Led by West Virginia State Treasury Riley Moore, a Republican, he as well as financial officers from fourteen other states wrote a letter late last month to “push back” against what this burgeoning coalition claims is an unfair, almost certainly illegal back-door “boycott” of the “traditional” energy industry. Fossil fuels, in other words.
It's no longer specifically partisan politics. The alleged conspirators undertaking this embargo are large banks. Moore’s letter reads, in part:
“The coalition of 16 State Treasurers, Auditors and Comptrollers has sent an open letter to banking industry officials notifying them that each state will take concrete steps toward selecting financial institutions that are not engaged in harmful fossil fuel industry boycotts for the states’ future financial services contracts.”
The exercise of political authority via guns and threats of prison are one thing, safeguarded by the Constitution and the demands of court proceedings, so is targeting an entire industry’s pocketbook via the threat of taxation. Encouraging a shadow ban on payments and payment processing, however, is an altogether more frightening proposition.
As always, you have to start by asking who gets to decide which business is now deemed so illegitimate its very existence is a threat to the “greater good” and therefore must be ground down to nothing by any and all means.
This is taking political autonomy and turning it on its head.
As has the application of dubious Civil Asset Forfeiture (CAF) laws overzealously applied to tyrannical extremes. Social media was lit up – rightly, for once – last week when the story of some unfortunate woman robbed at DFW airport made the viral rounds. What created such a sensation was just who it was who had done the robbing: the police.
A tweet featuring what we were told was the commendable work of a hard-working police dog, complete with the canine posed approvingly over top of the confiscated loot, simply said that the government’s non-human deputy had sniffed out $106,829 in cash in this woman’s luggage.
Her reported crime? None. Nothing whatsoever. The oblivious local news report dryly stated, “The woman who owned the bag was not arrested…”
The airport’s despots merely took advantage of CAF legalities which absolutely allow them to confiscate cash (in any amount) they deem “suspect.” ATM thieves everywhere are insanely jealous.
Sure, this American citizen who was only flying within the borders of the United States can petition some local court to give her back the government’s property, at her own expense, of course, at risk of further monetary cost and more costly criminal insinuation; all things inimical to a nominally free society.
Nothing new, money has always been recognized as the lifeblood of economic life and power; therefore, life. There’s no need to ponder why Karl Marx and Friedreich Engels devoted much of their collective output to this very topic.
It wasn’t really all that long when a fellow by the name of Willem Buiter proposed purposefully harmful negative rates be attached to holders of currency during deflationary periods such as when Buiter was proposing his scheme.
This was June 2009, the still smoldering deflationary wreckage of the Global Financial Crisis and its subsequent Great “Recession” both perplexing for traditional Economists like Buiter as well as forcing them to seek unconventional answers for the damage (a better one would have been for them to have taken a serious interest in global financing and money long before 2008).
To counteract the depressionary forces of deflation-type monetary hoarding, Buiter and others proposed this outline where the government would be able to force you (or your business) to spend cash whether you wanted to or not. From his paper:
“While private or local government IOUs may lose their value if they are not at some point redeemable into legal tender (at least in principle), currency is already legal tender. It is also irredeemable: it does not represent a claim on the issuer for anything other than the same amount of itself. So incentives have to be created to induce private holders of currency to reveal their ownership of currency, come forward and pay any negative interest due. No government has, as yet, had the stomach for that.”
Do they now, though?
As above, the argument is always government knows best what will be for the greater good. Except, obviously, how to avoid a monetary crisis in the first place.
Having spent the balance of the last dozen years watching digital currencies rise and proliferate, now, suddenly, there isn’t a central bank anywhere which isn’t experimenting with a Central Bank Digital Currency (CBDC) scheme.
To what end? To outcompete Bitcoin or Ethereum?
Hardly. The goal is very straightforward in its most Marxist purity: control.
The first element of control is surveillance. While it is certainly clumsy and scattershot, there is method to the snatch-and-grab tactics of CAF’s enthusiastic practitioners. And wouldn’t it be so much easier to be able to threaten newly-deemed “impure” businesses not by using private banks to deprive them of payments processing but by directly taking forward the power of currency itself cutting the “dirty bastards” off at the source?
It was mere months ago there was put forward an actual proposal to have the IRS “monitor” practically everyone’s bank accounts. With a CBDC, no need for so much paperwork or inconvenient formalities such as privacy protections.
And if the government demands you spend, Buiter’s expiration-dated cash is but a few digits and the press of a button away. Somewhere Jay Powell is licking his (confused) chops; no more reliance on the pseudo-money psychology of QE.
Having tried here or there to strangle and snuff out crypto currencies while still in infancy, it has been the government (and not just here in the US) which has done the most to sell an otherwise disinclined public on the virtues of going back toward private money; a fact of life and liberty long lost to what is now ancient history.
About eight years ago, early 2014, the IRS decided to treat crypto (basically just Bitcoin back then) as property. Oh, the irony, the purpose wasn’t to validate the concept rather to usher in its demise as much as might have been possible.
If you use Bitcoin to pay for some good or service, you might otherwise believe this is the end of the transaction. Not so, the greater good demands you tax yourself first for having had the benefit of this exchange of what the government says is not currency. I wrote about this in April 2014:
“A few weeks back the IRS issued rulings about crypto-currencies that firmly placed them within the grasp of taxing authority. In other words, you cannot avoid taxation by paying employees in Bitcoins instead of dollars. Further, the IRS is subjecting merchandise trade to its $600 filing limitation - if you paid two Bitcoins to Overstock.com for a new flatscreen you are supposed to issue Overstock a 1099 (this is not a joke).”
On top, you then have to figure the capital gains tax for yourself, meaning that if the price of Bitcoin had gone up between when you acquired it and then used some to buy the flatscreen, the federal government has the authority to further tax what it has already classified as a taxable capital gain.
