The Fed Wants to End Money as We Know It

The Federal Reserve is taking a giant step closer to the creation of a central bank digital currency (CBDC)

By Nomi Prins, Editor, Inside Wall Street with Nomi Prins

Its new digital payments system, FedNow, will debut in July.

According to Richmond Fed President Tom Barkin, it will create "a leading-edge payments system that is resilient, adaptive, and accessible."

Now, if you're a regular reader, you probably knew this was coming.

I've written before about the government's desire to move away from physical cash and towards a central bank digital currency (CBDC).

But that desire had been pretty wishy-washy up until this point.

That's no longer the case...

So today and tomorrow, I want to pull back the curtain on this crucial development and show you what it means for your money. I'll also discuss how you don't have to sit on the sidelines and wait for the CBDC trend to unfold. In fact, you can start preparing yourself for what's coming now...

The Newest Addition to the Payments Ecosystem

As a reminder, a CBDC is a currency that would not be printed. It would only exist in cyberspace, allowing consumers to transact without a bank account.

However, it also gives the Fed and government almost unbreakable financial control over your life.

For now, let’s take a step back and examine the Fed’s new payment system…

You see, the Fed wants FedNow to be recognizable as a payment method. It’ll be comparable to PayPal, Venmo, and Zelle.

As such, FedNow will allow businesses and people to send and receive instant payments 24/7, 365 days of the year.

This can be super useful in certain situations. Say a business needs a quick delivery of supplies… or someone has a bill coming up they want to pay immediately… 

They’d be able to fulfill these needs through FedNow. It enables settlements between banks in real time.

Any bank eligible for Federal Reserve financial services – regardless of size – will be able to use FedNow.

Here’s what Nick Stanescu, FedNow Business Executive, noted last October:

FedNow is going to be a game-changer that is going to revolutionize payment systems in the U.S.

Now, fintech apps like PayPal, Cash App, and Venmo, already transfer money from one party to another instantly. And, as you probably know, they’ve dominated the space.

But here’s the big difference between the payment fintechs and FedNow…

These apps can instantly transfer between themselves, but not into a user’s bank account. Meanwhile, the Fed’s payments service will offer instantaneous payments to individuals’ and businesses’ bank accounts.

And it will enable different kinds of transaction types, from an individual paying a merchant, businesses paying businesses, and beyond.

Now, the Fed is doing this all in the name of leveling the playing field in the payments ecosystem. It wants to give smaller banks and credit unions a fighting chance in the payments arena.

Yet, the Fed has a much bigger plan in mind…

FedNow Is a Precursor to a CBDC

FedNow may not be a CBDC, but it’s a precursor to one.

Here’s what Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, said in the Fed’s announcement:

Availability of the service is just the beginning, and growing the network of participating financial institutions will be key to increasing the availability of instant payments for consumers and businesses across the country.

So, by the Fed’s own admission, this is just the beginning…

The Fed is clever. By expanding its payments system to include more institutions, it can get people to rally behind an eventual Fedcoin.

Keep in mind that FedNow is supposed to be a win for consumers… They’ll be able to make cheap and instantaneous payments.

But there’s more to the story…

The Benefits Don’t Outweigh the Dangers

FedNow brings us closer to the rollout of the digital dollar.

And as I’ve said before, a digital dollar could offer some benefits…

It might come in handy if you need to receive a stimulus check… or apply for a government emergency loan for your business.

A CBDC could even support new business models and provide a foundation to jumpstart innovations in the financial sector.

But the benefits do not outweigh the potential dangers.

With a digital dollar, the government could have complete knowledge of – and control over – every transaction you make.

Tomorrow, I’ll dive into how a CBDC erodes your privacy and takes away your anonymity. I’ll explain the potential consequences of government overreach in our daily lives and how that can manifest for the average person.

Lastly, I’ll show you one way you can prepare and protect yourself against this inevitable trend.

Stay tuned for more.

The U.S. Will Inevitably Adopt a Digital Dollar... But You Can Prepare

The Federal Reserve's new digital payment system, FedNow, will launch in July.

I talked about this in my essay yesterday.

FedNow is a milestone in the creation of a central bank digital currency (CBDC).

It signals that our government is getting closer to adopting a digital dollar and transforming our current monetary system.

While a digital dollar may offer some advantages, the potential benefits don't outweigh the dangers.

Today, I'll dive into how a CBDC takes away your anonymity and gives the government more control over your transactions.

I'll also show you one way to position yourself against this inevitable trend...

How a Digital Dollar Erodes Your Privacy

As I talked about yesterday, FedNow may not be a CBDC, but it's a precursor to one.

All in all, it brings us closer to the rollout of the digital dollar.

Now, a digital dollar could offer some benefits...

It might come in handy if you need to receive a stimulus check... or apply for a government emergency loan for your business.

A CBDC could even support new business models and provide a foundation to jumpstart innovations in the financial sector.

But the digital dollar has several negative implications for a user's privacy.

