Digital currency is already here in the form of Bitcoin. Governments don’t like that cryptocurrency’s transactions are virtually untraceable — potentially aiding criminal activities — and they see an opportunity to expand their control far beyond what is possible with cash via the establishment of a Central Bank Digital Currency (CBDC).
President Joe Biden’s March 9, 2022, executive order on digital currency gives away the left’s objective. The order says that digital currency has “profound implications for … the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change.” That’s a lot to expect from a medium of exchange, and we can expect that the left’s plans for a CBDC would be even more ambitious.
Fear of a meddlesome CBDC is why Florida Gov. Ron DeSantis signed two bills in May that prevent CBDCs from being used in the Sunshine State.
But there are advantages to CBDCs, including increasing the efficiency of the financial system. This is why China and its BRICS friends are moving ahead on creating CBDCs.
But in China’s case, not only is it seeking first-mover’s advantage, but it is also attracted by the potential for absolute control that a centrally run digital currency could bring, with China’s nascent social credit system, now run by regional governments, potentially able to go national, then international.
A Possible Work-Around
The challenge in meeting the CBDC threat is that you can’t beat something with nothing.
That’s where best-selling author Kevin Freeman comes in with his latest book, Pirate Money: Discovering the Founders’ Hidden Plan for Economic Justice and Defeating the Great Reset. In it, Freeman proposes the creation of a digital currency based in bullion and backed by the states as legal tender.
First, the title: why “pirate money”? Because the eponymous pirates of yore viewed gold and silver as real money — though today, it’s rather inconvenient to lug about.
Freeman begins to make his case by reminding his readers that the value of the dollar has declined 87 percent since President Richard Nixon “temporarily” took America off the gold standard in 1971 — thus, what takes a dollar to purchase today could be had for 12.5 cents 52 years ago. This is because the dollar “is at its core unbacked ‘fiat’ money.”
Shifting to CBDCs, Freeman details how a CBDC could be misused by our federal government — stuff that would even impress George Orwell. With China, a CBDC would hand the Chinese Communist Party (CCP) the power to use “the Digital Yuan (to issue) … a line-item veto on personal spending. They can immediately extract fines. Or they can issue rewards.”
Thus, knowing what’s wrong with the digital dollar, Freeman tells the reader what could work digitally:
The ideal money today would be based in gold and silver, held and protected by a sovereign state, and available electronically. … But if that gold were in a Texas vault, for example, and the state kept track down to minute fractions of an ounce of your holdings, and paid whomever you directed, it would be ideal money.
Freeman notes that such a method of exchange already exists — sort of. It’s called Glint. This app lets you buy gold and keep it in a vault in Switzerland. Moreover, you can use your phone to pay for everyday items, just like a credit card.
But there are a couple of catches.
First, since it’s not legal tender, the Internal Revenue Service requires the reporting of your transactions, and you’ll be taxed on any earnings (though, ironically, much of those “earnings” may simply be the result of the dollar’s ongoing decline in value). Second, the gold is in Switzerland. And, while it’s insured, how can you really be sure it’s there and always will be?
To eliminate the pesky IRS demanding to see all your transactions (as it does today with Bitcoin), the bullion-backed method of exchange would have to be legal tender — for example, a unit of exchange based on the state of Texas’ gold deposits in its own, newly created Texas Bullion Depository, established in 2018.
Unsustainable Debt and China Competition
With his idea fleshed out, Freeman then issues two warnings.
First, the national debt is on an unsustainable course, with rising interest rates set to swamp the federal government’s ability to pay. He calls this “The Coming Storm and the Great Reset.”
Second, China will seek to exploit this coming crisis to dethrone the dollar as the world’s reserve currency.
The second really can’t happen without the first, though — and China has its own deep economic problems, compounded by paramount leader Xi Jinping’s maniacal drive for total control. As bad as things get in the U.S., at least our financial mess is out in the open for all to see, with our political class a bit less able to engage in currency manipulation than the CCP.
Even so, Freeman’s suggestion that states, likely led by Texas, develop their own gold- and silver-backed legal tender, as the Constitution allows in Article I, Section 10, seems a prudent backup in the event of a dollar meltdown. Even having a backup in place would likely strengthen the dollar, as it would make China’s monetary meddling less effective as a weapon.
I make much the same case in a paper entitled “Texas Defense” released by the Texas Public Policy Foundation on Sept. 12.
Gold and Silver’s Drawbacks
Lastly, as with many bullion-boosters, Freeman doesn’t touch on some aspects of gold and silver that take a bit of shine off the metals.
First, gold and silver are, as with any good, subject to the laws of supply and demand. In the century after the Spanish empire’s conquest of the Americas, the massive influx of silver introduced inflation, not only to Spain, but the rest of Europe. From 1500 to 1600, prices increased 2.5 times — since, prior to the advent of industrialization, productivity increases were relatively stagnant compared to the increase in the money supply (though on an annualized basis, inflation by modern standards was very tame — only about 1 to 1.5 percent per year).
Further, significant shares of gold and silver are used for jewelry and industrial purposes — the metals don’t just sit around in vaults at central banks.
Still, as Freeman points out, “throughout history, gold and silver have never been worth zero” — which is more than you can say for paper money.
The prime value of Freeman’s Pirate Money isn’t that it raises the alarm over the growing weakness of the dollar or the potential horror attendant with CBDCs, but that he offers a practical, constitutional pathway for states to create an alternative system of exchange that could work to ensure the operation of the economy in the wake of a dollar disaster as well as stave off the creation of a federal Central Bank Digital Currency.