Welcome to the Friday mailbag edition of The Daily Cut.
It’s where you get to put your most pressing questions to Teeka Tiwari, Jeff Brown, Nomi Prins, and the rest of the Legacy Research team.
And I do my best to get you an answer.
So make sure to send your questions to [email protected].
I’m dedicating today’s dispatch to a new kind of money that’s coming.
Here at the Cut, we call it FedCoin.
It’s a new kind of digital-only dollar that will replace the bills and coins in your pocket.
But central bankers call it – and other projects like it – central bank digital currencies (CBDCs).
More than 100 countries are exploring launching their own CBDCs.
China, Nigeria, and several Caribbean nations have already rolled out their own versions.
And in March, President Biden issued an executive order to prioritize researching a U.S. CBDC.
It directs federal government agencies to assess the technological infrastructure and capacity needs for a CBDC.
It also encourages the Fed – which has been looking into a CBDC – to continue its research.
As I’ve been sounding the alarm on in these pages, CBDCs are a major concern.
They’re purely digital, like bitcoin (BTC). You send and receive them from a wallet app on your smartphone, as you do with bitcoin.
But bitcoin takes power away from central banks. On the other hand, CBDCs help strengthen central banks’ power over the financial system.
That’s because CBDCs are highly centralized.
Decentralization is a core principle behind bitcoin.
You don’t need central banks, or even commercial banks, to run the bitcoin network. Instead, folks called “miners” verify transactions. Meanwhile, tamperproof computer code limits new supply.
Private investor and former executive Jeff Brown has been closely tracking CBDC developments for his readers.
He’s also been advising lawmakers on Capitol Hill about digital currencies as part of his work with the Chamber of Digital Commerce.
And he’s traveled to Israel on a U.S. Certified Trade Mission on blockchain and digital payments.
Here he is with how this new money works…
CBDCs will use a form of blockchain tech. They’ll come with cryptographic “keys” to verify ownership. This is the same as most decentralized cryptocurrencies, such as bitcoin.
But because absolute power and control motivate CBDCs, their centralized blockchains will allow central banks and other government agencies to track and automatically tax every transaction.
Today, a Jeff reader has a question about Biden’s executive order…
Reader question: Have you read Executive Order #14067, Ensuring Responsible Development of Digital Assets?
I’ve read a few pages and would like your opinion.
– Jenny V.
Jeff’s response: On the surface, President Biden’s order is about consumer protections around digital assets such as bitcoin, Ethereum (ETH), and “stablecoins” – cryptos with values tied to the value of a fiat currency like the dollar.
It claims its objectives include protecting and reinforcing our country’s financial stability and competitiveness… stopping illegal use of digital assets… and promoting technological development.
President Biden has also asked the Environmental Protection Agency for a report on the environmental impact of cryptocurrencies and their energy use.
But beyond these supposed goals, this is a grab for tax revenues.
With a CBDC, the government will be able to see every transaction we make. And it will be able to tax every transaction at will.
It could also use a CBDC to bully its opponents. For instance, it could stop whoever it wants to from being able to transact.
CBDCs could potentially be a very effective and efficient payment system. But the implementation comes with too much centralized power. The risks are immense and frightening.
Another reader wants to know the impact a CBDC will have on bitcoin. For an answer, we turn to world-renowned crypto investing expert Teeka Tiwari…
Reader question: It’s clear the U.S. is moving toward a CBDC. Can bitcoin and FedCoin coexist? Will the U.S. allow bitcoin to exist?
– Jack S.
Teeka’s response: It’s a great question. But I’m not worried about a CBDC ending bitcoin.
To start, it’s impossible for governments to shut down bitcoin. It’s too global.
And from conversations I’ve had with politically connected folks, it doesn’t appear that the feds want to kill bitcoin… or overregulate it.
Politicians recognize crypto is an enormous source of potential tax revenue. They want the U.S. to be where folks do business in these assets, under some sort of regulatory framework.
If there’s one thing our politicians are good at, it’s identifying and incentivizing the growth of tax revenue projects. They did it brilliantly with the internet.
I expect they’ll extend that flair for finding tax revenue into crypto.
We wrap up with a question for former investment banker Nomi Prins.
She now helps regular folks navigate – and profit from – the market distortions that central banks’ massive money creation causes.
And one of her readers worries that FedCoin will be bad news for folks with savings in U.S. dollars…
Reader question: Gathering all the information I can on the possible CBDC. What are your thoughts on savings accounts?
My biggest concern is that, if this happens, there’d have to be an exchange rate. Would it be correct to say the digital currency would be a fair 1 USD to 1 CBDC?
I have little faith in our current government being honest when this occurs. I’m thinking of moving my life savings, but it is an impossible amount to hide. Your thoughts please.
– Mitch B.
Nomi’s response: Hi, Mitch. I get your concerns.
A U.S. CBDC would have a one-to-one exchange rate with the U.S. dollar.
What to do with your savings is a personal decision. Only you know what access you need to live the life you want.
But what I recommend in general is keeping your savings across different banks. I do this because I don’t trust a single bank with all my money.
The shift from physical cash to CBDCs won’t happen overnight. It’ll be incremental. And there are steps you can take today to safeguard your wealth as it happens.
If you’re interested in learning more about the rollout of CBDCs – including FedCoin – Nomi recently recorded a video to help you end up on the right side of this shift.
She goes into more detail on what FedCoin could mean for our financial system… for regular Americans’ savings… and for the nature of money itself. And she shares some of the steps she referenced that you can take now to protect yourself.
You can watch the video here.
That’s all for this week’s mailbag.
Remember, if you have a question for anyone on the Legacy team, be sure to send it to [email protected].
Have a great weekend.
Regards,
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Chris Lowe
July 29, 2022