The Digital Dollar is coming, like it or not! Executive Order 14607 has already been signed by President Biden and beginning in November of last year, numerous banks, universities, and financial institutions have already begun CBDC (central bank digital currencies) system “test drives.”
Some banks and credit card companies have been test driving aspects of the program even longer, under the project names of Project Hamilton (U.S. Federal Reserve and Massachusetts Institute of Technology) and Project Lithium (Depository Trust and Clearing Corporation). And now, Project Lithium is partnering with the Digital Dollar Project, in order to fast track efforts to create and implement a digital dollar.
This isn’t the first currency shake up. As a matter of fact it seems to be happening about every 50 years or so. In 1933 President Roosevelt issued an Executive Order that became the Gold Reserve Act of 1934. Privately owning gold was made illegal. Failure to comply resulted in large fines or even jail time.
The Gold Reserve Act was not well received, added an extra burden to dealing with the Great Depression, and is highly unlikely to be repeated. In 1971, President Nixon, by way of the Gold Standard Act of 1971, abandoned the gold standard for good, which resulted in surging gold prices, rampant inflation, and dramatically increased power for the Federal Reserve.
It destabilized the dollar. Nevertheless, the death of the fiat dollar is inevitable. But if not properly controlled, the digital dollar could impose far- reaching restrictions on many taken-for-granted personal freedoms.
It’s already been acknowledged by most, that programmable currencies will soon replace ALL the cash currencies on Earth. More than HALF of countries and almost 90% of central banks are testing or at least exploring digital currency as you read. These countries include, but are not limited to; Australia, Brazil, Canada, China, France, Germany, India, Japan, Russia, and the United Kingdom.
Many investors are somewhat familiar with cryptocurrencies and the new digital dollar will be a programmable token, like bitcoin. But there will be a very serious difference, with very serious potential benefits and ramifications.
Current cryptocurrencies are decentralized digital currencies. The new digital dollar will be digital tokens programmed by our government at the source. Just like dollar bills are “produced” at the U.S. Treasury, so too will Digital Dollars be produced at the U.S. Treasury. But once distributed, fiat dollars can be utilized by the owner at the owner’s exclusive direction. But because Digital Dollars are programmed at a centralized source, they can also be turned off or reprogrammed by that same source, with a single keystroke.
Due to its ability to track and record transactions, most illicit activities, like drug dealing, could be all but eliminated by the digital dollar. However, due to its very centralized nature, without appropriate controls in place, concerns are that they system could be used to breach personal freedoms by allowing the government to become a surveillance state like China or North Korea.
Without clear and uncircumventable controls, such a central system could be used to control our very society, by controlling an individual’s spending capability. China, for example, has a social credit rating system.
Say the “wrong” thing on social media, buy the “wrong” thing, subscribe to the “wrong” media supplier, or God forbid, contribute to the “wrong” candidate and your social credit rating with its corresponding “funds accessibility” rating falls.
News pundits now frequently banter about China still being an oppressive communist country and the impossibility of a democracy like the U.S. resorting to such impositions to personal freedom. But the Canadian Parliament’s granting of “special emergency powers” to Canada Prime Minister, Justin Trudeau, in order to freeze the bank accounts of non-violent protestors got global attention and it should hardly be surprising when this digital dollar transition occurs, that most markets will react negatively and precious metals prices will surge.
When President Nixon took us off the gold standard in 1971, the stock market initially responded favorably, but by the end of 1972, recession and stagnation had kicked in as inflation continued to rise and continued throughout the decade.
The Federal Reserve continued increasing interest rates that finally peaked out around 20% and by 1980 inflation had peaked at 14%. Implementation of the Digital Dollar has the potential to create similar economic chaos and a similar currency crisis and once again, gold and other precious metals are poised to take advantage.