FedCoin and Depreciating Digital Dollars: What Will An Electronic Cash Future Look Like For You?

Economists may have all the answers when it comes to getting our economy back on track, but what will everyday life actually look like after the great reset to a completely digital currency?

America’s current political and economic situation is pretty crazy right now, isn’t it? We have the highest unemployment rate ever and bread lines miles long, while importers of goods can’t find space on container ships because retailers are gearing up for a record-breaking Christmas consumer spending spree. The Dow just broke above 30,000 for the first time while the U.S. debt sailed past the point at which it can ever be repaid. There’s a lot of cheering going on over the false prosperity in which our nation is now hopelessly mired, but whichever party is declared the more successful cheater after the current election mess is over is going to find itself faced with one inescapable question: how are we ever going to repay our debt?

The answer, of course, is to do what governments in hopeless debt have always done – impoverish the productive people who would otherwise create prosperity, through taxation and inflation. The problem with this (from Uncle Sam’s point of view), is that the people will stand for only so much taxation. Shove too much naked confiscation in the citizen’s faces, and eventually they rebel. Create too much hunger and deprivation by removing all the value from the currency, and unrest fills the streets. Not to be deterred by these obvious facts, however, a growing cadre of genius economists are pushing the notion that taking away what wealth and productivity remains in our country via increased taxation is, indeed, the road back to national prosperity. A giant among them, named Kenneth Rogoff, is even suggesting that raising taxes without raising the ire of the people should be done via the novel (and deeply unnatural) method of imposing heavily negative interest rates. In other words, he’s proposing to raise money by taxing wealth through making every dollar not spent today but saved for future investment and consumption, worth significantly less for each unit of time kept in storage (perhaps as much as 5% annually). The rather questionable theory behind this preposition is that if people are forced to quickly spend every dollar they make, then the velocity of money (the rate at which it change hands and thus creates more value), would quickly zoom upwards, jolting our zombie economy back to life. The upswing in overall economic activity that would result from everyone going out to spend, spend and spend everything they have would rapidly get the manufacturers manufacturing again, the farmers farming again, and scientists finding new cures for old diseases at breakneck speed, or so the Keynesian economists like Rogoff would have us believe. America would pull herself up by her bootstraps, and become a world economic and industrial powerhouse once again, or at least a financial utopia for the common man.

But Utopia is a funny place. It always has a way of receeding over the next hill every time we find ourselves pulling abreast of it, doesn’t it? Like the shadowy mirages of great cities that bewilder thirsty wanderers in the desert, Utopia always looks more promising from afar than it turns out to be once you arrive at the spot where it supposedly stands. In the case of the plan to rebuild our debt-soaked economy by punishing people for providing for their own long-term financial security, Mr. Rogoff and others of the Keynesian ilk now propose that levying a deep and punishing tax on money – a negative interest rate as deep as 3-5%, will bring ailing global economies back to life¹. But how to accomplish? Technological advances in the nature of money, namely the creation of a digital currency based on blockchain computer, are the likely candidates for the task. Digital dollars would be a relatively easy, at least in some respects, way of imposing confiscatory inflation on workers and savers without allowing said producers to rebel or escape the iron fist of government policy.

Two Proposed Methods of Robbery

Two methods of robbing the masses have been proposed: a purely electronic form of fiat money called Fedcoin, and traditional-style paper bills that would get a makeover and be manufactured with embedded computer chips pre-programmed to decrease the value of the bill over time.

Enter the Devils

While the idea of jolting our moribund economy back to life through a) massively increasing consumer spending, and b) rapidly devaluating the dollar (thus making debts relatively cheaper to pay off), while, at the same time, shrinking the national debt by taking the interest rate below zero, sounds nothing less than wonderful (insert sound of slight sarcasm, here), the devil is always in the details. And I perceive the details to hide some very big, and very mischevious, devils. Indeed, if implemented, I perceive that any attempt by our government to solve our debt crisis by herding the citizens into government-controlled digital money, will actually permanently crash both our economy and the global economy, while ushering in a period of global chaos and social repression that would resemble a Mad Max style of life for generations. Now, lest someone accuse me of being overly dramatic in my prognostication, please allow me to conduct a thought experiment and look at all the unintended consequences that would logically follow from binding our economy to any form of electronic currency controlled by our government.

Let the Listing Begin

The most fundamental problem that will follow from the imposition of Fedcoin or electronically depreciating dollar bills will be the complete erosion of trust between people and the government, and between lenders and borrowers.

As a direct consequence, most (not all, as I’ll discuss below, but most) lending will grind to a halt.
1. Who will be willing to lend when the borrower’s income is determined mostly or entirely by the government?
Neither lenders nor borrowers will have any reasonable guarantee that the borrowers will have a stable income lasting the length of the period of the loan. What if the borrower is convicted (or even accused) of supporting to the “wrong” political party or candidate? What if he or she runs afoul of a union dictate, or commits an infraction while being of the non-politically favored race? What if the borrower is simply a victim of identity theft or government identity glitch? Their income (and with it, ability to pay back a loan), may disappear. There will quickly be so many ways in which most people could be denied access to income, and so few ways in which to restore it, that lenders will find very few borrowers worth taking any risks on.
If banks and other lending institutions (mortgage companies, payday loan companies, and so on) can’t lend because they can no longer find a base of borrowers of sufficiently low risk, how will they replace the income they receive from loan interest? After all, the interest generated from making loans is a substantial (or total) source of their income. What will they do when it’s gone?
Will lending institutions demand outrageous fees upfront to compensate for the grossly heightened risks of making loans? Big new fees are how European banks are already compensating for the relatively minor negative interest they must absorb for making money available to borrowers. That does work to cover small amounts of interest lost – though it imposes a bigger burden on borrowers, who must now essentially pay for the bank’s lost interest up front – but it can’t be done to cover the entire cost of potential total default on loans of any substantial size.

