Chief Investment Strategist, The Freeport Society
On each landing, opposite the lift shaft, the poster with the enormous face gazed from the wall. It was one of those pictures which are so contrived that the eyes follow you about when you move. BIG BROTHER IS WATCHING YOU, the caption beneath it ran.
George Orwell, 1984
In the first 231 words of his infamous book, Orwell terrifies the bejesus out of any freedom loving person.
Yet, the world is progressing inexorably towards that dystopian future… only in a subtler way.
The Chinese Government’s Big Brother Social Credit Score system…
London’s (Big Brother) surveillance camera network…
And coming soon, Central Banks (Big Brother) Digital Currencies – CBDCs.
The Federal Reserve is actively developing our very own CBDC. In fact, it is so advanced in this project that several large banks are testing it as you read this.
The introduction of a digital currency – and the removal of bank notes and coins – is a matter of when… not if.
Look, there are many advantages that this technology will bring with it. Cheaper and faster movement of money is just one.
But there is a nightmare always lurking on the perimeter with this technology… and the only thing keeping it at bay is the people running the country.
This is serious stuff. It will have a significant impact on our financial futures and our freedoms… even on our rights to privacy.
It could become the ultimate Big Brother conduit.
That’s why, for today’s Freeport Navigator, I recorded a video edition with Justice Litle, Editor of Decoder.
Click on the image below to watch it now…
When you watch today’s edition of The Freeport Navigator, you’ll discover…
- How a Central Bank Digital Currency will work… and how far along in development the Fed’s version is.
- The true dystopian capabilities of this technology.
- And the three financial steps to consider to prepare for the inevitable arrival of digital currencies.
The biggest take away today is this: Stay aware of and up to date on developments related to CBDCs.
With knowledge comes power.
That’s why I’ve gone to great lengths to dig up as much information about what’s going on with CBDCs, the best and worst case scenarios, and possible investment opportunities that can help you prepare now. I’ve put it all into a special presentation, which I urge you to watch now.
Enjoy today’s video edition of The Freeport Navigator.
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Transcript
Charles Sizemore:
Hi, Charles Sizemore here, Chief Investment Strategist for The Freeport Society, and today we are bringing you a special video edition of The Freeport Navigator. On the agenda today are Central Bank Digital Currencies better known by their acronyms, CBDCs. So what are they, why do they matter and are they about to change our financial lives forever?
To help me unpack all of this, I have a very special guest today, Mr. Justice Litle, renowned macro expert and the editor of Decoder. So welcome, Justice.
Justice Litle:
Thank you. Glad to be here.
Charles Sizemore:
Yeah, so let’s just jump right into it. What is a CBDC? Let’s just start with the basics.
Justice Litle:
A Central Bank Digital Currency, or what they will be when they start rolling out, is basically like traditional electronic money plus smart contracts. So sort of like a cryptocurrency, except not a cryptocurrency. They’ll all be centralized and they’ll be run by governments.
So if you pull out a piece of paper currency like a dollar, it’ll have a serial number on it, or if you look on the inside well of your car door, it’ll have a vehicle ID number.
Central Bank Digital Currencies will be able to have that type of ID number on every unit of currency that moves around, sort of like a tracker.
Think of it as programmable money that can have legal contracts built into it that the government can use to track where it’s moving around, move it much faster, and have a lot more control over it, which is both useful and very, very scary for various reasons.
Charles Sizemore:
Sort of like a currency, like a dollar, a euro, whatnot, but with a lot of the functionality of Ethereum, for example… it’s this ability to make it programmable, have smart contracts, all of that.
Justice Litle:
Right. It’s like Ethereum, except it’ll be also more like Visa or MasterCard. Ethereum moves very slowly because of the limitations of trying to decentralize it over blockchain, whereas CBDCs will have that smart contract functionality, but they’ll be centralized, which means they will be able to move almost instantly.
It’ll be programmable money that can move extremely quickly between bank accounts, governments, contracts, all that kind of thing.
Charles Sizemore:
So this is interesting because we’re living in a time of a lot of financial innovation like PayPal, Venmo, Zelle. All of this stuff allows us to move money around really quickly, and that’s nice if you look at the existing infrastructure of the banking system.
ACH transactions, that stuff’s from the 1970s. That stuff predates my life. That stuff is older than I am.
And wiring money, that’s a real kind of pet peeve of mine. Every month I have to deal with my bank and send a wire to my kids’ school. That technology is from the 1870s, like the days of cowboys. That’s how old and antiquated that is.
Introducing something new is actually pretty nice, but there’s a dark side to this as well. I guess one positive is if the money’s programmable, if it’s on a blockchain, if it has an identifier, it can’t be counterfeited so that’s good, the problem is they know everything you do.
Justice Litle:
This is actually a very frightening development, or it could be depending on where you live, because there is a huge amount of potential power built into CBDCs and how they are used will be dependent on the government that is using it. There’s a lot of power.
Basically this is money that can spy on you. This is money that can self-report transactions to the government, it can tell the government what you did with it, where you sent it. This is money that the government, in theory, could turn on or off.
For example, if it decided it didn’t want you to leave the country or leave the state, it could invalidate your money outside of a certain area. It’s sort of a wild dream for bureaucrats who want to have extreme control over how money flows, who it flows to, who they can penalize.
It’s a huge step up in terms of efficiency, but it’s also very frightening depending on what a government chooses to do with it. The inherent potential for surveillance, for tracking, for penalizing people, for trying to shape social behavior is very frightening, and you’re going to get very different results.
Charles Sizemore:
That’s interesting… the social engineering aspect… because that’s been the dream of the technocrat forever to influence behavior with the the carrot instead of the stick, or actually a little bit of both, where they incentivize you to buy a smaller soda because they put a tax on the larger one, or they try to shape your behavior like that through taxes.
