary competition, soon devolving into a techno-monetary conflict.

Then Europe gets in on the act.

As per Bloomberg, the ECB is ‘about to release an analysis of the 8,000 responses it received as part of a public consultation process on the potential launch of a central bank digital currency.

ECB President, Christine Lagarde, says this of a digital euro launch:

The whole process — let’s be realistic about it — will in my view take another four years, maybe a little more.

Finally, the big one.

The US gets in on the act.

The Digital Dollar idea was floated as part of the first coronavirus stimulus bill back in March of last year.

The language was buried in the bill but make no mistake — it is inevitable.

Since the USD functions as the world’s reserve currency and is in essence a petrodollar according to my buddy Ryan Dinse, it may prove to be the last currency to fall.

But fall it will.

What you do from here on out though is not about making big gains on speculative cryptos.

It’s about understanding the underlying technological shifts that will impact global politics and eventually how you interact with other people.

TradFi is rigged, but you can buy a stake in a future order

Traditional finance (TradFi) was set up to benefit middlemen who all take a clip along the way.

Central bankers, major banks, brokers, clearing houses, hedge funds, financial advisers — the whole gamut of gatekeepers.

They provide infrastructure to be sure.

But they also rig the processes to their benefit.

The GFC revealed how poorly clothed the emperor really was.

As a result, the appeal of crypto is not just as some vehicle for speculation, but as a way of exiting this rigged system.

Gold will play a part as well, I’m sure.

Ultimately though, when the Western banking system shifts to CBDCs combined with the somewhat disturbing reports that AI and facial recognition software is proliferating amongst major US banks, it may not be much better than whatever dystopian model the digital yuan is heralding.

As such, when you purchase crypto you may actually be buying a stake in a future political order that rejects centralised control.

Freedom doesn’t die in silence; it dies in the centralised digital ledgers of governments seeking greater control of a broken financial system.

You’ll hear more from me on this theme tomorrow.

Regards,

Lachlann Tierney Signature

Lachlann Tierney,
For Money Morning

PS: Promising Small-Cap Stocks: Market expert Ryan Clarkson-Ledward reveals why these four undervalued stocks could potentially soar in 2021. Click here to learn more.


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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