If we extrapolate from the basic problem of potential lenders being unable to make loans to potential borrowers, we begin to see that this conundrum creates a broad spectrum of downstream problems which will cause not only the economy, but society itself to seize up.

Businesses will be increasingly unable to sell to one another because sellers will be unable to trust that buyers will be able to pay. When government is in complete charge of distributing money, businesses selling finished products to customers won’t be able to count on customers being able to pay their bills because customers may not receive their own salaries or support from the government in a timely fashion for a whole host of reasons. If businesses at the consumer end of the supply chain can’t be certain of being paid, the uncertainty ripples all the way up to the start of the supply chain.
If businesses are forced to use electronically depreciating bank notes, who is going to want to sell product when they have no idea what the notes will be worth by the time they get them? Even if the face value of the notes doesn’t change, maybe the government decided to decrease their purchasing power between the time you agreed to make a sale and the time you were paid. Businesses can’t function when they’re uncertain about whether they can cover their costs. Forcing businesses to operate on money that depreciates severely and erratically will cause chaos and eventually catastrophe across the business community. Bare shelves in the stores and steeply rising prices for whatever can be had will become a permanent fixture of life for most consumers.
Homes will turn from most people’s greatest assets into economic albatrosses around their owners’ necks. Although generally not considered to be terribly liquid to begin with, homes will become downright toxic liabilities when homeowners are unable to sell, and potential homebuyers unable to buy, because lenders can’t (or won’t) make loans available. The only potential remedy for a homeowner who needs to pull equity from their house and finds themselves stuck with an expensive asset that no longer serves its intended purpose, will be to sell it for cash on the black (aka, free) market. Selling a home for a privately negotiated price and without permission or the payment of taxes and fees will constitute a crime in the eyes of the state, of course, and a transaction of that sort could not be hidden from authorities.
The state will try to solve the problem of people needing to sell their homes but being unable to in one (or both) of two ways: either by making state-guaranteed loans available to favored groups and those willing to comply with onerous imposed controls, or buy purchasing homes outright from sellers and selling them directly to buyers, thus bypassing the banks and mortgage companies and putting mortgage companies (which will be considered the competition), out of business. The latter solution will “work” because, with the Federal Government in charge of an individual’s income, it can both issue sufficient income for the recipient to be able to afford the home, and automatically withold the mortgage payments from the income granted. (A situation of a sufficiently Rube Goldberg nature to please any petty bureaucrat’s heart.) As a bonus, as the state comes to own more and more of the housing stock, and with incomes and housing prices being determined and paid by the state instead of the market, realtors will be transformed from competitive home sellers to low-paid bureaucratic functionaries. Their role will change from trying to find their clients the right homes at the right prices, to simply serving as tour guides for citizens choosing among the rental properties the state deems they qualify for.
If the state is in control of both incomes and loans, it will, as a matter of course, begin choosing who is eligible for how much loan. The politically connected and the politically preferred will be granted access to the best housing. The elites and their masses of unproductive supporters will eventually come into possession of most of the finest housing (or, what starts out as the finest housing, until the unproductive trash them), while the workers and producers will be relegated by degrees to the poorest housing. Segregation will become equality, success will become failure, and the American Dream will become the total American Nightmare. George Orwell will be covering his eyes in horror.

Homeowners will not be the only people affected, however. Renters are going to discover that they, too, are beset with a new and unique array of problems that will make the era of high rents look like the good ‘ol days.

Because lenders won’t want to lend given the inherent insecurity of borrowers’ Federally-controlled incomes, most potential owners of rental property would be unable to purchase property to rent out. On the other side of the coin, or transaction, most owners of rental properties they are ready to part with, or have built on spec, would be unable to sell it. Potential buyers of rental properties will thus be stripped of the opportunity to supplement their incomes through collecting rents, and sellers of rental properties will be deprived of collecting the equity they were counting on when it came time for time to sell. Renters, on the other hand, may face a rental housing shortage because no private parties will be able (or willing) to finance the building or acquisition of new rental units.
The government will most likely intervene to “protect” renters from shortages and “unscrupulous” landlords who might take advantage of the situation by adjusting rents higher (as the law of supply and demand generally dictates). The government will do this by buying, or simply seizing, more and more rental properties, which it would then administer either directly, through newly created agencies, or indirectly, through favored banks. (A ‘soft’ form of this is already happening, as I will discuss a little further down.) The government will then set its own rates, which will likely have nothing to do with market forces but everything to do with the ruling party’s desires to segregate society and dole out rewards and punishments to various groups of people based on the government’s preferences for race, income, gender occupation, and level of party support.

