The tool–known as recession insurance bonds–would take advantage of newer digital payment technologies that allow the government to make instant wire transfers to the tens of millions of Americans who require emergency assistance. The Fed has argued that this switch will limit the inefficiencies that plagued the previous system, which saw citizens in need waiting weeks or even months for their stimulus payments to arrive. In the gap, countless people slipped deeper into food insecurity, poverty, and even homelessness.
As a refresher, here’s how these recession insurance bonds would work. The Fed would set aside a cut of the country’s GDP to put into consumers’ pockets, splitting the sum equally among households in the event of a recession. While the idea of helicopter money–cash deposits sent straight from the Federal Reserve to Americans’ individual accounts–would have been almost unthinkable even just last year, the fact that it has moved into the spotlight as a policy proposal means that it will likely be implemented sooner rather than later. As has happened time and time again throughout the pandemic, we must get used to ludicrous ideas entering the mainstream. The only thing holding back the Fed’s plan now is the existence of a digital currency that could be used by the central bank.
In this video, we will discuss this latest disastrous move in Fed policy, as well as what it could mean for the future of our country’s financial systems. Earlier this week, Federal Reserve Governor Lael Brainard spoke not so subtly about the coming system reset. She said that the Fed was “studying the opportunities and challenges presented by central bank digital currencies,” but we all know what that really means.
Brainard went on to discuss a new project in collaboration with the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT). Together with the wider Federal Reserve, these institutions are embarking on an effort that will stretch over multiple years and ultimately hope to institute a working digital currency that could be utilized by the central bank. The most telling line of Brainard’s recent speech, which was innocuously titled “An Update on Digital Currencies,” was sneakily tucked away in the middle. “It is important to understand how the existing provisions of the Federal Reserve Act with regard to currency issuance apply to a Central Bank Digital Currency (CBDC) and whether a CBDC would have legal tender status, depending on the design,” she said.
Assigning a Central Bank Digital Currency legal tender status marks a dramatic overhaul of current policy. Surely there would have to be a significant stimulus to prompt such a move. So what exactly would it take for the Fed to follow through on this policy process? Another crisis, of course. And with new crises popping up nearly everyday in the United States, it wouldn’t take any time at all for the Fed to find a justification for this system reset.
Already, other countries across the world have moved in the direction of digital currencies. Sweden is on the forefront of removing cash from their society and China has been testing digital currencies for years. The Bank of England has already suggested a shift to digital currency.
However, there is plenty of cause for concern that comes with this massive overhaul. Fears over privacy top the list. In order for the Fed to determine which sections of the population to distribute aid to first, they would need to have continual access to a database that details intimate aspects of Americans’ personal lives.
Furthermore, the implementation of a Central Bank Digital Currency would require some sort of public-private partnership with digital payment providers. Many of those competitors could be inspired to enter the market because it would allow them to acquire large quantities of individuals’ data. Another concern is the wave of inflation unleashed by this new policy, a wave that could very easily spiral out of control and drive the value of the US dollar down to nearly nothing….
All in all, the US is continuing on its dangerous downward slide into economic ruin, and as we discussed, much of the country’s fate now rests on factors outside of domestic control, such as China’s credit impulse. It’s a dark world we live in, and the outlook is looking bleaker every week.
For more economic collapse news visit our website: https://www.epiceconomist.com