A terrifying tool for financial control.
The middle of the 18th century was a time of great expansion for the British Empire.
Some of the most valuable parts of the kingdom were the lands of New England, far to the west of the British Isles. These new lands were carrying out roaring trade with the world, which was of great economic benefit to then-king George II.
Ships, whiskey, furs, wheat, rum, iron, and livestock were all part of shipments back to Britain. They also exported rarer and more valuable commodities, many of which were created from whales hunted in the coastal seas of the region.
Whale blubber was used to produce oil that would be turned into candles, or used as fuel in lamps. The filtering ‘teeth’ of baleen whales were essential in the manufacture of waist-binding corsetry. And the dull waxy substance formed in the stomachs of sperm whales—known as ambergris—was an ingredient used in the crafting of luxury perfumes, as well as also sometimes eaten as a dinner accompaniment for those who could afford its exorbitant price.
However, the flourishing trade that flowed from New England wasn’t without its problems for the British Empire, or its reigning king.
At the time, many of the colonies of New England were printing their own forms of paper currency. But with very little oversight as to how much they could create, inflation began to spike out of control.
In the earliest decades of the century, the colony of Massachusetts was experiencing almost 40% inflation per year. And in New England as a whole, the amount of paper money in circulation multiplied by a staggering thirty-four times in just a little over ten years.
This was of growing concern, especially to foreign merchants who traded with New England’s colonies. Ship captains who unloaded goods in the region would be paid in local bills, which had lost considerable value when compared to the British pound they were used to using at home.
Due to the waning reliability of the colonies’ money, merchants began to complain to the British government. And by extension, to the king himself.
So mid-century, England’s parliament signed into law the Currency Act of 1751, which among other things, forbade the colonies of New England to create any currency of their own. Instead, they would be forced by law to use, and to trade with, the time-tested pound sterling.
In one fell swoop, the existing money of New England’s colonies like Rhode Island, Plymouth, Connecticut, and others was abolished—overnight, it became illegal.
Farmers who were previously indebted to merchants in their own currency, were now forced to pay them in much more valuable pounds. And when it came to tax time, they were also required to pay the crown across the Atlantic in sterling as well.
For many colonists, this meant they had to sell off parcels of land in order to afford to pay their debts, or their taxes. This resulted in many British creditors preying on the colonist’s predicament, and taking advantage of them by buying land at less than fair rates.
The colonies protested vehemently against these new laws. However, their grievances would fall upon deaf ears.
England didn’t much care what the colonists thought. All it desired was to ensure the trading dominance of its merchants. But there was also the side effect it allowed complete economic control over the new lands in the west.
Inevitably, the colonists eventually rose up against the oppressive dominance of the British.
The currency controls and excessive taxes imposed on New England by the British would in part be reasons for the commencement of the Revolutionary War; the end result being the creation of the independent nation of the United States of America.
Three hundred years ago, they fought for their right to financial freedom. The question is, would we do the same today?
I ask this now, because it seems as if the shadow of global monetary control is once again looming. And like the above example from history, it may again originate from England.
Rishi Sunak is Chancellor of the Exchequer; in normal people’s verbiage, England’s chief finance minister. And recently, he made a proposal for what I believe may be the ultimate tool for financial control in the modern world.
The proposal is one he would like to see implemented in G7 nations—which include the United States, Canada, France, Italy, Germany, Japan, and of course, the United Kingdom—and centres around the creation of Central Bank Digital Currencies, or CBDCs.
You can basically think of CBDCs like Bitcoin, or other cryptocurrencies, in the way that they would be a totally digital means of using money. But whereas Bitcoin is decentralised, a CBDC would be completely controlled by the government and central bank of your nation.
There are a lot of buzzwords that Sunak threw around in his presentation regarding CBDCs; words like ‘secure’, ‘safe’, and ‘inclusion’. Words that are generally used when a government wants us to believe they’re creating something benevolent.
However, there’s another word generally linked to CBDCs that many people aren’t focusing on, which in my mind is the most important—and terrifying—of all.
That word is programmable.
According to the proposal, the new digital currencies that may soon be created in G7 nations would be able to be programmed with rules, that would constrain the user of the money itself. Rules like banning the user from purchasing certain items, limiting how much can be spent in a certain period, or even making your money expire after a certain date.
Just like the rules that constrain you to a level of a videogame, governments may soon be able to program any rules they may like into the money you’ve worked so hard to earn.
Confused? Well, let me give you some examples of how this could play out.
For a start, it’s obvious we’re living in a world that’s increasingly obsessed with reducing carbon emissions. And there’s a growing narrative in the media that individual carbon allowances could soon become a thing—some people believe we may be mere years away from this being implemented in certain nations in the west.
In the case that personal carbon credits do happen, a CBDC could be the best way for your government to control your individual carbon output.
If you hit your monthly limit of carbon, for example, you may be unable to purchase fuel for your car, or could be blocked from booking a flight, by the rules that are programmed into your money. At the supermarket, you may be forced to only choose from products that are considered low impact on the environment, with your money literally not allowing you to buy anything else.
In an even more frightening proposition, CBDCs could be used by governments to set money to expire, in a move to curb inflation, or encourage spending.
During times of crisis—like the previous two years—excessive printing of money has caused a phenomenal amount of inflation. Which of course leads to higher prices for everyone, and a devaluing of our savings.