Fedcoin and its effect on real estate is also likely to finally turn our increasingly irrational criminal justice system completely on its head.

The incentive to wrongfully accuse innocent people of crimes they didn’t commit, simply in order to obtain their private property and turn it into a government rental for free (a way of abusing the legal process of “asset seizure”), would be irresistible to those in power. Expect the rates of incarceration in America to skyrocket, and the jails to be emptied of real criminals (who would be turned into ‘good’ renters thanks to the government being able to control and garnish their incomes to make sure the rents were always paid) while good people will spend years behind bars for the ‘crime’ of attempting to be economically self-sufficient. Over time, private rental property will likely cease to exist, and the government will have full control over every unit of housing that wasn’t previously owned and is still being occupied by the single family that bought it.
- As I mentioned earlier, in a soft way, this is already happening. An excellent example of this trend is the recent (April, 2020) closing of a joint venture between the nation’s largest bank, J P Morgan, and AmericanHomes4Rent (NYSE ticker AMH) to drive forward plans to construct 2,500 purpose-built single-family rental properties in high growth areas of the west and southwest². Could this be, in part, a pre-emptive move to compensate for anticipated loss of income via a move to negative interest rates or accelerated debasement of the dollar?
- The ultimate goal for JP Morgan is to generate an income stream through collect the fees associated with providing and managing housing assets for large investors. Sound legitimate for a capital enterprise? Consider this: JPM is a bank deeply intertwined with the Fed. It also appears to be a, or possibly the, vehicle through which someone – most likely the U.S. Government itself – manipulates global precious metals prices in order to prop up the value of the U.S. dollar. (For more about that, please see my previous article on the evolution of American banking and my recently posted reprint of GATA’s article on precious metals manipulation). Beyond that, JPM is also the same bank fined several times by our same government for the (relatively minor) crime of cheating precious metals traders via “spoofing” of precious metals prices. If that’s not bad enough, consider that JPM is one of the big banks accused of illegally manipulating bond prices around the globe specifically to cheat pensions out of legitimately earned profits. (For more on that, please see my article on 6 Ways to Solve the Pension Crisis, and the Problems With Each.) So, I guess the question is, with such an illustrious track record, if the government allows JPM to own a substantial portion of the nation’s housing, what could possibly go wrong?
This isn’t an issue that is only now starting up. JP Morgan already owns roughly 52-53,000 multi-family rental units across the United States on behalf of institutional investors (ibid.). Does allowing JP Morgan (and other big banks – JP isn’t the only player in this game) to control the lion’s share of the housing in America – for the purpose of turning a profit for large investors, of course – sound like a fair deal to you? Does this sound like our government looking out for the welfare of the common citizen, or attempting to close the wealth gap? To me it sounds like not allowing several perfectly good crises (COVID, unemployment and crushing consumer debt) to go to waste! And where is Congress or our executive branch of government to rein in this increasing division of wealth and power? Right there to turn a blind eye, of course. Having control of the lion’s share of the housing market will come in very handy when the time comes for the Federal government to “rescue” the nation from the “crisis” of private home ownership and job immobility that it creates.

Sadly, this will not be simply our generation’s problem. The government will insure that future citizens who may have inherited the undesirable personality traits or cultural proclivities leaning towards hard work, thrift and independence, will be held down and used just as hard as we will be.

Expect that the transfer of real estate from generation to generation to be outlawed, in the name of the government protecting the “underprivileged” citizens and their children, from having less wealth than productive citizens and their children would. Impulsive spending and complete financial irresponsibility will be rewarded to reinforce the politically correct ideology that “all cultural beliefs have value” – except those that challenge the dogma of the state, of course. A mass acceptance of living totally in the moment and having no interest in the future will become necessary to keep people spending their entire incomes because the survival of the economy will perpetually depend upon it. At the level of debt America currently owes, and given the number of people who do not currently – and will not ever – engage in productive work, there is no realistic way to recover to the point that the government can cease engaging in financial repression.

Given our aging demographics alone, America is going to be taking on huge amounts of additional debt while losing a massive cohort of workers as the peak of the Baby Boom retirement hits. When the Social Security Trust Funds are depleted, probably around 2024 according to estimates by the Congressional Budget Office, the national debt will immediately soar by approximately $5 Trillion on top of well over $30, or more likely $50, Trillion already accumulated in debt from all other causes. How much will every man, woman and child alive in 2024 owe on a national debt of that size? How will we all realistically be able to handle that amount of loss of purchasing power should the government choose to try to inflate away all of that debt in, say, five years? Or ten? Or even 25 years, which would cover a good portion of a young person’s working lifespan? And that’s assuming that deficit spending would stop during the payment period. Of course it won’t. It can’t. Society can no longer function without mass wealth transfer and debasement to prop up both the financial and unproductive classes. The reality is that America is too old, too needy, and too unproductive to ever be able to repay what we have collectively borrowed to live beyond our means for at least the past six decades.

Allowing the Federal Government to eventually play God with real estate will have severe unintended, and quite possibly fatal, consequences for business and industry, as well as workers.

