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Rusere Shoniwa dissects the claims of The Daily Sceptic’s anonymous IT reporter that CBDCs will safeguard our liberty and finds his/her supporting arguments wanting. Originally published on A Plague on Both Houses.
Why is it important to challenge independent media outlets like The Daily Sceptic when they print nonsense about important issues like central bank digital currencies (CBDCs)? It’s not just because The Daily Sceptic is big. The Daily Telegraph is big too, but we expect it to publish nonsense; that’s its job, and challenging all its nonsense would not be a wise use of one’s time. The reason to challenge The Daily Sceptic is that it has reach within the Freedom Movement, and we cannot waver on CBDCs. This really is a hill to die on.
I think more and more people are beginning to realise that The Daily Sceptic isn’t that interested in a genuine freedom movement. But some of us may be labouring under the impression that it is. In fairness to the crew at the The Daily Sceptic, they’ve never positioned themselves as defenders of liberty so you can’t accuse them of being imposters. My view is that they are defenders of the status quo, but they are a reliable fact-generating machine for climate and vaccine scepticism. And facts are important.
A brief ‘housekeeping’ note before I start deconstructing some recent nonsense on CBDCs that was written by The Daily Sceptic’s Anonymous IT reporter. Dodging the use of pronouns gets irritating when referencing or critiquing an anonymous writer’s work. However, this Daily Sceptic piece promoting CBDCs as a liberty safeguard has so many holes in it that I concluded it could not have been produced by a human with sound reasoning skills and even a rudimentary knowledge of the topic at hand. Surmising that The Daily Sceptic has resorted to AI to pump out content, I realised that the my pronoun problem had been solved – ‘AI bot’ will suffice as shorthand for ‘The Daily Sceptic’s Anonymous IT reporter’. And the pronoun for AI bot is obviously ‘it’.
Claim number 1 – the private money in circulation that has anything to do with our central bank constitutes only 3% of money in use, so the central bank has no leverage over us.
AI bot begins its argument by discussing a complete irrelevancy – the composition of money within the banking system. It tries to convince us that there is nothing to worry about because “only 3% of the circulating money in daily use by you and me has anything to do with the central bank”, and that none of the payment activity in the “private money” sector – the payment activity that matters to us as consumers – is controllable by central banks. This is evidence not just of confusion about what CBDCs are (and therefore the fundamental danger they pose), but also of confusion about money concepts. So let’s unpack some basics about money as it relates to CBDCs.
There is no need to get bogged down in a lecture about all the facets of money, but it’s important to say that, when thinking about money and its relationship to CBDCs, there are three elements that can cause us to get in a muddle. Those elements are: what money is, what money does, and where money sits in the banking system. We must focus on the element that is most relevant to the CBDC debate – what money does. But let’s quickly go through the three elements so that you can be convinced that the element I am focusing on is indeed the right one.
1) What money is: it’s basically a store and measure of value. What is it storing and valuing? The wealth (or lack thereof!) of businesses and individuals.
2) What money does: It allows businesses and individuals to exchange their stored wealth with other businesses and individuals.
3) Where it sits in the banking system: this is the least relevant element, but it reflects the size and importance of different money stakeholders, as well as the differing needs of those stakeholders in storing and exchanging wealth. As I will explain, where it is in the system is of no relevance to the CBDC argument insofar as its threat to liberty is concerned.
So, the most important element in the discussion of CBDCs as a threat to liberty is the second one – money as a medium of exchange. It’s important to grasp at the outset that CBDCs are not, in spite of their name, a ‘currency’. CBDC is a payment system. It is in fact a radical revision to existing payments systems. And as a payment system, it affects mostly the exchange element – how we go about transacting with each other and with businesses and, crucially, our ability to transact freely without fear of undue intervention in the transaction from our government.
Don’t take my word for CBDCs being a payment system. It’s the unequivocal view of Sir Jon Cunliffe, the BoE’s Deputy Governor for Financial Stability. When challenged by the House of Lords Economic Affairs Committee on the ‘currency’ canard he replied:
“I agree with you entirely on currency [i.e. the use of the word as a misnomer], but the term is out there now and it is difficult to change it. I would probably refer to it as central bank digital money, because money is a means of payment, rather than central bank digital currency. The horse has bolted. Once an acronym becomes established, it is really difficult to change it.” [emphasis added]
At this point, I don’t have to argue with or fact-check AI bot’s breakdown of where money is in the system and whether the proportion that most concerns us as consumers is 3%, 30% or 90%. None of it matters. 3% is small, but if 3% is all you need to control the public’s payment system by virtue of the fact that the population is entirely reliant on that 3% for its day-to-day existence, then 3% obviously becomes a big deal as a lever of control. And what we are contesting is undue control over the population via control of the payment system that we rely on for everyday exchanges of our wealth. You’re welcome to accept AI Bot’s analysis of the percentage of money in the system that the ordinary citizen relies on. All it proves is how small a lever can be for it to have such a disproportionately negative impact on liberty.