This now becomes a lot easier. The example I give is, “We had access to your last physical, and your body fat percentage is a little higher than we’d like. Maybe we’re not going to let you buy that donut.”
Justice Litle:
Right, exactly. The level of granularity here is almost infinite. In theory, the government could use a Central Bank Digital Currency to tax a certain type of good. It could put an extra tax specifically on sugary sodas, but not on sodas that don’t have sugar in them, or it could put a tax on full fat popcorn, but not fat free popcorn. You can get so micro level. That’s partly what’s scary about…
Charles Sizemore:
Is that popcorn seasoned using seasoning that a very important campaign donor got into the law?
Justice Litle:
Right. Exactly. And the really dystopian vision of what CBDCs could do is already unfolding in China where they have something called a social credit score. It’s basically this giant government eye that follows you around and determines your access to credit based on everything from what you’ve said online in social media, to whether or not you jaywalked, to whether or not you have your party affiliations up to date.
In theory, what China is doing with its vanguard attempts to build programmable currency, and they’re way ahead of everyone else in this area, is sort of a nightmare example of where it can go.
But whether or not CBDCs are that intrusive and dangerous will vary greatly from state to state and region to region, and that will depend a lot on legislation. So to give you a quick example of how much legislation can make a difference…
In London, surveillance cameras are everywhere. You basically cannot move through any inch of public space in London without being video recorded.
Whereas in Berlin, in Germany, there’s almost no surveillance cameras because the Germans remembered the power that the Nazis had in World War II and decided they don’t want to give any type of government that surveillance power.
You have two major cities and democracies, one has a huge amount of surveillance, the other has far less. You can similarly get great variations in how CBDCs are used. In one region or country or even state, they might say, “Yeah, we’re fine with using these to spy on you.” In another place, they might say, “We’re not going to let the government have that type of power with that. We’re going to roll it back.”
So legislation and how different jurisdictions decide to use these things is going to be really, really important because the nightmare scenario isn’t guaranteed, and the use of these things is going to vary from country to country and maybe even region to region or state to state in the United States.
Charles Sizemore:
For sure. One thing to remember is once the technology is out, you’re not getting that cat back in the bag, right? So even if you do have laws that protect citizens today, our governments have never violated privacy laws, have they?!?
Justice Litle:
The more powerful that technology becomes, the more we risk accidentally winding up in one of the two great dystopian scenarios that were written about in the 20th century… one was George Orwell’s 1984 and the other one was Brave New World, Aldous Huxley.
One described basically a totalitarian sort of boot crushing communist big brother state, and the other one described a more corporate owned consumer state, but they were both instances of top-down bureaucrats controlling everything and effectively using technology to do that.
So Central Bank Digital Currencies have a lot of upside because of their technological power, but that’s also the risk that’s going to need to be monitored very closely in terms of how they develop, and again, it’s going to be different, it’s going to depend a lot on legislation from place to place.
Charles Sizemore:
What do you and I do… what do ordinary people do… to prepare for this, to protect themselves against some of the potentially nefarious aspects?
Justice Litle:
Well, I think that the dawn of CBDCs in terms of their danger really elevates the importance of privacy and security and being aware of what the risks are in terms of where you live, and possibly looking at diversification of assets and just being aware of what’s going on.
For example, as I just said, a country could go many different ways with their adoption of Central Bank Digital Currencies. One country could say, “We’re going to put limits on what this can do. We’re going to be sure to respect privacy.” Another country might go the way that Russia did with their tax system. Russia has this computerized tax system that basically can track every single transaction down to literally whether you bought that donut. It can tell, okay, you bought a donut from such and such coffee shop at 2:17 p.m. last Tuesday, and then it can decide what it wants to do with that information.
It will be very important to track legislation around CBDCs.
And I think it’ll be important to consider diversification of assets from a privacy and security standpoint, as well as a potential return on investment standpoint.
So for example, if we discover that certain major governments, who knows, maybe the Federal Reserve or the European Central Bank decide to get very, very intrusive with their CBDC legislation and their law bodies let them do that, maybe there are certain alternative currencies where you can put some of your savings into a certificate of deposit and earn a good return.
So I would say CBDCs are sort of a call to action to be aware of the dangers of technological intrusion and protecting your assets and thinking about different places around the world where you want to live, where you want to have assets, maybe just diversifying your exposure a little bit, not just to markets, but to governments because CBDCs could be a dangerous weapon in the hands of the wrong government or under the wrong legislation.
Charles Sizemore:
I would add that it probably makes sense to always have a little bit in precious metals, it probably makes sense to have a little in crypto, it makes sense to diversify outside of the financial system as well. Everything in moderation, of course, but it does make sense to hedge your bets there.
Justice Litle:
Absolutely.
Charles Sizemore:
This is coming whether we like it or not.
Justice Litle:
Yeah, they’re all working on them and they’re moving at different speeds, but it is a guaranteed thing that’s going to happen and it’ll be something really important to pay attention to.
Charles Sizemore:
Well, very good. Mr. Litle, I think we’re going to wrap this up.
Thank you for joining me today.
Thanks for sharing your insights here.
For anyone that wants to get more from Justice Lytle, please check out Decoder. It’s an excellent publication. He puts the pieces together for us mere mortals.
And if you’re interested in this theme of Central Bank Digital Currencies, if you’re wanting to know more about them, what the risks are and what some of the potential profit opportunities are as well, how we can actually make money from this transformation, you can watch this video.
This is one of the biggest developments in finance, perhaps the single biggest development in finance of our lifetimes. You want to be informed on this and you want to profit from it.
That is going to wrap up this special video edition of The Freeport Navigator.
To Life, Liberty, and the Pursuit of Wealth…
This is Charles Sizemore signing off.