Workers who cannot sell or buy their homes are workers who are restricted in which jobs they can accept. The ability to move is a prerequisite for accepting a job in a new location. Consider what would happen to worker mobility if the opportunity to move were abolished unless the worker agreed to let the state (in lieu of the lending institutions) handle the sale of his or her home, and the purchase of a new one. Alternatively, the worker could acquiesce to the state selling their home, and resign to become a permanent renter, quite possibly in state-controlled housing.
The pool of candidates available to take jobs would shrink dramatically, at least for a couple of decades until the state “solved” the “problem” of workers being stuck in the wrong places.
- The Federal government would have two means of solving this problem. The first would be to copy the Romanian communist playbook. I had a Romanian friend, once, who grew up under the benevolent dictatorship of Nikoli Ceauçescu. One of the more tender ways Ceauçescu’s state took care of its citizens was to relieve them of the burden of figuring out what they were going to be when they grew up. The state decided for them! Teacher evaluations and tests sorted the students into those who were going to college and professional schools, those who would learn a trade, and those who would perform unskilled labor for the rest of their lives. Those who made it to college or trade school would be assigned to a profession based on their talents and the needs of society (as determined by sensitive state bureaucrats). Once educated, most were then relieved of the pressure of finding jobs and figuring out where to live. The state took care of that, too. So if a business ever needed workers, presto! The government would provide warm cogs already fitted to the wheel, and positioned within easy reach. And those who were genuinely smart figured out along the way that they had better grovel and thank the state for its wisdom and benevolence, because the state wasn’t always so generous to those who questioned the program.

Is that the type of America that you would like to live in? No, that’s not the America I’d like to live in, either. Even the Romanians eventually grew skeptical of it. After 25 years, they threw a revolt to which Mr. Ceauçescu and his wife Elena were invited – to play the role of targets for a firing squad.

Now, I can’t say with absolute certainty that such specific tyranny will ever take root here. But I can say with certainty that, if the Federal Government gets its way with digital money, the option for them to engage in such a form of life-determining mission creep would definitely be much, much greater than it is today.

The second way in which government could “solve” the problem of potential workers being unable to move to where the jobs are because they were tethered to unsellable homes, would be to, well, phase out private home ownership (except for the elites and the underprivileged, of course). The most logical and likely way the government would accomplish this without inciting domestic warfare would be to gradually deny more and more workers the ‘privilege’ of having access to government guaranteed home loans. Eventually, only the underprivileged, the criminals, and others to whom the state wished to dispense “social justice” and “equality” would have access to the state-backed loans necessary to grant them access to the requisite funding. Workers would become renters, and the state could grant them the right to petition to move into state-controlled housing in the vicinity of the jobs they wished to take.
If the government chose to abstain from producing and placing workers into their jobs, but also didn’t intervene directly to help workers who couldn’t move because they were saddled with a home, businesses would be in a chronic, and likely fatal, dilemma. Their main pool of job candidates would extend only as far as the local commutes or public transportation system went. Candidates from outside of the area would be virtually impossible to hire, at least until nearly everyone was a renter and the rental system could accommodate free movement of employees. Businesses would be forced to choose mainly from local candidates, regardless of their suitability, talent or interest in the jobs available. How many businesses will fail because they couldn’t import the right number or type of people to fill their positions?
Even if the “problem” of private home ownership was “solved” by forcing every working citizen to rent from the state, how many people would be free to migrate to accept new jobs? What sort of bureaucratic approvals will be required for “good citizens” to be “allowed” to move? How much would such approval cost, and how long would obtaining such approval take?
If the ability for workers to freely move about becomes questionable, how many businesses will even want to try to expand and hire? What will happen to entrepreneurship? Without entrepreneurship, where will new ideas and products come from? In time, quite possibly the only forms of innovation will come from state-sponsored enterprises, subject entirely to the whims, goals and levels of knowledge of the cadres of bureaucrats (a notoriously poorly educated and unimaginative bunch) who control every aspect of civic and economic life.
Even if some businesses can operate with many or most of their employees permanently working from home, which would solve the issue of where their workers were located, many jobs simply cannot be done remotely. It’s hard to imagine a dentist filling your teeth over the internet, for example, though somebody will eventually figure out a way to fix that, I’m sure. But such a possibility is still a long way off if you have a toothache right now. Even for those jobs that CAN be done remotely, however, people still need to get together from time to time because the human element in collaboration cannot be satisfied electronically. Even now, businesses that championed working from home are beginning to see that eliminating physical contact among employees is taking a toll on creativity and productivity^3,4. How much will the erosion of both creativity and productivity reduce the long-term viability of businesses? How many startups will fail because they can’t sustain the “collective effervescence” (as famed anthropologist Emile Durkheim called it) of the in-person experience? What will the death of birth of new businesses do to the long-term viability of the economy, and to the sustainability of a technologically dependent society?
Not only employers but employees, too, are beginning to see that working from home may not be the wonderful, satisfying situation they assumed it would be when they dreamed about it from their office cubicles. Working from home is a grand experiment that is only in its early stages. It’s far too early to conclude that working from home will be a permanent success. What happens if masses of people and their employers decide that going back into the office at least part time is really the right thing to do, but the government begins making it nearly impossible for the workers to sell their homes and obtain suitable new housing near their workplace? How will businesses survive sudden, forced mass layoffs of their work forces, particularly if the people being laid off are skilled or seasoned professionals? How will masses of workers survive sudden and arbitrary unemployment? Will the government simply cut off their salaries since they’re no longer working? Or will the government replace their salaries with unemployment aid to compensate? How much will it cost taxpayers to fund the bureaucracy that will make that switch? If workers are suddenly jobless thanks to the government, will the government then force them into homelessness, as well since they won’t be able to pay their rents or mortgages to the state? Will the government then step in to “solve” the homeless problem by raising taxes higher or further deepening negative interest rates on the rest of the workers, to raise the money to fund new housing for the workers they threw out of their jobs? Won’t that become a complete nightmare for everybody (except the government paper pushers?)