Claim number 2 – none of that small percentage of private money with which we should be concerned is “controllable by central banks. Not now and not in future, with or without CBDCs.”
There is much else wrong with AI bot’s argument based on this assumption that the money circulating in daily use by us has nothing to do with the central bank. AI bot states triumphantly that :
“Your mortgage, loans… credit card balances are all private money, none of it controllable by central banks. Not now and not in future, with or without CBDCs.” [emphasis added]
Putting aside the smoke and mirrors in the BoE’s suggestion that this new-fangled money is a ‘currency’, the idea that the BoE will have no control over its own ‘currency’ once it successfully infiltrates these sectors of private money, is frankly stupid. The BoE is the issuer of the CBDC, and the clue to that is in the first two words of the name – Central Bank Digital Currency. It will therefore, in conjunction with the government, determine the conditions of its use. And remember, because this money is really a dystopian revision to the payment system, the conditions of use primarily relate to the rules of exchange to be imposed once it has issued its money. In the discussion further down about disintermediation, I will demonstrate that the BoE intends to be in control of its new form of money, but it will use retail banks to do its dirty work by administering it. And you won’t need to take my word for it because it comes straight from the horse’s mouth.
The method of control embedded in the CBDC exchange system is by now well understood. The payment system (I will keep using that term in relation to CBDC to ram home what it actually is) is programmable. That means the BoE will have the ability to set conditions on the exchange of money at the transaction level and in real time. Don’t take my word for it. Listen to the head of the central bank of central banks, Agustin Carstens, head of the Bank for International Settlements (BIS), who said this:
“A key difference with the CBDC is that the central bank will have absolute control on the rules and regulations that will determine the use of that expression of that central bank liability and also we will have the technology to enforce that. Those two issues are extremely important and makes a huge difference with respect to what cash is.” [emphasis added, time stamp 7:30]
Do you still want to believe AI bot when it says that none of your private money is “controllable by central banks. Not now and not in future, with or without CBDCs”? Or would you rather pay attention to what the head of BIS is saying?
Now, the nice Mr Carstens’ explicit reference to “the technology to enforce” the CBDC rules and regulations provides a good segue into Digital ID, without which no discussion of CBDC is complete. Funnily enough, Digital ID is conspicuous by its absence in AI bot’s Swiss cheese analysis of CBDC.
The desired levels of hyper control in CBDC cannot be achieved without Digital ID, which is why the G20 is hell-bent on introducing the two together. To appreciate the threat to liberty that CBDC poses, you must understand that there are essentially only two prerequisites for the complete loss of all freedom – CBDC and Digital ID. An analogy for the interaction between these two things might be the plug attached to an electrical appliance and the socket that supplies the electricity to power it. Each needs the other to achieve the controllers’ dream.
The CBDC payment system is fully intended to operate on a platform that will integrate personal data that will link to each CBDC wallet. The System controllers pushing the ridiculous concept of Digital ID want you to think that it’s as harmless and as necessary as a ‘driver’s license’ to allow you to access the internet ‘safely’. Never mind that we’ve been accessing the internet perfectly ‘safely’ without a license for 30-odd years now. And that’s the problem. It’s been too free, and some of us are starting to exceed our thinking limit.
As we all know, licenses are issued with conditions and can be revoked if those conditions are breached. And what if those conditions are opaque and change with the seasons and whims of government policy and diktat?
Once the payment platform is integrated with Digital ID, the government will have at its disposal:
· an automated real-time mechanism for identifying behaviour deemed to be in breach of the conditions of both the CBDC usage and your online digital ’license’, and;
· the ability to punish breaches, without due process, by curtailing your ability to transact.
