‘Digital Dollars’ and Retirement Funds

'Digital Dollars' and Retirement Funds

Central Banks Pursue a ‘Digital Dollar’

The push is on to create Central Bank Digital Currencies (CBDCs). In a nutshell, they are the digital version of central bank issued money. Over one hundred countries are exploring digital currencies. That represents 95% of the world GDP. China, Nigeria, and India have already issued them. CBDCs could lead to big changes in the basic activity of the central banking system – making and distributing money. As a result, your retirement funds may soon be under control of the Federal government.

Fed Chair Jerome Powell said the US central bank has no plans to create one without direction from Congress. But nine U.S. financial institutions, including Citibank, Wells Fargo, and Mastercard, recently joined with the Federal Reserve Bank of New York to test a digital US dollar.

CBDCs can be divided into two types. One is for bank-to-bank use. This is just a variation of the existing payment system. The other one is for use by the general public.

At first glance, the public use CBDC doesn’t look much different from your current online bank account. What the consumer doesn’t see is that your money would be in an electronic wallet controlled by the government, not by you or your commercial bank.

The result is a fundamental shift of control. On one level, central banks want to retain control of the international finance system. Banks recognize the challenge posed by cryptocurrencies. Beholden to no government, crypto is viewed as a rival to central banks. Crypto can undermine a central bank’s power to control an economy through monetary policy.

The race to a US digital dollar is spurred by a fear of losing dollar dominance. “There’s a worry that if we don’t launch a digital currency in the U.S. or Europe, China will set all the standards for them, and then we’ll be at a disadvantage,” says Megan Greene, global chief economist at the risk and financial advisory firm Kroll. “Also, digital currencies like crypto really scared the bejeezus out of central bankers.”1

The digital dollar is also about controlling the individual. CBDC is pitched as a benefit for individuals. Advocates say it will help people without bank accounts access the financial system. In addition, the Fed could, for example, deposit stimulus money right into your account in case of a disaster.

These benefits come with even greater drawbacks. Privacy would be eliminated. A digital currency could allow governments to track every transaction you make. This may deter some crime. But it creates a new form of social control in the process. For example, a ruling party may no longer permit the purchase of things it considers wrong, like alcohol or guns. The central bank could also determine who you can transact with, isolating those it deems problematic. Or, if you are express a ‘wrong’ opinion, your funds may simply be erased. Retirement investors could be forced to put money into “woke” funds that don’t align with their beliefs.

One of the biggest concerns is the ‘wealth of ignorance’ surrounding digital currencies. The crypto world is ripe with stories of billions being stolen or lost because the technology was exploited in some previously unknown manner. Then there are the “unknown unknowns” – global problems we can’t even think of yet. “I think it is inevitable there will be unintended consequences as a result of CBDCs,” says Ms. Greene.2

A senior adviser at the Bank of England recently came out strongly against CBDCs.3 He argued that the issues digital dollars are meant to solve can be fixed with legislation. Plus, the cost to create an entirely new global financial system aren’t worth the benefits. And the perks of increased government control over monetary policy (for example, charging negative interest so people are forced to spend their money and stimulate the economy) aren’t worth the risks to personal and economic freedom.

The momentum for the digital dollar is building. What you can do to protect your funds and your freedom is move some money into precious metals. Physical gold and silver exist independent of the digital world. If you want to stay in control of your money and your privacy, contact AHG today to learn more about our Gold IRA.

1. https://www.wsj.com/articles/digital-currencies-banking-system-11673625716
2. https://www.wsj.com/articles/digital-currencies-banking-system-11673625716
3. https://www.ft.com/content/44015dbd-e28a-4be9-b690-ff309b80b890

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