Now, let’s carry this line of thought out to some logical extremes

If your head is already spinning with questions and nightmare scenarios, let me pull you along a little further to consider just how bizarre and ridiculous things will REALLY get when we consider the potential effects of the change to FedCoin or electronic currency on some of society’s, shall we say, ‘less mainstream segments’, such as the sex industry.

Whether we like it or not, or approve or disapprove of it, the sex industry is very real and moves billions through the economy every year. And it’s not going anywhere regardless of how stupid or broken or controlling the government becomes because it serves a very deep-seated, primal purpose. But if we take a look at how Fedcoin or electronic currency is likely to affect the sex industry, we might be able to see just how totally FUBAR the whole plan is likely to become.
Take prostitution. Automatically traceable or depreciating dollars won’t dampen the prostitution business. In fact, despite the government’s official stamp of disapproval on the practice, the use of electronic currency is likely to actually boost business.
- Men will immediately realize they had better ‘get their money’s worth’ before the cash loses value and literally costs them time in the boudoir. Prostitution is a major industry in many urban neighborhoods where residents can’t afford food, rent, medical service or child care. Putting traceable or depreciating bills into these communities will be as effective at stopping legally unapproved behavior as putting cameras on the streets is effective at stopping crime. Control systems like these don’t work because they target the wrong areas of the human brain. Indeed, if bills are designed to automatically lose value if not spent quickly, they will actually provide incentive for men especially from ‘culturally relaxed’ communities, to spend MORE on self-gratification because getting that is easier, more rewarding and less time-consuming than engaging in more wholesome activities such as taking care of wives, children and homes.
- If the demand for prostitution and related services actually increases with the introduction of electronic money, what will that do to such evils as human trafficking and the repression of women?
- Would the trackable FedCoin solve this problem, by holding the spenders accountable? Not likely, for who will actually care? Is the government going to impose a ‘supremacist’ value system on communities that would prefer to live by different values? Is the government committed to thwarting natural selection going to deny anyone food, shelter, education and medical care because they choose to spend their cash on other things?
If you think about it, we’ve already tried the Universal Basic Income (UBI) experiment in numerous communities, just in piecemeal fashion. Recipients obtain their incomes from a variety of disconnected government services rather than from just one source, such as an electronic bank account. What we’ve learned is that simply giving people money with no strings attached is a spectacular way to ruin lives, families and communities, as well as increase socially corrosive belief systems. It’s therefore kinda’ hard to figure how doing more of the same, but literally by pushing the cash into each person’s hands instead of at least making them go get it from various government agencies, is going to create less bad behavior instead of more.
It’s also challenging to figure out how much is going to be enough, and what the total tab for taxpayers will be. If “underprivileged” communities that operate largely on self-defeating cultural values will be granted the right to spend taxpayer-sourced money as they see fit, why wouldn’t they be at least as smart as the military, or the government itself, and waste it because they know they’ll always be backstopped? Businesses do it as long as the Fed has their back with unlimited QE (aka the perpetual “Fed put”), so why should we expect everyday citizens who grow up without a strong sense of personal and social responsibility to behave better?

Justice May Be Blind, But FedCoin Will Make It See

What will happen to our justice system, even such as it currently is, when the government electronically manages all of our cash? Will FedCoin make us all more equal under the law? Or will it make existing inequalities even worse?

People of all walks of life and from all segments of society do wrong, but all are supposed to be judged objectively by impartial jurors. Will the economic all-seeing eyes of Uncle Sam really be blind to political and economic differences among the accused, though? Through the legions of police, judges and social spies on his payroll, might he peer more closely at a small town lawyer who could be improperly pettifogging, for example, than at a member of the President’s legal counsel who decides to lay down in the job? Or might he seek to de-frock a country priest accused of engaging in unseemly behavior, but decide that the Archbishop who presides over a politically valuable flock, got caught with his pants down because his belt was too loose? Who is more likely to have their salary cut off and be punished for wrongdoing?
Most likely, those at the top of a FedCoin-based economy will have to be granted some way of opting out of the system when the needs of human nature override the boundaries of what society considers acceptable behavior. What will a system to hide the elites’ wrongdoing look like in the era of electronic money? Will high-level officials be allowed to keep using unchipped bills to pay for their indescretions? If so, the people they pay will have to be authorized to spend it, and who will take it? Might the continued use of legacy cash create its own underground economy of elite sleaze?
Alternatively, will the people in power be granted FedCoins that can be spent without being electronically tracked? Will the coins then become trackable once they hit the wallets of the providers of goods and services? How much of a programming nightmare would that be to accomplish reliably? And what provider is going to want a deal like that, anyway?