Will this integration of the CBDC and Digital ID happen? Again, don’t take my word for it. Our pals at the BoE have indicated that it is inevitable because you cannot stop technological progress. When pressed by the Economic Affairs Committee on whether Digital ID would be a feature of CBDCs, the BoE governor was somewhat coy; however, very little reading between the lines is necessary to understand its inevitability:
“To what extent that digital ID would be unique to that platform or something that was broader in terms of your identity, it is rather like Jon’s [Deputy Governor for Financial Stability] point about the iPhone: the technology will probably move us on very rapidly in a short time, so it is a bit of speculation to some degree.” [emphasis added]
Claim number 3 – a CBDC pilot in the Bahamas did not go very well, ergo CBDCs will fail.
AI bot goes on to cite the launch of a CBDC in the Bahamas in 2019 and its apparent failure as proof that CBDCs don’t have legs:
“If we want to know what really happens when a CBDC is introduced, we don’t have to speculate because it has already happened in the Bahamas where the so-called Sand Dollar was introduced in 2019.”
In citing the apparent failure of the Bahamas Sand Dollar, AI bot also gives us a clue as to what’s really going on there and indeed other locations where CBDCs are being rolled out or, more accurately, trialled:
“Only one of six retail banks and one of five credit unions is even in the pilot.” [emphasis added]
It’s a pilot. Look that word up in the dictionary – experimental, exploratory, trial, test. You wouldn’t roll out a new technology to a market with hundreds of millions, and ultimately billions, of customers until you’ve tested it in a controlled live setting on a small bunch of guinea pigs. African countries or others judged to be insignificant backwaters are used as guinea pigs by both Big Pharma and Big Finance. They are less sensitive to the impact on test subjects in these markets, not because they care more about consumers in the West, but because fallout from bad consumer reactions cannot be as easily contained or completely ignored here in the West.
Nigeria was another CBDC guinea pig earlier this year. The take-up for the Nigerian e-Naira was 0.5% – a comprehensive rejection – so the government responded by restricting cash withdrawals. That caused rioting as people struggled to buy basic necessities. By all accounts, the E-Naira was a spectacular failure and the Bahamas Sand Dollar a damp squib. But they are trials. The CBDC control freaks and their central-bank-mafia bosses are learning from their mistakes, and once they’ve ironed out the creases, their products will be coming to a bank near you.
Claim number 4 – disintermediation is another massive hurdle for central banks to jump in rolling out CBDCs.
AI bot then cites disintermediation as being another insurmountable problem facing central banks in their quest to introduce CBDCs. The disintermediation risk in this context simply refers to the movement of money out of existing retail bank accounts and into the BoE’s CBDC product or Digital Pound. The risk is that, if this happened fast enough and at high enough values, it would cause a banking liquidity crisis – effectively a run on banks. This would be a risk if the BoE were to create a new product and compete with retail banks for business. But it’s not. Remember, CBDCs are primarily a new payment system. The BoE has no intention of competing with banks for deposits. The aim is to shift money out of one payment system and into another.
To the extent that the Digital Pound could be considered a financial product within the retail banking system, then it’s a product within the overall payment system in the same way that a particular type of current account or savings account is. It makes no sense for the BoE to get its hands dirty managing millions of retail CBDC wallets when retail banks already have the infrastructure and know-how to do this. Retail banks would therefore administer CBDC wallets on behalf of the BoE. Under this likely arrangement, the BoE would create inter-bank accounts with retail banks as it issues its new ‘currency’. That would give the retail banks the liquidity buffer they need to convert existing retail accounts into CBDC wallets. As existing accounts are converted and moved onto the BoE’s CBDC platform, the banks would use up their accounts with the BoE.
Disintermediation is a red herring thrown into the debate to give the impression that CBDC is a new financial product in competition with existing money. This is simply not true. The House of Lords Economic Affairs Committee that looked into the BoE’s CBDC fixation and concluded that it was a “solution in search of a problem” discusses disintermediation as if it were a frightening contingency requiring stringent mitigation. The clue as to how it would be batted away lies in paragraph 80 of the report:
“Patrick Honohan told us [the committee] that commercial banks could issue bonds, which may be an expensive funding source, or central banks would have the option to lend their holdings of CBDC deposits back to commercial banks: “that moves the risk of a bank failure from the depositor to the central bank…” [emphasis added]
The more explicit confirmation that disintermediation has been thought through by the BoE and is, as I say, a total red herring, comes again from the horse’s mouth in oral hearings of the Economic Affairs Committee. When pressed by Lord Fox on the disintermediation issue and the BoE’s relationship with commercial banks, Sir John Cunliffe, deputy governor responsible for financial stability, responded:
“The central assumption that we are working with is a so-called platform model, which would be partnership between the Bank of England and the private sector. In the same way that we do not issue cash directly to the public—we issue it to the banks, which then issue it to the public—the interface with the customer would be private sector…There are some proposals in other jurisdictions to give customers direct accounts. It comes back to what Andrew was saying. The intention here is not to disintermediate the banking system by putting the Bank of England where the banking system is at the moment. The aim would be for us to provide the settlement asset but for the private sector to deal with the distribution, the storage of the settlement asset and the technological innovation around the settlement asset.” [last 2 exchanges of Q96]
This confirms that the BoE aren’t in the least bit concerned about disintermediation. So why is AI bot? It also confirms my hunch that the retail banks will be administering the CBDC wallets on behalf of the BoE.
