We’ve been shouting ourselves hoarse here at the Cut about governments’ War on Cash… and the coming digital-only dollar.
Aka “FedCoin,” this new currency will replace the dollar bills in your wallet.
The only way you’ll be able to spend or earn this new e-cash is via a digital wallet app on your smartphone.
It’s a disaster for your privacy. With FedCoin, the government will be able to monitor, track, and record every transaction you make.
It also has profound implications for the U.S. dollar… and our preferred currencies, gold and bitcoin.
As you’ll see in today’s dispatch, this should be on your radar right now… not when FedCoin is already here.
That’s especially true if you own bitcoin… or are considering buying.
You might think a new digital currency rival as mighty as the U.S. dollar would be bad news for the world’s first cryptocurrency.
But as you’ll see today, the introduction of FedCoin will actually boost bitcoin demand… and send prices even higher.
The Daily Cut is the premium e-letter we created for all paid-up Legacy Research readers.
It’s where you’ll hear the latest big ideas from Jeff Brown, Teeka Tiwari, Bill Bonner, Doug Casey, Dave Forest, Nick Giambruno, Dan Denning, Jason Bodner, and the rest of the Legacy team.
And since the Cut’s inception two years ago, we’ve been warning you about the threat a cashless society poses to your wealth… and your freedom.
Our cofounder Bill Bonner summed up the danger best in these pages back in September 2018…
Wouldn’t it be nice for the Deep State if all your financial information… and the control of your money… were directly in its hands?
In Margaret Atwood’s dystopian novel The Handmaid’s Tale, a future U.S. has turned into a police state. The authorities control people with electronic money cards. Like rats in a cage, they get their rations… until the watchdogs cut them off.
If the government controls every aspect of the money system, this could be the real future, not just fiction.
Unfortunately, that future is much closer than most people understand.
As regular readers know, Jeff is our resident tech-investing expert at Legacy.
He’s also a member of the Chamber of Digital Commerce. In that role, he’s been advising senators on Capitol Hill about digital currencies.
So he knows what’s going on at the highest levels of power.
And at the end of 2019, he predicted that the Chinese government would roll out its version of FedCoin in 2020.
That’s already happened. The People’s Bank of China is China’s central bank. In April, it said it had started a pilot program for its own digital currency in four major cities. The program’s stated goal is to reduce China’s reliance on paper currency and fight money laundering.
And Jeff just shared news with readers of his Bleeding Edge e-letter that the U.S. version is in the works now…
Federal Reserve Governor Lael Brainard just announced that the Fed is working closely with the Massachusetts Institute of Technology (MIT) to develop a central bank digital currency (CBDC). In fact, Brainard revealed that they have been working on this project for several years now.
So there we have it – the digital dollar is coming. That means the days of paper currency and coinage are numbered.
A CBDC is the official term for FedCoin. But it’s the same thing – a centrally controlled digital currency, issued on a blockchain.
Blockchain is the shared digital ledger behind bitcoin and other cryptocurrencies we’ve been spotlighting in these pages.
But FedCoin will be different from bitcoin in one key way. It won’t be decentralized…
Anyone who downloads the bitcoin software can connect to the blockchain. This forms a decentralized network.
That just means nobody controls this network. Nobody is in charge.
You don’t need a referee to keep track of transactions. There are no commercial banks or central banks.
Tamperproof computer code automates new bitcoin supply. And network participants called “miners” validate all transactions.
It will be purely digital, like bitcoin. And you will send and receive it via a digital wallet app on your smartphone, like you do with bitcoin.
But with FedCoin, Congress and its central bank – the Fed – will still run the show.
Jeff has firsthand experience of how lawmakers on Capitol Hill think about FedCoin. And he says they have no intention of letting go of their tight grip on U.S. dollar supply by decentralizing their new currency. Jeff…
FedCoin will have a monetary policy similar to what’s in place today. The government will still be in control. We can expect it to keep the digital printing press running hot.
The Fed will even invent new ways to implement monetary policy. For instance, it will now be able to deposit funds directly into consumers’ digital wallets. That would have been a huge help at the start of the pandemic. Instead, the government had to send out stimulus checks in the mail.
And the powers this new currency will give the government don’t stop there. Jeff again…
FedCoin also makes negative interest rates possible. The Fed could deduct interest from our digital wallets each month to encourage spending in hopes it would stimulate the economy.
Plus, the taxman must be foaming at the mouth. A digital-only dollar will allow the IRS to monitor and tax every transaction you make. Doing business off the books won’t be possible. Every transaction will leave a permanent digital record.
That’s why we keep banging on to you about the importance of owning gold and bitcoin.
They’re great ways to avoid negative rates and the collective effort of central banks around the world to devalue the currencies they issue.
Paper money may have no intrinsic worth. But it’s not free to create.
The following table shows what the Bureau of Engraving and Printing pays to produce each note in 2020.
| Denomination | Printing Costs |
| $1 and $2 | 7.7 cents per note |
| $5 | 15.5 cents per note |
| $10 | 15.9 cents per note |
| $20 | 16.1 cents per note |
| $50 | 16.1 cents per note |
| $100 | 19.6 cents per note |
Source: Energy & Capital
Those costs add up. In fiscal year 2019, the Bureau of Engraving and Printing sent about 6.2 billion notes to the Fed.
This year, it will spend about $21.5 million making $100 bills alone.
Digitizing all cash will save the government money as it boosts the supply of dollars.
In contrast, bitcoin and gold are in limited supply. And both cost money to produce. This means they hold value better.
Teeka Tiwari is another of our in-house crypto experts here at Legacy.
He put CBDCs on readers’ radars in March 2018. At the time, he got a ton of questions about whether CBDCs meant the end of bitcoin.
But that’s not something Teeka is worried about. As he explains it…
FedCoin and other central bank digital currencies will make bitcoin and other cryptocurrencies much more valuable. They afford users greater anonymity.
And you have scarcity with decentralized cryptocurrencies, which you won’t have with FedCoin. This protects you from having your wealth inflated away by governments and central banks.
Bitcoin has a hard cap of 21 million coins. You won’t have that guarantee with CBDCs. There will still be a central bank that can fiddle with interest rates and balloon the money supply, causing inflation.
Regulators are thinking, “We can kill the market for private cryptos by creating our own digital-only currencies.” But my call is it will expand the crypto market, not shrink it.
Now is a great time to convert some dollars to bitcoin. In doing so, you’re getting out of a currency that has infinite supply… and into one that preserves value through scarcity.
And if Jeff and Teeka are right… FedCoin will accelerate that trend even further.
Regards,
 |
Chris Lowe
August 31, 2020
Bray, Ireland
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