More potential perverse effects of electronic money, even for the godly

FedCoin is likely to have perverse effects in other ways, too, even on the ‘opposite’ tier of society: the religious community. Let’s look at how electronic cash might intersect with religion.

Churches are unlikely to embrace FedCoin because they and their affiliate enterprises are, and always have been, exempt from paying income taxes or filing annual income reports with the IRS^5,6. This isn’t a trivial issue, as some large churches are actually very large businesses, as well. For example, Life Church, based in Edmond, Oklahoma, brought in $143.4 million in cash and non-cash donations in 2018. Another very popular institution, Pastor Joel Osteen’s Lakewood Church in Houston, reported $78.8 million in contributions for their fiscal year 2017 (ibid.). And in 2013, the Mormon Church became the largest private landowner in the state of Florida, with approximately 670,000 acres at its disposal to farm and timber⁷. Why does a modern church need so much land? According to church leader Gordon Hinckley, the institution’s objectives were to create a bounty of agricultural resources for its members, and an additional stream of revenue for itself (ibid.).
Life Church and Lakewood Church are among the few churches that choose to voluntarily report their incomes and assets, although there is no ironclad way to verify whether the numbers the offer up are factual. The Mormons apparently didn’t say what they expect to haul in from their agricultural enterprises, and they didn’t have to. But the prospect of juicy profits must have been pretty large, as their justification for the acquisition was a statement that “Good farms, over a long period, represent a safe investment where the assets of the Church may be preserved and enhanced.”(ibid.) Pardon me if I think that sounds more serving mammon than Jesus.

Because churches are legally allowed to keep their business enterprises, no matter how large or lucrative, away from the prying eyes of the government, they can easily hide their true incomes and financial ventures. What will happen when Fedcoin obligatorily lays their coffers wide open should the government choose to investigate them? What might the government find? An article in the January, 2011 issue of The International Bulletin of Missionary Research, offers a clue. The authors estimated that Christian churches would spend $31 million that year on global missions, while Christian religious leaders would commit $34 billion in financial fraud. The authors conclude that if current research is correct, the dollar amount of fraud in Christian churches will climb to $60 billion annually⁸. That’s a pretty hefty load of sin going on! For an amusing (though sad) overview of some of the more spectacularly shameful fiscal behavior perpetrated by some of the world’s more colorful and notorious religious hucksters (mostly, but not entirely Christian – proving that greed doesn’t discriminate against faith)- here’s a fun little read: https://www.businesspundit.com/15-religious-swindles-that-shame-the-holy-name/ This group of holy swindlers and shysters practicing at a wide variety of houses of worship could have taught P.T. Barnum a thing or two!

Even if churches truly do have nothing potentially questionable on their books, simply allowing the Federal government to peer into their innermost financial transactions may provoke a Constitutional crisis. The deal is this: the exercise of religion (including the raising and dispersal of funds to pay for church maintenance and activities) is exempt from control of society at large, and even more so from the state, as long as the churches keep their noses out of the realm of the state, which is politics. This arrangement is based on the argument that the secular state has no natural right to tax religious institutions – and thus no need to investigate or control their economic activities – because the ability to tax is derived from holding a position of power over the taxed entity. Obviously, the purely secular state has no natural power over the divine (and, by extension, the earthly representation of the divine).
So what happens if FedCoin inadvertently gives the state the inherent power to see, examine or investigate all fiscal operations of every church, and, by its very nature, deprives the church of what has heretofore been considered legitimate financial privacy? Will the government have to find a way to carve out tracking exceptions for all donations made to churches, and for all church expenditures? Unless such privacy could be assured (and what a nightmare accomplishing THAT will be!), FedCoin could provide a sort of back door to controlling church incomes, and thereby church power. Not being a religious person, myself, I have no particular feelings about the matter one way or the other, but I am concerned about the potential for a deeply divisive Constitutional fight that would have serious social consequences for everyone. This could be a very literal fight to the death between a starving, increasingly out-of-control government and a very large, economically powerful and deeply entrenched social institution. It sounds like something that most of us would prefer to stay away from, especially when we already have a pandemic and a very ugly election fight (with a possible Constitutional crisis from that, as well), to get through.
- A worrisome sign of a potential impending conflict came in 2018, when the congressional re-write of the tax code began chipping away at the special tax status of churches as well as some other historically exempt organizations including orchestras and hospitals. A Republican-controlled Congress (surprise!) fired the first shot by imposing a 21% tax on some fringe benefits these organizations offer their employees⁹. This is relatively small potatoes, yes, but what might happen if progressive Democrats continue to accrue more political power? Will laws permitting the religious community to operate without taxation and economic oversight, be more likely to come under increasing scrutiny?
- As the national debt explodes, where will the state find the will power to refrain from grabbing the hundreds of millions of juicy tax dollars they could potentially squeeze from religious institutions – at the mere cost of destroying one of the fundamental tenets of our system of government? By the same token, if the state continues to honor its side of the contract, will the churches, which find themselves increasingly at odds with secular leadership, be able to refrain from getting themselves into trouble by meddling in politics? Will FedCoin be the catalyst that irrevocably changes the nature of the relationship between church and state?
- How will American faith-based communities that voluntarily remain non-modern, such as the Amish, Mennonites, and some Indian tribes that maintain a more traditional way of life, fare when confronted with the necessity of adopting electronic currency in order to interact with the outside world? How will they be impacted by money that automatically depreciates at the speed of our exploding debt? There are fairly substantial communities in our midst simply do not run at the average frenetic pace of modern- especially urban – technological life. Forcing them to use money that depreciates faster than they can circulate it in their communities will arbitrarily make them poorer. Rapidly depreciating currency taxes communities that enjoy a slower way of life at an arbitrarily higher rate than it taxes communities that live at a quicker pace. Is it ‘socially just’ to effectively punish people for not living a fast-paced, highly technological lifestyle?