I can easily foresee the argument that a government could set any money that enters your bank account to expire within a year or two, in order to keep the amount of money in circulation at a reasonable level. This would mean they could continue to print money to cover their flaws as financial managers, but could then later level the playing field by destroying any of your ‘unused’ cash at a certain time.
If they wanted to stimulate the economy, they could also set your money to expire in a move to ensure you spend it, instead of it gathering dust as savings in your account.
A programmable CBDC would give the powers-that-be the ability to enact any kind of restrictions on your money they wanted to. From limiting your savings, to automatically collecting taxes and fines, or even shutting you off from your money completely.
Basically, your money won’t truly be yours. Instead, it will be something you’ll be allowed to use the way your government wants you to use it.
Where I get truly worried about this kind of programmable cash, is the possibility for it to be used as a tool for control. The kind of control we’re already seeing in our world today.
The perfect example is China, whereby simply saying the wrong thing on social media, or by associating with people the government deems to be ‘troublesome’, can already ban you from having access to train services, bank credit, or the ability to apply for a passport.
In China, this is only possible because the Chinese Communist Party has the nation’s financial system utterly under its control.
“Yeah, but that’s China. It won’t happen here.” I hear you say.
Well, maybe think again.
Looking back at the UK, the nation has already discussed taking away basic human rights like access to a passport, or a driving license, if a person has a certain kind of criminal record. Australia’s Liberal government has proposed similar ideas, for people who choose not to get a jab.
Or what about Canada? Where whether you agree with their reasons or not, mostly-peaceful protestors have already had their bank accounts and funds frozen, because they disagreed with certain government mandates.
With a CBDC, the ability of a government to impose restrictions like this on a population will basically be jacked up on steroids.
With the above stories in mind, imagine if your government would have the ability to turn your money on or off at will, or make it disappear at a moment’s notice.
Now ask yourself, do you trust your government with that kind of financial power over you?
For me, the answer is no.
In his proposal to G7 nations, Sunak says that a CBDC would only be offered as an optional method of payment, alongside the existing array of payment choices available to people today. Things like coins, notes, and electronic payment methods.
But how long until a CBDC is the only way you will be able to trade?
How long until a government wants full electronic control over our money?
Only time will tell.
But if Central Bank Digital Currencies do come into play, how do you protect yourself from this potential type of financial authoritarianism?
Well firstly, you can simply refuse to use it.
When CBDCs initially enter society in their optional phase, you could choose to stick to using cash, or current standard forms of electronic banking. Even better, you could make it a habit to start doing some of your weekly trading in cryptocurrency, if that’s a possibility.
On top of this, if you’re concerned about the potential for your government to abuse CBDCs, you could always encourage other people you know to avoid them. Start sharing around any information you see about the downsides of CBDCs now, because let’s face it, your government will only be selling the general public on their benefits.
Lastly, you can always start putting some of your savings into money. Real money, in the form of precious metals like gold and silver. Money that’s stood the test of time of being money for thousands of years.
If CBDCs become a thing—and they likely will soon in one form or another—they don’t have to be our only reality.
Just like the colonists of New England resisted the control of their currency a few short centuries ago, we have the power to keep our money in our hands.
All the best,
P.S. - If you’re European, and looking for a great place to hold gold and silver, we personally use Gold Avenue. They store your metals in Swiss vaults, and in most cases you can purchase and store without paying VAT.
Good morning to you, from the UK. I regret the rather dismissive tone you have of CBDC. I don't believe it serves much fearing a technology rather than the people using it and in this case I believe you have rather done that. CBDC have the potential to do good as well, in fact they are being piloted right now in multiple countries as a way to prevent fraud by said governments and corrupt establishments. They can drive financial inclusion positively in developing countries and would allow for more granular monetary policies as well as more structured aid plan for disaster relief and much more. It's been said before but they are technological very different from Bitcoins and other crypto currencies in circulation, and so should they, and that's specifically to protect people from the large risks Bitcoins and such pose. CBDC also offer the ability to settle payment offline, something that current crypto currency models dream of. The question of coin expiration is a real one but I'm afraid you may not be looking at the full picture, beyond fiat management issues which were also posted here before my comment, there are equally technical reasons to do this, namely the avoidance of chain fragmentation and the impact it would have on the ability to process payments quickly, in the way you might be used to. A second reason is that it must also be analogous to paper/polymer money being destroyed and replaced, to update its security or otherwise. Constructed properly they can permit protection of anyone's identity, preventing government and banks alike from power over your money. I don't even mention the different class of CBDC, some wholesale, some retail, multi-CBDC cross border remittance frameworks. I am not going to pretend there is no evil in this world, but I find it rather more constructive to educate people about how better choices can be made around CBDCs rather than build some sort of fear-based framework of dire things to come. I will fully disclose as well that I work for a young startup which won the Global CBDC Challenge by the Monetary Authority of Singapore last November. We specialize in confidential computing and privacy. Our solution very specifically was built to avoid the problems you speak of. It's only fair you may consider looking at all the sides of the story. Happy to chat further should you want to reach out. Very best regards and thank you for another well written newsletter.
Hi Leon, thank you for this story which was really interesting and great to prepare us for any possibilities of this happening. I also really appreciate that you recognized the Canadian truckers as peaceful protesters instead of what a lot of Canadians agree with the negative untruthful narrative. Which has sadly divided many families and friends.