Updated: Oct 21, 2022
CBDCs what are they? It’s a good question. It’s a central bank digital currency. But is it good? Or is it bad? CBDCs, which are central bank digital currencies. Now, that sounds innocuous enough, right? I mean, we were pretty much already digital, right? We go to the store, we use our credit cards, we use our debit cards, rarely do we take out cash, and I have cash in my wallet, it kind of gets moldy, I use cash so little. And even when I go overseas now, you do need cash. But most of the time every place takes credit cards. So, things are already very electronic and very digital. The governments around the world are going to seize on that opportunity and they’re going to say, “hey, everybody’s already used to paying things with digital money; so, why don’t we just transition everything over to digital money?”
Now, during the pandemic, I don’t know if you guys noticed this, but there was a lot of lack of change. Like if you wanted to go someplace, they were rounding things up, because they didn’t have the change to be able to give you. So, I don’t know what happened to the coins all of a sudden, but they were disappearing. And people are using cash less and less and less. And so that is how the CDC is going to be put into society. It’s already happened at China. So, we have a blueprint. But there are some risks to it. And it’s going to sound like it’s a really innocuous, gentle thing, we’re just going to move our money to a central bank, digital currency, which is put out by the government. But essentially what it does is it takes out the middleman takes out their banks, right? The banks or their lending institution. So now the lending will go directly to the consumer and take out the middleman sounds pretty good, right? Well, it’s not always good to take out the middleman. In this case, the government is the middleman, right. And so, if you take out the middleman, now you just have a single source to provide capital. Let’s talk about some of the risks.
First of all, there’s some financial risks. You have exchange rate risk all of a sudden, it’s just government to government negotiation. And by the way, we’ll give you some extra bombs that you could drop, if you keep your rate fixed to your currency exchange rate. So that’s a risk out there. Not a big one. But it is a risk. And it just takes away a free market element, we don’t want to take away many free market elements, if we can help it, we certainly want to put it in the hands of one or two powerful people that can control the money of the world.
Number two, because it’s taking away the potential for competition through the banks to lend money, it’s also going to potentially lead to increased lending costs. Not good, right? We don’t want to increase lending costs; we want competition to decrease lending costs.
And third, it could decrease access to capital. So instead of going to your bank and making an application, now, banking used to be different. Banking used to be a small bank and the community and they have a reputation for making good loans, if they don’t, they go out of business. You would go as a small business person or a homeowner and say, “Listen, I want to borrow from the bank.” The bank would assess whether that was a good risk. Today, they kind of sell all the loans to the government. So that is a risk. There’s decreased access to capital, that’s a potential of a CBDC. So, you got to watch out for that.
But here’s where it really comes to fruition and we’ve seen this in China, it’s a human rights cost to have a CBDC, and here’s what I mean. Let’s unpack what a CBDC is; It’s a central bank, digital currency. Well, that sounds like the dollar, right? Just print whatever you want. There’s no scarcity. You just print as much as you want, and then the government controls your money. The problem is, if you just do that, then you have an unlimited amount of money, is it an infinity sign is the denominator. And that’s why we get rapid inflation. Well, now it’s going to be even easier for the government to do that. But on top of it, it’s going to be wrapped in a crypto technology. And that sounds okay. Well, I’ve heard Bitcoin and I’ve heard of a theory, and I’ve heard of all the other coins out there. But there’s a cost to that. And number one, the main one is surveillance. So, they’re going to be able to surveil you and watch what you’re doing, watch how you spend money, maybe even put capital controls. I was in Greece in 2013, 2014, 2015 and 2016. And they had capital controls in the country. So, if you were wanting to go out and get a certain amount of money, you could only pull out 400 euros a month or a week, but it doesn’t really matter. It’s a limit. So, you could have had a million euros in the bank, but you could only pull up 400 if you didn’t have multiple accounts.