OK, if your head isn’t reeling from this little trip through the bizarre, unintended consequences of letting a Federally-controlled electronic currency loose to wreak havoc on the people, here’s another real life example to illustrate the absurd. Let’s take a look at how electronic money might affect the illegal drug industry.

Drug dealers, whether we like them or not, walk among us and will be affected by Fedcoin or electronically depreciating currency bills just like the rest of us will. So far I haven’t heard anyone consider the potential broader social effects of creating new headaches for them. Sure, we’d all love to see them go away, but realistically, that’s not going to happen. So we’d better think about the potential blowback if the government tries to separate them from the standard paper cash they operate their businesses on.
Will FedCoin or electronically self-destructing currency reduce demand for drugs? Probably not. In fact, If I know my fellow man (and I think I do), my guess is that that the demand for drugs will only grow as society becomes increasingly stressed by the increasingly obtrusive interventions of government. For an excellent real-time overview of exactly this happening, see https://www.zerohedge.com/political/fumes-stimulus-frustration-california-legal-cannabis-sales-explode
- As long as the human mind can be influenced by psychoactive substances, and to the degree that it seeks either enlightenment or escape, it will crave and seek these substances out regardless of risk and cost. Drugs are big business whether the government cares to count it into the GDP or not. Like all businesses, the drug trade will attempt to survive anything the authorities throw at it.
No matter how the government attempts to phase in FedCoin or self-destructing currency, the drug cartels will reject it in favor of legacy cash, precious metals or something else they can gin up. Legacy money, meanwhile, will be around underground and will still have value within the drug networks, at least for quite a while. Eventually, one of three things will happen: a closed, circular, parallel permanent underground economy will be built around legacy money and drugs (similar to, and probably part of, the ‘elite sleaze’ economy I speculated on earlier), or, if legacy money becomes too difficult to use, a new underground source of revenue will evolve to take its place, or, if legacy money fades and nothing can be found to effectively replace it, the supply of drugs will decline and prices will climb out of reach even when demand doesn’t drop. The government will then be in a serious bind. What will it do when addicts spend most of their allowance on product, and haven’t enough left over for food, rent or child support? Will the government simply increase their income (and the inflation necessary to evaporate the additional debt away) until the addicts have all the currency they can spend, and they die on the street of malnutrition and overdose? Or will the government cut down their incomes and force a choice between withdrawl, hunger, homelessness, or the instigation of violent chaos as a last ditch effort by the addicted to procure their substances of choice?

These are very nasty questions that most of us would prefer to not have to think about. However, they WILL become a reality not only for the combined millions of dealers and addicts, but for the much wider swath of polite society that will discover with great surprise that they’re in the path of the fallout. Crime and murder rates will soar, especially in the very communities that the wealthy, liberal, white, co-dependent psychic parasite young people and their half-assed parents are pleased to believe they’re “liberating” from the bondage of basic human decency, self-management and self-development.

While I realize that these are issues most of us probably wouldn’t even think of, they are necessary to consider because our country is full of people we don’t like to acknowledge but for whom FedCoin or electronically depreciating money will have very real consequences. And those consequences aren’t going to be limited to their lives. The consequences will definitely spill over into ours, too. Imagine what is going to happen if the millions of drug addicts who live just about everywhere among us are more or less simultaneously forced into partial or full withdrawl because they cannot pay for product? If you think things are crazy now…!

The last thing I’d like to consider (and you can read that any way you want to), is the effect of FedCoin or electronically depreciating cash on retirement planning.

If a central objective of FedCoin and electronically depreciating cash is to force people to spend their money right away, what will happen when people become old or sick? Will retirement become a thing of the past? Will the infirm get cut off and deliberately put out of society to die? If money must be spent instead of saved, how will the young provide for themselves when they become old? Or will living to a ripe old age become a thing of the past? Will America turn into Logan’s Run, where everyone will be given the opportunity on their 30^th birthdays to compete to go on living, but where nobody pays enough attention to realize that the competition is rigged so nobody ever gets to win?

Assuming the public won’t be ready for such an arrangement (at least for a while), what is poor old Uncle Sam to do when his citizens get old while bereft of means to support themselves? Does he step up, give them as much cash as they need for as long as they need it, and deepen the negative interest rates for younger savers until they, too, have nothing to live on? Who keeps the system afloat at THAT point? Or perhaps the rotten paw of Austan Goolsbee will reach from beyond the grave (yes, I know he’s supposedly still alive, but, let’s face it, giant psychic parasites aren’t really living things in the way that normal people understand life to be), and increasingly helps the privileged who are no longer able to be milked, go ever more gently and ever more early into that good night so they stop selfishly running up the debt?

