CDBC letters on digital board

FedNow is Everything We Feared –

CBDC Is Coming

Stasiland, On the Road to Slavelandia

by Toby Esterhase

The US has $151 trillion in debt backed by only $5 trillion in assets, of which 41% are student loans owed to the US government — which may never be repaid. Having abandoned the gold standard around a hundred years ago, most developed countries have a similar debt problem.

And so the Bank of International Settlements (BIS) has told all their members they must have an operational CBDC by 2025. The countries are testing or deploying CBDCs right now, including the US which launched FedNow.

My credit union implemented FedNow, called “Instant Pay,” this past Monday. It is happening.

The US Federal Reserve denies that FedNow is a CBDC, claiming it is only a payment mechanism.

But the full CBDC implementation as a new, programmable, centrally-issued and centrally-controlled currency to replace the US dollar is only 18 months away.

Nevada’s Cash Economy is One of the Largest

Nevada has the nation’s highest unemployment rate (5.3% as of July, 2023) yet has one of the highest GDP growth rates. A part of this dichotomy can be put down to Nevada’s relatively large shadow economy. Similarly, an estimated 40% of Florida’s construction and agricultural workers are illegals, paid in cash. A 2009 study estimated Nevada’s cash economy at 23% of the state’s GDP. The IMF estimates the US shadow economy size at 8.3% of GDP, exclusive of the illegal drug trade.

Clearly, a large portion of the population in the United States, and an even bigger portion in Nevada, rely on cash income just to survive.

Aside From Panic, What Can Cash Economy Workers Do?

In the surveillance-money society, it is wise to separate your money into five parts:

  • Your emergency savings. Any money you keep in a bank is not yours. Your deposits belong to the bank and they give you an IOU in case you want to withdraw any of it. So, it is best to only keep emergency savings in a bank if you need quick access for an unexpected expense.
  • Your long-term savings. This needs to be in a form that is inflation-resistant and is either difficult for the cancel culture to confiscate (silver or gold) or impossible to confiscate (Bitcoin), but that can be converted to fiat at some distant-future time.
  • Your financial investments, such money to buy stocks, which must be in CBDC form.
  • Your anonymous money in the form of Bitcoin, which you can use to purchase prohibited items, such as black market gasoline once you have exceeded your carbon credit allowance.
  • Your daily and monthly spending money. This will be derived from your CBDC income and paid to others from your CBDC account(s).

Difficult as it always is to predict mass societal behavior, at least the possible options can be listed.

Widespread Theft.

In California, thieves can make between $2,000 and $4,000 a day stealing merchandise from stores and selling the booty for cash. There is no risk of arrest or criminal prosecution in San Francisco for shoplifting under $950 per occurrence.

Various states could issue gold and silver coinage.

This idea has received quite some attention in state legislatures. The US constitution permits it. It would require enough coinage to cover the economic transaction float. In Nevada, for example, that would be around 23% of the float needed to support the entire state’s economy. Typically, the amount of money needed to facilitate trade in an economy is about 1/8th of the GDP of that economy. That’s a world average. The Nevada economy in 2023 is about $850 Bn. So, for Nevada, the amount of gold and silver coinage needed to support trade would be 1/8th of 23% of $850 Bn, or $24.4 Bn. That’s a minimum. It does not account for all the coins that people will hoard. This amount is around 12 million ounces of gold.

Private specie might appear.

Gold leaf certificates, laminated in plastic, are already available (the Utah Goldback), but at an enormous premium to the spot price of gold. They are easily counterfeited.

Foreign paper currencies such as the Yuan might become popular.

The convertibility of the US dollar for any kind of gold backed currency such as a BRICS-style Yuan would suffer an enormous shortage at any official exchange rate, or sell for a huge premium if bought on the black market.

The existing Lightning Network takes over the cash economy.

The Lightning Network is an instant-payment channel for Bitcoin transfers. Since Bitcoin would compete with the CBDC, the government will surely shut down all the Bitcoin exchanges. When this was tried in China, citizens started using Rolex watches and rare gems purchased in China as ways to export Renmimbi from China and trade it in for Bitcoin in an adjacent country. That gambit faded in popularity once people realized that holders of Bitcoin, particularly miners (China is the second-largest Bitcoin mining nation in the world), would be willing to sell their Bitcoin for Yuan in completely anonymous peer-to-peer transactions inside China itself. (The Chinese government finally capitulated this year and allowed Bitcoin exchanges to open in Hong Kong.)

The drug cartels will make sure that they can still operate once anonymous cash is phased out in the United States They have 18 months to set up their CBDC money laundering operations.

I will be watching with great curiosity.

(Toby Esterhase is the pseudonym of a Silicon Valley technology investor living in rural Washoe County Nevada.)

(The views expressed in this commentary are those of the author and do not necessarily reflect the official position of the Nevada Signal.)