You were kind of screwed, if you had to live on 400 bucks a week or a month, so it’s 400 bucks, I’m pretty sure that’s what everybody was living on. And that’s what everybody was struggling with and the economy was just bogged down even more than it was prior to the capital controls. The government will have even more tentacles into how you’re spending. And that could be tied to what’s called a social credit score, which they’re using in China. Basically, if you say anything against the powers that be, now your social credit score goes down, and they can limit your spending, that’s a real risk to freedom. We don’t want anybody limiting our ability to have freedom of speech or our ability to defend. And they might say, “Hey, listen, you know, we don’t like you, because you’re a Trump supporter, or we don’t like you because you’re a Biden supporter, or we don’t like you because you’d like guns, or you’re a pro-abortion or anti-abortion, we don’t think you should be able to get a mortgage on your house. So, we’re limiting it to the people that see things our way, that’s a major risk. That’s government control, that’s regulation. Anytime you hear the word regulation, that means somebody else is in charge of your freedom, you got to watch out for that. It’s a, it’s a power grab, the government is going to sneak it in, it’s going to be the camel’s nose under the tent. But pretty soon the whole camel is going to be in the tent. So, you got to watch out because the government wants control of how you spend your money.
And by the way, you’re going to hear a lot of F.U.D; fear, uncertainty and doubt around cryptocurrencies. And you know, what? Some of it is justified, some cryptocurrencies, and, in fact, there’s like 20,000 different projects, tokens, they’re called, and most of them are crap, right? And I call them “shit-coins”. A lot of people call them shit-coins. There’s Bitcoin and other shit-coins. Bitcoin is the only real one that first of all has a network effect. And second of all, it is not tied to some centralized person. It’s a decentralized thing controlled by the people, it’s controlled by the 15,000 or so nodes that verify that the transactions are accurate. There’s no human being involved in that. And it takes a majority of those nodes to be able to overturn anything, it’s impossible now. It’s so entrenched, and that ledger, which we can go into in another video, that ledger is immutable, you can’t change the transactions that have already happened. So, you’re going to hear this fear, uncertainty, doubt. And the big one is: cryptocurrency going to be used for money laundering? Well, for sure. Like, let’s give them that one. But cash is used for money laundering, wiring money is used for money laundering. In fact, cryptocurrency and Bitcoin is like the worst way to money launder because there’s a public ledger that shows every single transaction. So, how could you possibly believe that there’s money laundering going on with these idiots that say that there is money laundering on the blockchain, for everybody to see, in fact, there was a big hacking of one of the exchanges about six or seven months ago. And these idiots, you know, put it out on social media anyway, they were caught in like six hours because it was public transaction. So, like, that’s a stupid objection to having a central bank, digital currency or any kind of cryptocurrency, the final risk is the risk of hacking. Now imagine that the government controls all the money and they have one computer, right, which is essentially what they’re going to talk about doing. It’s all going to be on one big giant computer. And they’re going to push a button and say, “you know what, let’s send Ukraine another 40 billion, let’s, let’s get some more money from John Q Public. And we’re going to we’re going to tax over here or we’re going to increase by a couple of 100 trillion dollars just because we want the green New Deal.” Like anything’s possible, they just need to add zeros. And there’s even less accountability from the Fed. And from the government. At that point, they are just going to print money into oblivion until our currency explodes. But a lot of people were saying, what happens if it gets hacked? Well, think about that. If there’s one place, there’s the money is controlled. What if a hacker gets in there? Right. And that’s the big knock-on cryptocurrencies, but bitcoins have never been hacked. A lot of them have but mostly on the exchanges.
But imagine the government, because the government so good, they couldn’t even put out an Obamacare website. Remember that? It costs like $1.6 billion dollars to put a website together, and they still never got it out on time. That was our government work. Then they turned it over to private individuals, and it was up and running in like a week, right for a fraction of the cost. So, if we put the government in charge of anything, we run the risk of cronyism. All right, that can tell you in effect, the people that are closest to the money are the ones that make the money. You see that with the wealth gap right now. But secondly, you put them in charge of something, they’re probably not going to watch out for the backdoor. And the things that are opening up with their developers, right? There’s always an Edward Snowden that’s going to leak some stuff out because of the interest of the public, he thinks he’s doing the right thing, or he’s putting a backdoor. He doesn’t believe in government pressure. Why would you want to put all your control in one entity, you want competition, that’s what brings prices down. That’s what creates efficiency.
All right, bottom line. Don’t let them scam you into Central Bank digital currencies. Just because it’s easy to spend money on your credit card and Apple Pay and Google Wallet and MasterCard and PayPal doesn’t mean that’s what a central bank digital currency is. There’s a lot of big risks involved with that.