I realize that none of the options above is pretty to think about, but one of them is what we’ll get if we fail to stop the government’s attempt to digitize our economy. I hope that this paper has given you some new and sobering things to consider when you’re wondering what the world will look like under the shiny promises of a brave new utopia, brought to you through the promise of a Federal digital currency.

Fighting back?

If you’re as thrilled as I am (which isn’t very much) about the prospects of life being lived under the thumb of FedCoin, negative interest rates and digital money designed to depreciate on a preset schedule, here are a few suggestions as to how, together, we might keep the monster at bay:

If you own a business, give customers who pay cash a discount equal to the amount you have to pay the credit card companies to process card transactions. This will encourage cost-conscious customers to increase their use of cash. More cash in circulation and less use of credit and electronic payments shows central planners that people will not be as accepting of digitized money as they hoped we would ne. Increasing the difficulty for the government to roll out its plans will slow it down, and could possibly stop FedCoin from being implemented at all.
Better yet, if you are a business owner, begin accepting gold and silver as payment in lieu of credit or cash. Maybe even offer the cash use discount as above. The bonus for you is that the metals will appreciate as the dollar inevitably goes bust, so you’ll be sitting on a pile of rising real wealth held outside the banking system if TSHTF or if digital money becomes a reality.
- The state of Utah allows citizens to pay for goods and services with Constitutionally approved money, which is gold and silver. Consider petitioning your state to do the same.
If you are a consumer, pay for more things with cash. Go elsewhere when businesses won’t take your cash, after politely explaining that you refuse to help the government condition us to accept their digitized payment scheme.
Use your current dollars to purchase small denominations of gold and silver. Rounds or coins may be best, as they look like other loose change and can therefore be more easily concealed and exchanged during barter. Also, small coins lack serial numbers or other identifying features. Don’t bother with graded or certified coins. There’s no guarantee that you’ll be able to command the extra premiums in a barter situation, and they can be more easily traced. You’ll be able to sell them for the premium you invested only at a coin dealer, and you’ll get FedCoin or depreciating notes in return. That’s no bargain.
Put aside unchipped currency notes of various denominations now, to be used for private transactions if the government starts printing digital notes. If digital notes start coming out, ask your bank to exchange digital notes for legacy notes. If you receive digital notes as change from cash purchases at the store, ask the cashier if they have any legacy notes in the till for which you can exchange the digital notes.
Keep abreast of the situation via the various blogs and web sites that carry information about currency changes being contemplated. Take every opportunity to let your elected officials know that you do NOT approve. Ask them to explain how FedCoin or digital notes will work, and how they are planning to handle the various problems outlined in this article.
Share your concerns with your friends and family. Encourage them to save unchipped currency, and buy some precious metals for themselves. Ask them to let their reps know that they don’t approve of digital currency, either.
Make your feelings known on digital chat boards. Various organizations scan the boards to gauge the public mood on various issues. Help make it known that the public is on NO mood for a digital economy.
Sign up for newsletters such as Gold Anti-Trust Action Network, Wolf Street, and Wall Street On Parade (and there are many others, too, depending on your preferences. These are simply suggestions.) Begin educating yourself on the importance of sound money, and the dangers of government cryptos. Become knowledgeable so you can speak to others with confidence.
Refrain from stepping up when the government, or any private organization that might be associated with the government’s efforts, asks for volunteers to help out with testing any part of the system. Beware the incentives. China recently offered the equivalent of a couple of hundred measly dollars for volunteers to help them test out a government crypto. They had thousands volunteering for a few hundred slots. It’s really amazing that people will gladly sell their souls for a pittance, because they either never stop to think about the consequences, or they can’t grasp that the government is not intent on making their lives better. Don’t be gullible. Don’t help to lift up the corner of the tent so the camel can slide its nose under. It wants in only so that it can eat you alive.
Do what you can now to purchase hard assets (shelter, storable food, clothing, and so on) so that, if the worst comes to pass, you won’t need to be held complete hostage to government dictates. And,
Last but not least, I hesitate to say this, but be prepared, if necessary, to pitch in to support more outgoing mass efforts to discourage the government from going down the electronic currency road. It’s a sad and ugly thing, but direct public pressure is sometimes the only method that works. In a 1787 letter to William Stephens Smith, son-in-law of John Adams, Thomas Jefferson himself opined “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is it’s natural manure¹⁰ In a related musing, the Buddha urged his disciples to speak about liberation “in whatever language the people understand”. Sadly, bullies and bureaucrats (do I repeat myself?) understand few languages except that of force. Directly threaten them, and suddenly they begin to figure out what you’re saying. Be polite, and they never hear you. No, I’m not advocating for blood in the streets, but name one instance in which a tyrannical government was ended by nice people asking those in power to please respect what they see as their rights and dignity? Just sayin’. Let’s hope the situation can be controlled before it reaches the point at which serious resistance is needed. Better yet, let’s all actually do the work necessary to have a shot at stopping the madness before it gets started. Keeping the government’s digital dreams out of our currency will be the best economic investment we will ever be able to collectively make, for both ourselves and all future generations.