For one, when money becomes digital, it also becomes fully traceable.

Whether authorities can be fully trusted to strike the right balance between protecting privacy and fighting illicit activity remains a question. And its answer depends on how comfortable you feel about trusting the government. Either way, you can definitely forget about anonymity.

Here's what digital yuan project lead Mu Changchun recently had to say:

The central bank's digital currency is more portable. If it provides the same anonymity as cash, it will greatly facilitate illegal transactions such as money laundering. Therefore, the central bank's digital currency should not have the same anonymity as cash.

Beyond that, the possibilities are limitless. They range from taxation to interest rates... and beyond.

Once the ruling class realizes the power of CBDC systems to support various taxation initiatives at low transaction costs, expect more tax proposals. These could include anything from sugar taxes, alcohol consumption taxes to foreign visitor expenditure taxes.

Tax enforcement doesn't come free. It's costly, eating up around 10% of all taxes collected in the U.S.

But with the digital dollar, the government will be able to apply complex algorithms to taxation on any transaction in real time... and at little or no extra cost. 

What about interest rates?

Your digital dollars would have to pay interest, which would be automatically charged to consumers' accounts. In the case of negative interests, the holders of the CBDC would pay a fraction of the CBDC to the Fed continuously. This means that the balance of their digital wallets would gradually decrease.

For a refresher, negative interest rates are a form of monetary policy that sees interest rates fall below 0%.

Normally, when interest rates are positive (like they are now), your bank pays you to park your hard-earned cash in a savings account. But negative interest rates turn the opportunity to earn interest on its head by allowing the bank to charge you for the "privilege" of holding your money with them.

The only difference with the Fed-issued CBDC is that you'll be incurring this charge directly from the Fed rather than your local bank.

Negative interest rates would also incentivize consumers to spend their digital dollars – another handy tool in the Fed's toolbox to influence the economy.

Finally, a CBDC could even be programmed so that it's only spendable if the holder of those funds meets certain requirements.

This means that, if you do something the government doesn't like, the government could turn off your ability to transact at the push of a button, or it could charge your account.

At that point, the government could have almost unbreakable financial control over the individual. Meaning, it would be a step closer to redistributing the country's wealth any way it sees fit.

This may sound far-fetched, and even dystopian... but if a digital dollar will be tied to your unique digital ID – it will be doable.

What This Means for Your Money

With the launch of FedNow, it's becoming clear that the U.S. will inevitably adopt a digital dollar at some point.

And a digital dollar could transform our monetary system as we know it.

As I've written previously, a digital dollar would enable the Federal Reserve to fabricate money out of thin air. That's because it's easier – and faster – to create a CBDC electronically than a fiat currency.

And the greater the money supply, the less valuable each unit of it becomes.

The good news is, you don't have to sit on the sidelines as the CBDC situation unfolds.

There are ways to prepare yourself against this rising trend.

Consider investing in hard assets like precious metals. They have proven to be resilient against every kind of crisis imaginable.

Gold fits the bill perfectly.

It is the ultimate form of wealth insurance. And it has preserved wealth throughout different events and changes to our monetary system.

That's because it is relatively hard to produce. And that won't change anytime soon...

Two thousand years ago, an ounce of gold bought the average Roman citizen a toga, belt, and sandals. Today, it still buys you a nice suit and pair of shoes. And, if you want a more recent example, 20 ounces of gold will still get you a pretty nice car... as it would have about half a century ago.

That's why I always recommend holding gold in your long-term investment portfolio. That's regardless of how the whole digital dollar situation plays out... or how many trillions of dollars in freshly printed money supply the Fed dumps on us.

The best way to buy gold is with a combination of physical gold and gold stocks. You can buy physical gold online through accredited places like the U.S. Mint.

I wrote a piece detailing the best places and practices to buy physical gold. If you didn't catch it, read up here.

You can also buy a gold exchange-traded fund (ETF) that is backed by physical gold. Gold ETFs offer the advantage of holding gold without the hassle of storing, securing, or transporting it. (I covered this in more detail in one of our mailbag issues.)

But remember: never invest more money than you can afford to lose.

Regards,

Nomi Prins
Editor, Inside Wall Street with Nomi Prins

P.S. A small group of powerful people are colluding to virtually “ban” cash – leading to the end of the dollar as we know it. It’s a plan that the Federal Reserve, the White House, and the financial elite are set to enact with the launch of the digital dollar.

But I’ve found one asset that can help you become your own banker – and escape the clutches of this power grab.

Physical gold and gold ETFs are a great place to start when you're looking for a safe haven in your portfolio.

But as the CBDC rollout inches closer, it becomes even more important to diversify your portfolio. That's where individual stocks come into play. I've actually identified my No. 1 gold pick for 2023 and beyond... and three "unprintable" plays to take advantage of the Fed's plan to launch a digital dollar.

I've also found one asset that will help you become your own banker and escape the clutches of this major distortion of our financial system. I put together a video presentation with all the details you need to know. To watch it, go right here.

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