Claim number 5 – CBDCs won’t be able to track your spending for energy rationing purposes because a Swedish credit card tried that in 2019 and failed.
AI bot goes on to discuss a feared goal of CBDC implementation – imposing spending limits based on CO2 emissions. AI bot then dismisses this concern by citing the failure of a Swedish credit card that was launched in 2019 on the premise that it would stop overspending on your carbon footprint. It failed because while credit cards are very good at relaying merchant information (the seller’s identity) within the payment system, merchant information is a woeful proxy for actual CO2 emissions and carbon footprint. I don’t disagree and nor do I need to. Have you spotted AI bot’s logic failure yet? It’s using a ‘weakness’ in the current payment system and projecting this weakness onto the CBDC payment platforms that are still being trialled. In plain terms, it’s comparing apples and oranges.
Now, we don’t yet know whether CBDCs will overcome this inability to effectively ration energy through spending restrictions, but it’s a massive failure of logic to assume that an upgraded system – whose aim (see Mr Carstens above) is to impose “rules and regulations” on the use of the currency – will fail because the current payment system does not deliver this Orwellian feature. That’s why they’re moving to the CBDC platform – to go where they have not gone before! What we do know is that, as I have been at great pains to emphasise, the CBDC platform is intended to interface on a vastly expanded scale with Digital ID, smart devices and the internet of things. When it comes to energy rationing, think smart meters, which the government is now legally empowered to smash down your door to install.
Claim number 6 – cash is becoming increasingly archaic and is not the answer to a need for a public form of money. A well designed CBDC is the answer to problems such as the plight of the unbanked, “having something useful to withdraw if your bank is about to fail, or simply not wanting an intermediary between you and your counterparty.”
AI bot’s final salvo in its argument for CBDCs is to trash cash. It says cash is the only form of public money but is failing owing to being “anachronistic, expensive to handle and vastly less convenient than its private money alternatives”. Stating the bleeding obvious, AI bot triumphantly claims that as the private sector stops accepting cash (due to “private sector innovation”), the more useless cash will become. Well, yes. And in this context, that argument is a form of begging the question.
No-one in their right minds would deny the inherent inefficiency of cash as a medium of exchange in many sectors of today’s economy, but pro-liberty advocates are keen to retain cash as a medium of exchange because it is the most private method of transacting. And for a minority of people not in the banking system, it is the only way they can survive. A CBDC will not miraculously cure the dilemma of the unbanked because all the same hurdles and more – Digital ID and a smartphone – to getting retail CBDC wallets will need to be jumped. I actually don’t care about how we exchange money as long as privacy is maximised and I don’t have to use a smartphone to transact. For all the reasons I’ve mentioned, a CBDC won’t do that, and arguing in favour of a new form of public money simply because the demise of cash is inevitable in an increasingly digital world is not an argument for CBDCs being a safeguard of liberty.
Daily Sceptic’s AI bot score – 0/6
So there you have it. Six CBDC claims made by The Daily Sceptic’s AI bot, all of them pants. To top it all, not one of those claims constitutes an argument in favour of the proposition in the title of its article – namely how “CBDCs will safeguard our liberty.” With the exception of the last claim, which is a failed argument for replacing cash with CBDCs, they are all a mish-mash of why CBDCs might not succeed if implemented. That does not amount to an argument for how they will safeguard liberty. And that’s because it’s not possible, even for an AI bot, to make an argument for CBDCs safeguarding liberty.
I hope that the counter-arguments I’ve offered make it patently clear that sitting back and allowing CBDCs to happen would be like bringing home a lion cub, feeding it well, and hoping that it doesn’t turn into fully grown lion that may one day eat you.