Despite this and other intentionally cumbersome impositions, “somehow” private digital money has utterly flourished over the years since. Whereas there may have been only Bitcoin and a small handful of others when these “clarifying” instructions had been issued back then, there are today more kinds of digital currencies and the like than you could easily count.
One key reason is what amounts to the double-edged sword of the modern digital life. The balance between privacy and the ability of that digital life to be tracked down to the most insanely small levels for most often the most dubious of political reasoning. You wouldn’t need $100,000 in physical Federal Reserve notes raising a stink in some suitcase; you’d only have to run afoul of some Federal Reserve algorithm tracking your every financial move.
Warm and fuzzies all over (especially considering the Fed’s profoundly inglorious history with mathematical models).
The usual bromide uttered in defense is, “if you’re innocent, you have nothing to hide and therefore shouldn’t harbor any concerns about any level of surveillance.”
That’s the thing about money. We like to think of it in terms of properties, or as a product of taxation, even the abstractions about its usefulness (form does follow function). At root, money or currency, public or private, it’s all about trust.
Its users trust it, and it can work (though it still needs more work). Or they don’t, so it doesn’t. The current eurodollar system a perfect example.
And this is the looming titanic struggle between private crypto and government-led CBDC’s. Who, or what, will you trust more?
This digital revolution (building upon the eurodollar’s virtual ledger currency evolution) has to first decide that final question: more favorable to the individual or the government? This isn’t purely a political matter, as economics (small “e”) demands the former.
Any argument deduced of the “greater good” must first show its work. I don’t mean in the form of democratic election, or even legality itself, rather it must prove and overcome the hurdle of trust.
The explosion of crypto formats in just a few years tells us something useful about just this foundational aspect. The people of the world have an intuitive sense there is “something” very wrong when it comes to money. Similarly, the public is uneducated as to the way money had been handled in the past – convertibility and money as personal property.
Those features, which are now treated as bugs, were intuitive for all these reasons. Individuals were treated as sovereigns and so might their money for what had long ago been self-evident reasons; economies work so much more fluidly and efficiently.
Today, all manner of gaslighting and misdirection has attempted to sully what should be clear alternatives. You’ll hear, for example, the myth government has always held a monopoly on money. Not so. Never so. Once more, the eurodollar the perfect now counterexample.
Speculators all over the spectrum have piled into private cryptocurrencies at almost any price because they believe the Federal Reserves has “debased” and “devalued” the dollar by “printing” so much. What dollar do they speak of?
No, but that spirit is arriving at the correct conclusion anyway if taking the wrong route to reach it. Mistrust over the government’s purported handling of the world’s reserve currency, not just the US, is well-founded though for reasons Mr. Buiter might more easily recognize rather than the man-on-the-street who has never once heard the term eurodollar.
In other words, the Fed’s “money printing” which prints no money is a response to a very real, substantial and unfixed global money problem. The more the Fed does, the more it irks an increasingly doubtful public because what the Fed does never seems to solve the problem.
There’s always more Fed, feeding this fundamental suspicion however misled as to the details behind it.
The monetary system is indeed broken, which causes the Fed to act thereby arousing rising suspicion which provokes greater and more earnest interest and devotion to competing means of currency.
It is this rather than “money printing” which has propelled the private digital race toward a more productive future. Whatever the current prices on some of these, and they are ridiculously inappropriate for the current situation, the investment in technology and infrastructure behind themdriving more thorough, increasingly plausible formats regardless of contemporary prices.
The government in all its facets will continue to be crypto’s biggest selling points. Revisiting that 2014 theme:
“What happens if Bitcoins progress to the point they no longer need to be convertible? The IRS rulings here cease to apply. At that point Bitcoins, or whatever crypto-currency can stand on its own, become both property and currency, i.e., true money. Competition with the government monopoly of legal tender then ensues which likely leads to a singular solution - either the dollar as fiat currency gets replaced or it gets reformed into something far more workable and, more importantly, no longer centralized where government rights continue to supplant all others.”
You shouldn’t interpret this as some sort of commercial or advertisement for any of them, including Bitcoin(s). Rather, my plea is to take a serious look at understanding where they have come from and why they have thriven. For rather human reasons, the digital revolution took the longest time for it to have finally penetrated these core pieces of modern society contained by money, finance, and banking.
Like it or not, Marxists and statists alike, the door to new money has been pinned wide open by the former’s (eurodollar) long and deeply misunderstood existence and now decay.
With that prior in disarray for so long, and no answers anywhere in sight from the current stodgy, post-Great Depression convention, the environment is and has been exactly right for the usual free market answers of competition and innovation. And the more the present monetary and economic environment stays wrong, the more governments will seek the usual avenues of suppression and repression because that’s all they think they have left (when, again, knowledge would all along have provided a realistic set of solutions).
Trust. The word will be implanted within the CBDC technology as if merely affixing that word conveys its full and necessary meaning onto the user.
It will be from here a choice: either that poor lady flying into DFW would never have alerted policing powers at any point, be they man or dog, with her actually private property digital $100k safely tucked away electronically remote; or, equally as remote, it wouldn’t matter one way or the other if she was flying or transiting somehow since the IRS, the Fed, Treasury, Speaker of the House, DEA, Commission of Public Safety, even her local dog catcher would be able to track and, if the “greater good” “required”, confiscate or otherwise encumber all her funds at the legally-sanctioned tap of an official tablet at any time they’d choose.
Probably on Willem Buiter’s command since inelastic, deflationary currency would almost certainly still be the world’s biggest problem in any CBDC system overlaid atop the existing broken currency regime. This wouldn’t fix the eurodollar, it would only make it far easier for authorities to, and to want to, exploit its inelasticity.
